Bolstered by an expansion of its distribution network, and cost efficiencies from its 6-month-old recycling plant, officials of Advanced Environmental Recycling Technologies Inc. said the company is on pace to increase sales of its MoistureShield brand of decking by 20 percent or more this year.
The wood-plastics composites maker also plans to launch an exterior molding line, as well as a line of outdoor furniture products by the end of the year. The products are to be formally introduced at the International Builders Show, set for Jan. 12-15 in Orlando, Fla.
We've already started the expansion and ordered the tooling and the machinery to make those new products, which will be manufactured at AERT's plant in Springdale, Ark., said Brent Gwatney, vice president of marketing and sales for MoistureShield, during a mid-September interview at the Remodeling Show and Deck Expo in Baltimore.
By the end of the year, we should have that expansion completed, Gwatney said. We think we are positioned well to take this technology into the next generation of products and become a dominant player in several wood-plastics composite products. We can deliver products at the price points the market wants and that makes us able to compete.
Gwatney said the outdoor product line will include products such as benches, tables and trash receptacles. We are hoping, especially with the exterior moldings, that those products can develop a life of their own. We think it is just as big a market as decking, he said.
While much of the building and construction market flattened when the home-buying tax credit expired earlier this year, decking has been an exception to that plateau, with a number of manufacturers reporting higher sales than in 2009.
It has been a good year, with volume up, said Stu Kemper, CEO of TimberTech Ltd. in Wilmington, Ohio. Our addition of a more economically priced PVC product, ReliaBoard, has allowed us to make volume gains in the double-digits this season and to take some share in the economy segment.
Building and construction has struggled, but decking has held up well because of the overall trend to outdoor living, said Kemper. The market is not booming, but it is stable and a solid good category.
AERT has also had a strong sales year.
Our sales of MoistureShield were up more than 22 percent through June and I believe we have a good chance of achieving a 20 percent growth for the entire year despite a dip in sales in August and a drop in demand across-the-board for all building products during July and August, said Gwatney.
He credits the company's ability to hold its price on decking because of its $13 million, 70,000-square-foot recycling plant in Watts, Okla., that opened in March; 22 years without a field failure of its product; and the addition of 13 distributors this year, filling geographic gaps and virtually doubling the number of distributors to 28.
In addition, there was rapid acceptance of the Vantage Collection line of MoistureShield decking products introduced earlier this year. There was a 90 percent changeover in the market from January to March because the product is embossed on both sides so it gives the builder efficiency during deck construction, he said.
We added about 13 distributors because we had some areas where we needed to get the product into the marketplace, particularly out West in northern and Southern California and Idaho but also in areas such as Ohio, western Pennsylvania and western New York, said Gwatney. Any time you are building the distribution chain, you are growing the business.
He also said the decking market is likely to remain a price-based market for at least two years, giving AERT a boost because we are able to dig deeper into the waste stream and recycle types of plastic that others can't, including dirty agricultural film, at the Watts plant, Gwatney said. The firm has estimated that the Watts plant could reduce its feedstock costs by 20-30 percent.
The increased sales and cost efficiencies at AERT are reflected in its first- and second-quarter earnings. Sales for the second quarter, ended June 30, were up 5 percent to $23.2 million and the company's gross margin increased by 2.4 percent. Net income of $1.3 million was identical to a year ago, and operating income improved from $2.3 million to $2.5 million.
That compares to losses of $400,000 in the first quarter of 2010, down from $1.6 million a year ago; $5 million for all of 2009, $35.9 million in 2008 and $9.5 million in 2007.
Long-term, Gwatney contends that the company's biggest advantage will continue to be that AERT has not had the field failures some other wood-plastic manufacturers have had.
We have 15 patents on our products and [are] able to analyze the plastic before it is used, he said. We haven't been in that group of composites that have failed and builders like that because as a builder, you don't want to go back to redo something. You lose all your profits when you do that.