Spartech Corp. has confirmed several more moves to dispose of noncore assets, including the sale of a profile extrusion business and the closings of four plants.
In a Sept. 9 quarterly earnings release, the Clayton, Mo.-based maker of sheet, packaging and compounds announced that it plans to sell its profile extrusion business in Canada to rotational molder Acrylon Plastics Inc. Spartech also announced that it will close a compounding plant in Lockport, N.Y.
The profile extrusion business, part of Spartech's Engineered Products segment, is located in Winnipeg, Manitoba, and has annual sales of about $9 million. No purchase price was disclosed in the deal, which is scheduled to close in October.
Acrylon is based in Winnipeg. The company was founded in 1978 and does rotational molding and thermoforming of components for buses, farm equipment and other end markets. The Lockport site, which primarily makes compounds for the automotive market, will close by the end of October.
Officials also confirmed in the release that Spartech recently closed a sheet plant in Atlanta, a toll compounding plant in Arlington, Texas, and a marine products plant in Rockledge, Fla. The Arlington plant was run exclusively for Chemtura Corp., a leading plastics additives maker that filed for bankruptcy in March. The Atlanta, Arlington and Rockledge plants accounted for losses of more than $3 million in the third quarter.
In a Sept. 10 conference call with investors, President and CEO Myles Odaniell said Spartech already has achieved $80 million in annual savings through extensive structural cost reductions. But he added that Spartech's recent activity isn't just a cost-reduction story.
We've improved the capabilities of this organization, he said. We've chosen a challenging time to drive this level of structural change, but it's better positioned Spartech for the long-term.
Odaniell added that the firm has addressed any liquidity questions that may have existed a couple of quarters ago.
When the Lockport plant is closed and the sale of the Winnipeg plant is completed, Spartech will have closed or sold 9 plants about 25 percent of its previous total in the last 18 months. The recent moves come two months after Spartech altered its financial obligations to allow it to sell non-core assets.
Spartech's profit for its fiscal third quarter which ended Aug. 1 was down 66 percent to $1.5 million when compared to the year-ago quarter. Sales for the quarter took a 31 percent plunge to less than $242 million in the same comparison.
Weak third-quarter demand in transportation, recreation and leisure, and building and construction affected our results, executive vice president and chief financial officer Randy Martin said during the conference call. That was where we saw the largest drops, and those markets make up 40 percent of our sales mix.
Although Spartech's financial picture appears to be improving, officials said challenges remain.
[Recessionary] effects should continue through 2009, and demand is expected to remain weak, Odaniell said. Everybody is destocked at this stage. We're getting no clear signs from our customers that there will be a one-time restocking or an ongoing restocking of any permanent nature.
Odaniell added that Spartech has improved its ability to pass on increased feedstock costs to its customers in a real-time basis. Martin said the firm now generates only 9 percent of its overall sales from the automotive market, compared to 16 percent at this time last year.
The third quarter was particularly brutal for Spartech's color and specialty compounds unit, which saw operating earnings fall almost 60 percent to $2.7 million. By comparison, operating earnings at the firm's custom sheet and rollstock unit were up almost 30 percent and skyrocketed almost 80 percent in its packaging technologies unit.
Asked about the future of the compounding unit, Odaniell acknowledged that the business has been more impacted by the economic downturn than other units.
Compounding has seen a 45-50 percent drop and hasn't seen any demand come back yet, he said. It's a business that's used to maximize cash and provide a level of integration that's unique and affects the value of our sheet business. But it's still underperforming, and as we go forward, we'll assess its value.
Earlier this year, Spartech added two new extrusion lines in Warsaw, Ind., to make its Royalite-brand sheet, as well as a grade of sheet made from recycled PVC.
The firm also closed part of a sheet plant in Donchery, France.
Not counting the newly confirmed closings, Spartech has eliminated at least 700 jobs since early 2008.
For the first nine months of Spartech's fiscal 2009, sales were down 31 percent to about $723 million vs. the year-ago period. Nine-month profit tumbled from almost $5.3 million to less than $200,000.
Copyright 2009 Crain Communications Inc. All Rights Reserved.