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November 13, 2017 01:00 AM

Aurora Plastics settles into growth mindset

Judy Stringer
Crain's Cleveland Business
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    Aurora Plastics

    Darrell Hughes is a self-professed "hands-on guy."

    Although he's worked mostly at big companies — such as GE Plastics, where he managed international product lines, and most recently at Avery Dennison North American in Mentor, Ohio, where he was vice president and general manager — Hughes never hesitated to roll up his sleeves and step outside of those executive roles when needed.

    Still, even he was a bit surprised by the intricacies of running a much smaller operation.

    "When you are trying to get ready for a board call and your phone is not working, for instance, sometimes you have to do something you've never done before, like fix the phone system," said Hughes, now one year into his new stint as head of Aurora Plastics, a Streetsboro, Ohio-based PVC compounder. "I managed quite some time without any administrative support. I've gotten really good at booking my own travel and keeping my own schedule."

    Hughes assumed the CEO post in September 2016, one month after Wind Point Partners, a Chicago-based private equity firm, and Ontario Teachers' Pension Plan partnered to acquire the 20-year-old company, which — surprise — started in Aurora. The new owners' willingness to invest in Aurora Plastics, coupled with an escalating demand for PVC building materials, drew him to the opportunity.

    "The whole focus here is on growth," he said. "This is not a turnaround story. This is a great company, a great platform — as we like to say — for rapid organic growth, as well as acquisition growth."

    The latter is most apparent of late. Aurora has closed two acquisitions since June, buying Reinier Plastics Inc. of Marieville, Quebec, over the summer and S&E Specialty Polymers of Lunenburg, Mass., in October. Hughes would not disclose financial terms of the deals. The acquisitions, he did say, expand the depth and reach of Aurora Plastics' portfolio.

    Reinier Plastics has a strong foothold in Canada when it comes to Aurora Plastics' core offering, rigid PVC compounds. Like Aurora Plastics, the Quebec firm is a merchant compounder, meaning it takes pure PVC resin from suppliers and mixes in any number of additives to make specialized PVC pellets or powders. It then sells those to manufacturers that mold and extrude the compounds into a wide range of plastic products.

    Rigid PVC blends have excellent weatherability, making them ideal for exterior building applications, such as siding, windows, fences, decks and doors, according to Matthew Kuwatch, vice president of marketing and business development at Aurora Plastics. The company's highly engineered compounds can be manufactured in dark colors, which homeowners like these days, and don't have to be painted — or, better yet, repainted — and don't rot, Kuwatch said.

    "In short, it's a much better product than wood for building," Hughes said, estimating that 50% of rigid PVC compounds are used in building and construction.

    The recovery of the housing market and uptick in construction in general have fueled a growing demand for rigid PVC building materials, he added. And an abundant supply of ethane — the primary feedstock for PVC and other polymers — in the U.S. means American companies like Aurora Plastics currently have access to lots of low-cost resin.

    "You have great cycle recovery, a great product for the application and a great [raw material] supply," Hughes said.

    Industry watcher Bill Ridenour, founder and president for Polymer TransAction Advisors, said Aurora Plastics has one more advantage in the rigid PVC sector: manufacturing efficiency.

    "Even though they are much smaller than some of the other businesses in PVC, their plants are laid out very well to compete from a cost standpoint," he said.

    Along with entry into the Canadian market, the purchase of Reiner provided Aurora Plastics with a new product line: flexible PVC compounds, which are used in the soles of footwear, in gaskets and seals on appliances, in car parts and in a wide range of tubing and wiring applications. About one-third of Aurora Plastics' rigid PVC customers also manufacture products using flexible PVC, Hughes said, making Reiner an obvious fit.

    The subsequent acquisition of S&E Specialty Polymers strengthened Aurora's "scale and scope in flexible PVC," he said, bringing more capacity to its newest product line as well as entry into thermoplastic elastomers (TPEs) and thermoplastic polyolefins (TPOs), which integrate rubber into polymer blends and are a good alternative to flexible PVC in certain applications, such as sealing rings and wire and cable jacketing.

    "It allows us to be responsive to our customers," Kutwach said of offering both flexible PVC and TPEs/TPOs. "Some want to use one or the other because of how their manufacturing processes are set up."

    With the acquisitions, Aurora now maintains four compounding sites. The company was founded in 1997 and operates production plants at its headquarters in Streetsboro, which was expanded in 2014, and in Welcome, N.C.

    Hughes would not share financials but said — based on new product lines, new customers via the recent purchases and the company's growing capacity — "You can think of a significant acceleration in terms of revenues."

    Employment is closing in on 200 full-time workers, Kuwatch said, four times its size just five years ago.

    "Aurora Plastics is one of the very good, well-run players in PVC," Ridenour said. "Now that they are branching out, I think they will be pretty successful in the other resins as well."

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