Trex Co. Inc. is lowering its sales projections for 2007 and beefing up its product defect reserve for warranty claims, the public company said in announcing its third-quarter finances.
Trex is putting $45 million more into its cache to handle claims made concerning some deck boards produced at its Fernley, Nev., plant from 2003-06. The surface of some installed boards has flaked, company said.
``Only a small percentage of the Fernley product has exhibited this condition,'' said Andy Ferrari, chief executive officer, in a Nov. 6 conference call. ``Less than 1 percent sold to date was impacted.''
Ferrari said the firm has changed a formula and improved processing to remedy the problem. Trex now is testing the quality of every bundle produced, he said.
``We're confident that any product made at the Nevada plant after mid-2006 will not exhibit this defect,'' he said.
The defects were only part of the company's financial woes this year, as it has lowered its sales projections for 2007 to $315 million to $335 million - down from an earlier estimate of about $350 million. Trex sold $337 million worth of goods in 2006.
Company officials cited the housing slump as part of the problem.
Trex suspended production indefinitely at its plant in Olive Branch, Miss., in September. The plant employed 115 and housed two extrusion lines, though it is designed to house as many as six. The company has invested $40 million in the plant since its 2005 opening. The plant represented about 10 percent of Trex's overall production capacity.
The Winchester, Va.-based company has reduced its manufacturing staff from 935 at the beginning of 2007 to 665, according to a Trex news release.
Trex is in the midst of an image change, trying to broaden itself from a wood composites firm to a building products firm, after announcing expansions into cellular PVC deck and trim. Neither product is being made in-house. Veka Innovations of Fombell, Pa., is making the deck boards.
Trex has tapped Israeli building products maker Palram Industries Inc. to manufacture its trim board. Palram's North American operations are in Kurtztown, Pa.