CertainTeed Corp. celebrated its 100th year in business in 2004, a year of significant change for the company.
Peter Dachowski was named president and chief executive officer in May, and in December, the firm named Rose Lee vice president of its pipe and plastics group and general manager of the pipe and extruded PVC-based Form-A-Drain businesses.
Lee oversees production plants in Waco, Texas, and Lodi, Calif., and Form-A-Drain operations in McPherson, Kan.
Beyond plastics-related building products, CertainTeed also is involved in other materials, including asphalt roofing and fiber-cement siding.
Vertically integrated, the company produces 85 percent of the resin it uses.
Lee sat down with Plastics News at the International Builders' Show in Orlando. Dachowski was interviewed by telephone Jan. 17.
Q: There have been a lot of changes at CertainTeed over the past year. Moreover, the company has made changes in plastics manufacturing operations, including aggressive moves to become vertically integrated in window operations, and a new production facility for fencing and decking in Buffalo, N.Y. What changes can the industry expect from CertainTeed's plastics operations in 2005?
Dachowski: ``At the current time, we don't have any particularly bold programs yet to be announced for 2005. We see major sources of growth in terms of the opportunities to extrude and mold, principally PVC, but also other materials.''
For instance, Dachowski said, the company injection molds polypropylene products and will continue to grow in that area. The firm makes products such as injection molded siding panels that replicate the look of cedar shingles, marketed as Cedar Impressions. The firm introduced Double 9-inch rough-split shakes and mitered cornerposts at the show.
Q: CertainTeed's parent company, Cie. de Saint-Gobain, noted a need to improve profitability in its 2003 annual report for the United States and Canada. According to that report, operating profit in 2003, at $500 million, was 8 percent below the prior year and 25 percent below 2000. Did operating profit improve in 2004 and what do you expect for 2005?
Dachowski: ``[For] Saint Gobain overall, specifically the extrusion business in 2004, profit fell because of the squeeze between raw material costs and selling prices. We're actually getting squeezed in both [resin operations and extrusion]. It's not a hedge at all, being vertically integrated.
``We have been in the process since mid-December of implementing a price increase, effective the early part of January. It's still relatively modest relative to the size of the cost that we're incurring going forward.''
In 2005, Dachowski said the company will work to re-establish profit margins by withdrawing from certain product lines.
Q: CertainTeed has done much to vertically integrate its window operations over the last two years especially by adding fabrication capacity. Do you see this as an effective means to combat offshore competition?
Dachowski: ``I don't think offshore competition is the main issue in the short-term. The industry is a pretty competitive industry all around, just from domestic producers. Between our five owned fabrication operations and our four independent fabricators, we have a fairly, not totally complete, national network. At this stage, we're concentrating predominantly on operational excellence, in terms of improving our cost position; and in certain facilities, our delivery reliability. Another acquisition, for example, would not be in the cards. We're pausing to catch our breath a little bit.''
Q: Will CertainTeed overall grow primarily through acquisitions, or organically, over the next five years?
Dachowski: ``I think our acquisition activity would be concentrated on relatively smaller companies. Our offering right now is one of the broadest available. We're very well-satisfied with that. On the other hand, we're never satisfied in that we're always looking for opportunities to add new things. Any one of them would have to have a certain coherence with our current offerings. That's one of the things we'll be able to focus on in 2005. We'll be casting our net; I don't know what we'll come up with.''
Q: What do you hope 2005 will mean in terms of growth in the pipe sector?
Lee: ``For us, it's actually growing in the right segments. In agricultural-irrigation, in our trenchless construction, those are the areas that we'd really like to grow. And I think we'll do pretty well. We feel that the key to future success is focusing on areas that we can bring, it sounds cliche, but additional value to the distributors or the end-use customers that use our product. And those are quite a few segments, whether it's in well-drilling, or mining, or horizontal directional drilling, trenchless construction, where a lot of [high density polyethylene] products are used, but where PVC also is very viable and competitive and a good product for those applications.''
Lee said finding those niche areas is key. The PVC pipe segment often is viewed as commodity, so differentiation is important.
``That's the road for our longevity and survival,'' she said. ``Where are those little niches that are a good size and profitable for us, but not necessarily something that will get on the radar screen of really gigantic players? We did quite a bit of downsizing over the [past] three years to get us positioned very lean. And so we bore a good amount of fruits of our labor for that in 2004, and we're positioned really well in 2005 to continue growing that way.''
Q: How do you combat the challenges of getting PVC itself accepted?
Lee: ``If we could all operate from fact-based, scientific, data-driven information, then I think there would be a lot less difference of opinion and emotion. So being a PVC materials-based company, when issues like that arise, that's exactly what we try to do, to the best of our ability, [with] objective, third-party data, correlations that have been drawn, all those little things.
``It's a lot of education, a lot of repeating and replaying what's been said, using a lot of data. And a lot of times what works well is the testimonial of other customers that have successfully been using the product. That goes a long way.''