Sluggish, lower-than-expected sales growth has triggered layoffs at bioplastics resin producer NatureWorks LLC that some sources said equal as much as one-third of its workforce.
In spite of that action, the company's second 150 million-pound line will start as scheduled at its Blair, Neb., polylactic acid plant in mid-June, said Steve Davies, communications and public affairs director for the Minnetonka, Minn.-based company.
The layoffs were made March 18, just six days after the company officially announced that it would begin a site search for a second PLA plant, which it expects to open in three to four years.
Before the layoffs, NatureWorks' labor force was roughly 120 and most cuts were in support staff, Davies said. He did not disclose how many employee recently were laid off, but several sources put the number at more than 40 people.
“We have better sales than last year, but sales have dropped substantially from what we projected,” he said. “Oil prices are artificially low, consumer demand globally for all products has dropped and there is an overcapacity for commodity resins.
“We went from being cost-competitive and cheaper” than commodity resins six to eight months ago to a situation where “we are no longer cheaper, even though our value proposition hasn't changed,” Davies said. “But we don't see the low price in oil or commodity prices sustainable long term.”
Davies said the layoffs do not signal a reduced commitment to bio-based resins and pointed to a deal NatureWorks announced March 19 for Ashland Distribution to distribute Ingeo-brand, corn-based PLA resins in North America.
The expansion at Blair will double annual production capacity for NatureWorks PLA to 300 million pounds.
“But we don't expect the plant to be running at a full rate” initially, said Davies. He added that there has not been any cutback in Ingeo production because of the layoffs.
“We are still very bullish about this resin. But we will grow a lot slower in the short term, maybe the next two years,” he said.
The firm still is experiencing “a healthy double-digit growth rate. We have to keep an eye on the future, but manage for the short term,” Davies added.
After triple-digit growth since 2003, sales at NatureWorks “flat-lined in 2007” because of capacity constraints, he said.
Incremental capacity improvements on the existing line at the Blair plant boosted PLA capacity nearly 20 percent in 2008, according to Davies.
NatureWorks is a joint venture between Cargill Inc. of Minneapolis and Teijin Ltd., based in Osaka, Japan.