Trex Co. Inc. is suspending operations at its extrusion facility in Olive Branch, Miss., citing economic conditions and a need to improve the company's profit margins.
Company officials notified the 115 workers in Olive Branch on Sept. 13. Production will stop immediately and indefinitely, they said.
``We're rationalizing our manufacturing capacity until market conditions warrant it being reopened,'' said Andy Ferrari, Trex's chief executive officer, in a Sept. 13 conference call. ``We will begin the process of mothballing the plant immediately.''
Trex will transfer the capacity to its facility in Winchester, Va., where the company is based. Trex also has an extrusion plant in Fernley, Nev.
The Olive Branch plant is Trex's newest. The company has invested $40 million in the plant since its 2005 opening. The facility housed two extrusion lines, though it is designed to house as many as six. The plant represented about 10 percent of Trex's overall production capacity, company officials said in the conference call.
The company has adequate inventory, so there will be no interruption in service to Trex customers, Ferrari said. It claims it has no plans to sell the plant, which produced deck board.
The shutdown will achieve annual savings between $6 million and $7 million, Ferrari said.
Trex officials did not mention the recent severing of the firm's distribution agreement with Batavia, Ill.-based Parksite Plunkett-Webster as a factor in the plant's shutdown. But the move could not have improved Trex's financial position.
PPW was one of Trex's largest customers, and it generated 10-20 percent of Trex sales - that translates into roughly $50 million of Trex's total $337 million in sales for 2006. The company terminated the relationship after PPW agreed to distribute Azek Deck - formerly known as Procell Decking Systems. Trex officials said that agreement violated PPW's exclusive agreement with Trex.
Trex is the market leader in wood composite decking and is credited with creating the product category.
The firm frequently has been cited as a potential end market for recycled grocery bags, so the plant shutdown could be important news for film extruders and bag manufacturers that are trying to boost bag recycling efforts in an attempt to avoid bans and taxes, especially in California.
But the Progressive Bag Alliance, a consortium of plastic bag manufacturers, said the Trex plant shutdown is not likely to dampen PBA's efforts in that area. Trex works with PBA to implement plastic bag recycling programs in the U.S., according to PBA's senior managing director, Donna Dempsey. PBA continues to see growth in such programs among U.S. communities, Dempsey said via e-mail.