First Look: Industry News & Analysis 21909

Husky sold, going private

Private equity, in spite of recent tumult in capital markets, ultimately beat out any strategic buyers for Husky Injection Molding Systems Ltd. (Bolton, ON), with founder and controlling shareholder Robert Schad agreeing to vote his 44% stake in the molding machine, hot runner, and mold manufacturer to Onex Corp. (Toronto, ON) in a deal valued at CAN $960 million ($958 million). “Onex is an entrepreneurial company, like Husky has always been,” Husky President and CEO John Galt told MPW in a phone interview following the announcement, “and I think there’s a natural fit.” Onex valued Husky’s outstanding shares at CAN $8.18, a 38.6% premium over Husky’s March 7 close on the Toronto Stock Exchange, which is the date it announced it was pursuing a sale. But the price is only slightly above its Sept. 27 close of $7.58.

The deal will require shareholder and regulatory approval, with a meeting planned on Dec. 6, but Schad’s decision was described in a release as “irrevocable,” and Husky’s board has already voted unanimously to recommend shareholders approve the deal, pointing toward a mid-December close. Nearly 10 years after going public, Husky will once again be a private company—a welcome prospect to Galt.

“I think it’s an appropriate time in Husky’s history to go private again,” Galt said. “I think it will allow us to execute our strategy aggressively, and it will certainly lower the cost of operating the organization [eliminating some accounting and reporting costs]. I think there’s also an issue in the injection molding industry, when the vast majority of our competition is private, about disclosure of information.”

Galt added that Husky is currently considering expansion into India and Central Europe. He declined to acknowledge the number or nature of bidders for Husky.

In Brief

Mylar customization

DuPont Teijin Films (Richmond, VA) has developed a proprietary way to customize its Mylar-brand polyester sealant film to provide controlled respiration. This permits tailored oxygen transmission rate for a range of fresh cut vegetables.

72 billion lb of PVC

Analysts at Magolis Polymers (Keansburg, NJ) say global consumption of PVC in 2007 will be 32.7 million tonnes (72 billion lb) worldwide and the five-year global AAGR will be 4.8%. These and other results are found in a new multiclient study, “Polyvinylchloride in the 2010s,” available at www.margolispolymers.com.

Storage bags move

Illinois Tool Works (Glenview, IL) has expanded its Minigrip/Zip-Pack/ Space-Bag business globally, with the acquisition of Hwa Meir Packing Daily Commodities Co. Ltd., a manufacturer of storage bags based in China’s Guangdong province.

Chery hits milestone

1,000,000: that’s the total number of cars produced by Chery Automobile Co. in its first eight years, becoming the first Chinese automaker to reach that mark. Chery needed six years for the first 500,000 but only 17 months for the next half million. It has plans for 14 overseas factories by 2010, including JVs with Fiat and Chrysler to produce and sell cars in the West.

Awards deadline

Entries for the 20th DuPont Awards for plastics packaging will be accepted until January 31, 2008. For additional information and entry materials go to www.packaging.dupont.com.

Conair purchase adds to extrusion presence

Auxiliary machinery manufacturer Conair (Pittsburgh, PA) has acquired Michigan Plastics Machinery (MPM), a manufacturer of downstream extrusion equipment, and will roll it into the new Conair Extrusion business unit, which offers program planning, process consultation, site evaluation, and a technical center with machine trials, including upstream and downstream equipment.

After sales, Conair Extrusion will offer on-site installation, startup, and system optimization.

Conair estimated in a release that MPM would automatically boost its sales to extrusion processors by 50%, with more growth anticipated. Conair will retain the MPM brand, manufacturing products from its own Franklin, PA site as well as MPM’s operation in Kawkawlin, MI. MPM was founded by former Conair employee Steve Sickles in 1999. Sickles and his management team, as well as MPM’s staff, will be retained.

China’s molding capacity huge, and growing

Helmar Franz, chief strategy officer at Haitian (Ningbo, China), recently shared his forecast for the Chinese market with special emphasis on the growth of injection molding there. The short version: The market there is huge and booming. Franz is the former CEO of Demag Plastics Group, but since early 2006 has been with Haitian.

Haitian alone predicts it will manufacture 20,000 injection molding machines this year, a nearly 22% share of the global market of about 92,000 machines, which has a total value of about $13.4 billion. Fully 75% of those 92,000 were made in Asia, said Franz. According to figures he cited from the China Plastic Machine Industry Association, the trade group predicts that the combined annual growth rate for production of presses in China will be 13.3% through 2010. Demand will be even higher at 13.9%.

China’s injection molding industry accounted for about 65% of all machines bought in 2005, say the most recent figures from the trade group; Chinese OEMs accounted for 61% of all injection molding machines produced that year. Demand in India, Brazil, and Southeast Asia accounted for the next three swiftest-growing markets in terms of demand, but these markets are much smaller. In short, China is not only the fastest-growing market for injection molding machinery, but also the largest.

Haitian is the global leader in number of machines made yearly but Franz said the firm also strives for leadership in sales. Although it makes about 22% of all injection molding machines, Haitian’s sales in the first half of 2007 were €183 million (about $260 million); double that, and its sales for the year will be $520 million, or about 4% of the total spent. Still, Haitian’s sales and profit both were up more than 20% compared to the same period in 2006, with nearly €28 million in profit booked in the first six months of this year. Currently, Franz says the firm sits at number four in total sales for injection molding machines, behind (in order) Husky, Engel, and KraussMaffei/Netstal (both owned by the same firm, Madison Capital). Haitian officials believe the firm passed Toshiba in sales this year.

German OEMs double sales prediction

According to the plastics and rubber processing machinery group within the VDMA, the country’s machinery OEM trade group, German exports of plastics and rubber machinery rose 13.6% in the period January-June 2007. The U.S. continues to be the most important market but China, in second place, has closed the gap. Russia ranks third with exports up by 51% in the first half of the year. There were also marked increases in exports to Mexico and Brazil, placed sixth and seventh behind Italy and France.

Based on the positive developments so far, the VDMA is doubling its early summer forecast for sales growth at German plastics and rubber machinery manufacturers to 7% for the year. Thorsten Kühmann, managing director of the plastics machinery group at the VDMA, said, “Companies’ capacity utilization is very high. The level of orders in hand and the jump in orders in the summer months will secure their workload for the remaining months of 2007 and on into the coming year.” His group represents 183 manufacturers who account for more than 90% of the country’s sales of plastics machinery. German manufacturers, in turn, account for more than 25% of total global plastics machinery sales.

ExxonMobil expands compounding operations

In a move shifting it closer to its plastics processing customer base, ExxonMobil Chemical Co. (Houston, TX), supplier of Santoprene thermoplastic elastomers, polyethylene, polypropylene, styrenic block copolymers, and oriented-polypropylene films, has formed a new specialty compounds and composites business. The company recently started a specialty compounding center in Baton Rouge, LA, and already compounds in Lillebonne, France. ExxonMobil earlier his year opened its Polymers Automotive Applications Center in Kawasaki, Japan.

In related news, the supplier plans to proceed with a second world-scale steam cracker at its Jurong, Singapore site that will feed a new petrochemical project which will include a 1-million-tons/yr ethylene steam cracker; two 650,000- tons/yr polyethylene (PE) units; and a 450,000-tons/yr polypropylene (PP) unit. Asia remains an area of focus for the company with Sherman Glass, Sr. VP ExxonMobil Chemical Glass, telling attendees at Chemical Market Associates Inc.’s (CMAI; Houston) World Petrochemical Forum earlier this year that ExxonMobil Chemical anticipates 60% of global demand growth for chemicals, and half of all chemical demand, coming from Asia.

Partnerships grow in bioplastics

Cargill (Minneapolis, MN), owner of bioplastics supplier NatureWorks, has partnered with Japanese plastics supplier Teijin Ltd. (Tokyo) in a deal wherein Teijin will acquire 50% ownership of NatureWorks. According to the firms, the joint venture will help accelerate NatureWorks’ global sales growth, and gives Cargill access to Teijin’s experience in fibers, films, and plastic compounds.

The NatureWorks plant in Minnesota is approaching capacity, and MPW has heard numerous processors say that customers’ interest in bioplastics cannot be met, as supply of these materials remains limited. It is easy to imagine Teijin eventually opening a facility with Cargill in Asia, where bioplastics’ demand is as high or even higher than in North America.

Meanwhile, DuPont will partner with Plantic Technologies Ltd. (Melbourne, Australia) to develop resin and sheet based on Plantic’s high-amylose cornstarch technology. Potential applications center on packaging, including cosmetics, personal care and food packaging trays, caps and containers. The partners will co-develop materials, with DuPont marketing and distributing Plantic’s material and sheet as part of its Biomax family.

Coca-Cola, URRC partner for massive recycling plant

Beverage brandname owner Coca-Cola will invest $50 million into what’s being billed as the world’s largest plastic bottle recycling plant, with an annual capacity of 100 million lb of recycled polyethylene terephthalate (PET). Located in Spartanburg, SC, the site will produce food-grade PET reclaim suitable for bottle-to-bottle recycling. Coke is partnering with United Resource Recovery Corp. (URRC; also Spartanburg) on a 30-acre site that will be completed in 2008. At full capacity, it will create enough reclaim PET for two billion 20-oz Coca-Cola bottles each year.

Founded in 1992, URRC created its patented UnPET process for chemically cleaning PET flake into a state suitable for food-grade packaging in 1994. Currently, Coca-Cola uses URCC’s prototype plant at the Spartanburg site, which has been operational since 2001. The expanded version will model Coca-Cola’s recycling facility that opened in Mexico in 2005, which also applies URRC technology.

Processor plans big for APET sheet

With current amorphous polyethylene terephthalate (APET) sheet capacity of 30,000 tonnes/yr, Octal Holding & Co. already is no small fry, but the Salalah, Oman-based processor announced during the SPE thermoforming conference in Cincinnati (Sept. 16-18) that it intends to become the global APET sheet leader by May 2008. By then, a new $300 million PET resin supply/APET sheet-extrusion complex will be online, giving the processor an additional 300,000 tonnes/yr of APET sheet capacity.

Octal is located near Salalah Port in Oman, and claims that its deliveries from there can reach almost any port within 12-18 days. The processor has distribution, sales, and customer-service operations in the U.S., Europe, and Asia. The firm started operations in late 2006 with 20,000 tonnes/yr of APET sheet capacity and recently added an additional 10,000-tonnes/yr capacity. Assuming competing APET sheet extruders do not increase their capacity by a significant amount in the meantime, Octal says its May 2008 expansion will make it five times larger than the next largest merchant producer of APET sheet as well as the largest PET supplier in the Gulf region, with its capacity representing nearly 20% of the total industry output of APET sheet. Two private equity firms in the U.S. invested in Octal: Chemlink Capital and Pound Capital. Several smaller Oman-based investors also fund Octal but the majority of the investment comes from Chemlink and Pound.

Joe Barenberg, the firm’s COO, based in its Dallas, TX global sales center, said, “Our approach addresses the longstanding deficiencies that have hampered the large-scale expansion of APET as a packaging substrate.” Barenberg added that by mid-2008, Octal would have annual sales of $500 million as a foundation from which to double capacity within 20 months.

Speaking with MPW at the SPE thermoforming conference in September, Barenberg added, “We feel that [APET] is a naturally constrained market and risk-of-supply is a serious consideration for APET users,” Barenberg said.

According to Octal, worldwide demand for APET reached approximately $2.25 billion in 2006. A new report on the APET sheet market in Asia from PCI PET Ltd. (Derby, England) stated demand in Asia is rising at an estimated 15%/yr.

Battenfeld, on solid footing, back with big machines

Management and owners of injection molding machine manufacturer Battenfeld Injection Molding Technology (Battenfeld IMT; Kottingbrunn, Austria) say their firm is on the road to improvement and expect it will break even by late 2008. Munich, Germany-based investor Adcurum acquired the OEM in October 2006 from SMS (Düsseldorf, Germany), which subsequently also sold Battenfeld Extrusionstechnik, manufacturer of pipe, profile, and sheet extrusion lines, to another financial investor, Triton, with headquarters in Stockholm. SMS still owns Battenfeld Gloucester, manufacturer of blown-film lines.

At Battenfeld IMT, FY07 sales are expected to increase by about 10% versus FY06 (no figures given). SMS closed Battenfeld’s large molding machine factory in Meinerzhagen, Germany before selling the firm, but the Kottingbrunn facility has been redesigned so that it can now build machines as large as 1300 tonnes. Previously, the Kottingbrunn plant only built machines sized to 650 tonnes of clamp force.

JVs in China: Sinopec and DuPont…

Sinopec and DuPont Packaging & Industrial Polymers (Geneva, Switzerland) have formed a joint venture (55% controlled by Sinopec) to build a 60-tonne/yr-capacity ethylene vinyl acetate (EVA) line in China at the existing facility of Sinopec Beijing Yanshan Company in Beijing. Startup of EVA production is planned for late 2008. This is DuPont’s first EVA facility in China, where it says the market for this material is growing most rapidly.

Sinopec already has significant capacity for PE, PP, PVC and PS.

…and Radici and Lati

Italian thermoplastics supplier Radici and compounder Lati have signed a letter of intent to form a 50/50 joint venture in China to develop the engineering plastics market there. The joint venture’s headquarters and production base will be in Suzhou at the RadiciPlastics Suzhou Co. Ltd. compounding plant, opened by Radici in April 2007.

The joint venture will manufacture and market a range of engineering plastics in Southeast Asia under the firms’ corresponding brand names in the market. The JV also will market all the compounds of both parent companies, to include those not yet slated to be compounded in China.

Closure molding by the numbers

According to compression molding equipment maker Sacmi (Imola, Italy), the world market for plastics closures is expected to grow by 7% from 2006-2011. Sacmi officials reckon that of the 340 billion beverage closures produced last year, 39% were injection molded, 28% compression molded, and the remaining 33%, including nonplastic caps, were made via other methods.

MBO completed at M&H Plastics

Suffolk, England-based plastic packaging processor M&H Plastics was acquired from owner JP Morgan Partners by its management, with the support of the Bank of Scotland’s Integrated Finance division. The bank holds a minority share; price of the transaction was not disclosed.

M&H Plastics employs 500, and extrusion- and injection blowmolds bottles, and molds caps and closures, primarily for the cosmetics and personal care markets. Its CEO is Mark Bryant.

Ivan Drienik

Ivan Drienik, founder and president of blowmolding tooling supplier R&D Tool and Engineering Co. (Lee’s Summit, MO) passed away on Sept. 6 at the age of 65. Born in Bratislava, Drienik emigrated as a youth, became an American citizen and served in the U.S. Army. He founded R&D in 1976 and grew it into a leading global supplier of packaging molds. The National Tooling and Manufacturing Assn. (NTMA) is creating a scholarship in his name, with donations accepted by the NTMA’s Kansas City chapter.

[ On the record ]

“We’ve three plants in China already, and we’ll build three more in the next two years.” Laurent Burelle, CEO at Plastic Omnium.

“Innovation keeps you different than the others—than your competitors. Nobody can keep going on price alone.” Walter Tesche, managing director PUR systems for KraussMaffei.

“I think we’ve already begun to explore growth opportunities that we wouldn’t have looked at within GE, so we’re excited about that.” Brian Gladden, CEO of Sabic Innovative Plastics, the former GE Plastics, which was purchased by Saudi Arabia’s Sabic.

“I think you need three plastics in autos: PC for transparency, nylon for strength and heat resistance, and PP to fill in the rest.” Jean-Claude Steinmetz, VP automotive/transportation, at polyamide supplier Rhodia.

“Obviously there are no firm plans around that, but Robert has offered up his services to the new buyer under any conditions that they might see fit.” John Galt, president/CEO of Husky, on Robert Schad, the company’s founder, now that he’s sold his controlling stake in the firm.