CHICAGO (June 28, 3:45 p.m. EDT) — George Abd's company is vastly different than a year ago, with a significantly altered manufacturing footprint in North America.
Still, the president and chief executive officer of compounder and sheet extruder Spartech Corp. now leads a company with a balance sheet that boasts stronger cash flow and its lowest debt-to-equity ratio in the past 10 years.
The financial scenario means the company has more flexibility to pursue acquisitions, and it will, Abd promised in a June 20 interview at NPE 2006 in Chicago.
“We're taking a more active role in identifying [deals] that we feel will be positive for the company,” Abd said.
He would not say what's on the drawing board, but he did say the growth will be in the company's core areas: custom sheet and roll stock, color and specialty compounds, and engineered products.
Custom sheet and roll stock represent 63 percent of Spartech's total sales, the color and specialty compounds division represents 31 percent and engineered products account for 6 percent.
Growth outside North America will be a thrust for the company, which has an operation in Donchery, France.
As for internal growth, the company is focused on its Rejuven8 products, which are manufactured from NatureWorks polylactide. Clayton, Mo.-based Spartech is taking the material into packaging and the market for gift cards.
Abd said the company expects sales growth of nearly 25 percent in green products this year.
By the end of the year, Spartech plans to be more open about its product development, for instance, letting shareholders know how many new products are in the pipeline.
“For us, it's almost like being a drug company. You have to have a series of new products coming out. You need to make sure you're constantly keeping that [pipeline] full.”
Spartech has 300 product lines.
Still, the company is not without its operating challenges, as freight and utility costs continue to be burdensome. Utility costs are a major factor that company executives consider when deciding which plants to expand — or, as was the case last year, which ones to consolidate, Abd said.
Utility costs, for example, were one of the deciding factors in the company choosing to close a compounding plant in Arlington, Texas.
Last year, the company implemented a lean manufacturing effort.
“Our focus is looking at what we have installed and improving upon that,” Abd said. He used the example of the company's Midwestern consolidation project, in which the company is merging three plants — in Richmond, Ind.; Clare, Mich.; and Greenville, Ohio — and their 17 lines into an expanded operation in Greenville.
For the second quarter, ended April 29, cash flow increased to $26.1 million, compared with $22 million for the same period in 2005. The increase allowed the company to pay down $25.2 million of debt, and at the end of the quarter, Spartech said it had no outstanding debt on its bank credit facility.