Precise Technology Inc. is setting up an injection molding facility in Poland, following consumer product makers migrating to low-cost locations in central Europe.
The Lodz, Poland, plant signals stepped-up investment outside the United States for Precise, which also is planning a facility in Western Europe for medical manufacturing and is scouting for its first operation in China, said Mike Farrell, president and chief operating officer of the North Versailles, Pa.-based firm.
Precise's aggressive expansion goals come amid a difficult business environment for the firm: Its credit rating was revised down in May, when Standard & Poor's Rating Services raised questions about its financial prospects. Farrell, however, said the questions reflected tough conditions for the industry in general.
The Lodz operation will include 14 presses and employ about 130. The plant should begin operating by the end of the first quarter of 2006, initially to support one of its major customers, but it will seek other work, Farrell said.
He declined to identify the customer in Poland, but razor maker Gillette Co., a large customer of Precise in the United States, recently announced plans to open a $148 million plant in Lodz as well. Gillette said it was closing two plants in England that employ 450 and moving that work to Lodz.
``Poland is fast becoming the central European choice for low-cost labor,'' Farrell said. ``It's surprising - the focus on the packaging side of the business with companies moving out of Ireland and Western Europe and moving operations to central Europe.''
While low-cost labor may be a draw for consumer-product companies, it's not for Precise, which plans to build the facility with the same high-speed robotics and automation it uses in other plants, including its only European plant, in Zevenhuizen, the Netherlands, Farrell said.
The Lodz plant will be new business for Precise, not a transfer of existing work, he said.
Farrell said the company's next expansion is likely to be another plant in Western Europe, possibly Ireland, to supply the medical device industry.
The company also is looking at China, where customers are saying it needs to have a facility, Farrell said.
``Truth be known, we are a little behind the eight ball in China,'' he said. ``Our customers are telling us from a platform standpoint that they have a need for us in China to support them.''
Standard & Poor's said Precise had seen weaker-than-expected operating performance because of delayed product introductions on the medical side, and rising raw material costs. S&P said that if financial performance did not improve in the rest of the fiscal year, ``the company may be challenged to remain in compliance with the financial covenants in its bank credit agreements.''
But Farrell said there is no risk of that happening, and he said S&P has issued similar downgradings to other plastics firms, reflecting tough conditions in the industry.
Precise's corporate credit rating, B+/negative, revised from B+/stable, still is strong, he said.