Automotive compounder Shanghai Pret Composite Co. Ltd. has apologized to its investors, because its acquired U.S. assets WPR Holdings LLC — including Wellman Plastics Recycling LLC and D.C. Foam Recycle Inc. — failed to reach the profit estimate that was used to calculate the acquisition price.
In a March 26 filing, Pret Chairman and General Manager Zhou Wen said the Wellman business generated $3.36 million of net profit in 2015, less than half of the estimated amount in the evaluation report.
The evaluation report, authored by Shanghai-based Shenwan Hongyuan Securities Underwriting Sponsor Co. Ltd., projected that WPR would reach net profit of $7.15 million for the year of 2015. The actual profit fell short by 53 percent.
Shenwan Hongyuan blamed falling resin prices caused by plunging oil prices.
“While production costs for recycled plastics remained stable, selling prices were affected by competition's oil-based [virgin] materials,” the company said. “These are matters that the company could neither have been informed of beforehand nor have controlled afterwards.”
The Wellman deal was completed in February 2015 for $70.45 million.
Since the acquisition, Pret has expanded its nylon offerings and added PET products, the company said. Wellman has added two PP compounding lines in Johnsonville, S.C., under the newly named Wellman Advanced Materials unit. Pret also plans to invest in long glass fiber composite production lines and tap the U.S. market for its materials produced in China.
Also in the past year, Pret conducted trial production of WPR products in China and notified its customer Ford Motor Co. of the shift of production.
Pret posted 2015 sales of 2.8 billion yuan and net profit of 260.4 million yuan.