Knee-deep in restructuring and cost-cutting, Crompton Corp. is reasserting its commitment to the plastics additives business while also trying to pass along materials price increases and reap the benefit of booming interest in wood-plastic composites.
In an interview at K 2004 in Dusseldorf, two Crompton additives officials outlined the Middlebury, Conn.-based firm's current plans in that area. Sean O'Connor, vice president of vinyl additives, said that the 5,500-employee Crompton needs to make changes by year's end that will result in $50 million in annual savings beginning in 2005. The changes will include staff reductions, but he declined to say how many.
The changes are being directed by Robert Wood, who joined Crompton as chairman, president and chief executive officer earlier this year from Dow Chemical Co.
Crompton - a $2.2 billion producer of specialty chemicals and polymer products and equipment - reported in October an 18 percent increase in third-quarter polymer additives sales to $366.2 million, compared with the year-ago period. Plastic additives sales rose 22 percent, mainly due to higher selling prices, last year's acquisition of GE Plastics' specialty chemicals business, and higher unit volume.
However, for the first nine months of 2004, corporate net profit plunged 72 percent to $21.3 million from $77 million on improved sales of $1.9 billion, as the company continues to reorganize.
O'Connor described the changes as ``a move toward a more-functional organization'' that encourages working toward the entire company's good, rather than individual business units' good. He said some people in the market ``have been a bit nervous about Crompton,'' but he stressed that the company's plastics additives focus has only been strengthened.
O'Connor noted that Crompton has been rather late to go to China, but the firm recently opened a plant it acquired in Nanjing to produce polyurethane prepolymers and organosilicones. Crompton no longer produces lead-based products, and it is trying to convince China and other markets of the benefits of its tin-based and organic-based stabilizers.
Like most manufacturers, Crompton has been hit by soaring raw materials prices and is doing what it can to claw back its margins. O'Connor said that in the United States, for example, the price of tin metal has nearly tripled, to $9,000 a ton from $3,500 last summer, and benzene is up fourfold, pushing up phenol prices with it.
Crompton has responded in kind - and in late October was in the middle of its third price increase on tin stabilizers this year. A month or so before, the firm said it successfully pushed through its fourth hike this year on phosphites.
``We've lost quite a bit of business due to our price increase efforts,'' O'Connor said, but the company has had few other options. ``We've had some success [raising prices]. We're trying to be reasonable.''
One bright spot is the 15-20 percent annual growth over the past two to three years in wood-plastic composites. Those products consume a lot of Crompton's additives, such as lubricants, coupling agents, foaming agents and antioxidants, said John Wefer, manager of plastics additives.
Wefer said the U.S. market tends to use polyethylene (recycled grocery bags, etc.) as a major substrate material in wood-plastic composites, whereas polypropylene is used more often in Europe. The significant issue for outdoor applications of the material, such as in decks and fencing, is water absorption. Wefer said 50-60 percent wood-fiber content is usually the maximum allowable since, ``above that, cellulose fiber causes a wicking effect.''
Crompton recently introduced Polybond 3029, a coupling agent made by reacting maleic anhydride with high density PE. The additive improves adhesion and mechanical properties in the composite and helps to reduce water absorption. Wefer said it has been very well-accepted by the market. Crompton does not offer a powdered version of Polybond, but it is now sampling a micropelletized version that allows the user to make a pre-blend that is said to enhance compounding.
Meantime, the company also is working to offer similar benefits to those preferring PP-based wood-plastic composites. Coupling agents used in such composites typically are made via a reactive extrusion process in which maleic anhydride, PP resin and an initiator are melt-blended in an extruder.
Crompton said it has developed a proprietary process for making maleic anhydride-functionalized PP that allows molecular weight and functionality to be varied independently, again improving water-absorption performance and other properties.
Wefer said these new products are now in the advanced pilot stage, with full production not due to start before the end of 2005. Still, it is a cause for optimism at Crompton, which welcomes all good news right now.