Housing starts are forecast to rise in the United States in 2021 and economists predict above-average growth for the gross domestic product, but there's another reason Ipex Group Chairman and CEO Alex Mestres has cause for optimism.
Operating as Ipex USA LLC, the Pineville, N.C.-based North American subsidiary of Belgium's Aliaxis SA extrudes plastic pipe for the building, industrial, agriculture and infrastructure markets — the latter of which has been terribly neglected.
But that could be changing.
"We can't ignore the infrastructure investment opportunity driven by a public infrastructure spending backlog of more than $2 trillion," Mestres said of his positive outlook. "I strongly believe that the value we bring will continue to resonate with a resilient U.S. market as we seek to grow our operations."
Ipex had a growth spurt in 2019 with the acquisition of Silver Line and its four manufacturing plants, which gave the company a more prominent presence in the U.S.
"Many of the products in the Silver-Line portfolio were either new to Ipex or they enhanced our existing offering," Mestres said. "The acquisition not only broadened our portfolio in many segments, but opened the door to new markets as well. Some examples would include well casing, threaded drop pipe, irrigation and drainage products."
2019 turned out to be a record year for Ipex in the U.S., according to Aliaxis' business overview for consolidated accounts, which notes "a significant increase in average sales and gross margin generation from top 10 customers."
The 75-page annual report says Aliaxis saw sales of 3.1 billion euros ($3.7 billion) in 2019, but it doesn't break the results down by region. The employee base does, however, and it says Aliaxis employed 15,511 people in 2019 with the Europe, Middle East and Africa division accounting for 38 percent of all staff and North America ranking second with 19.3 percent, closely followed by Latin America, India and Australia.
Plastics News estimates Ipex's North American sales have increased to $700 million, which moves it up in the ranking to the No. 6 spot, formerly held by composite decking extruder Trex Co. Inc.
Mestres declined to comment except to say the experienced Silver Line employees have been an asset to Ipex.
"Given how competitive our market is for employment, it is hard to overstate the importance of welcoming roughly 350 high-caliber individuals to our team," Mestres said. "We have a common vision for our future, and we now all benefit from the new capabilities and skill sets that we collectively bring to the table for the benefit of our customers.
After a year of integrating Silver Line, as well as widening its distribution footprint, Ipex is ready to grow again.
"We remain actively interested in pursuing additional acquisitions in North America," Mestres said, describing the target as "companies with a significant fit and substantial growth synergies."
Ipex currently has 11 manufacturing sites and 11 distribution centers in the U.S. and 26 manufacturing sites and 26 distribution centers in North America.
Regarding prospects for further sales growth, Mestres pointed to the increase in U.S. housing starts, which were at a seasonally adjusted annual rate of 1.53 million for October, according to the U.S. Census Bureau. That's 4.9 percent above the revised September estimate of 1.46 million and 14.2 percent above the October 2019 rate of 1.34 million.
"Housing starts are still forecasted to rise coming off strong results in 2020," Mestres said. "Similarly, economists are predicting above-average GDP growth for 2021, with consensus estimates at 3.3 percent annualized, and business investment is projected to increase next year by an estimated 3 percent."
On top of that, President-elect Joe Biden has a $2 trillion Build Back Better plan that calls for investing in schools, water systems, municipal transit and universal broadband. Getting the incoming Democratic president's plan through Congress will take cooperation with Republicans, but many are hopeful for a compromise.
"The U.S. offers the potential for Ipex to continue increasing our participation in a large growing market and build new customer relationships while exceeding their expectations," Mestres said. "Despite the effects of the ongoing pandemic, we are encouraged by a number of short- to medium-term economic indicators and we are optimistic about the future of those segments in which we participate."