The Profile Extrusion Business in the new Normal Economy

PCRS undertook an economic analysis of the North American profile extrusion business in 2000 and again in 2004. Since 2004 the companies in this business – processors, die-makers, machinery and auxiliary equipment suppliers - have suffered through the most difficult economic conditions since the commercialization of the profile extrusion process. Other regional plastics processing businesses have also been adversely affected. However, the recession starting in December 2007 has taken a profound toll on regional profile extruders since 75% of their output is directed to customers in two industries – automotive and building and construction - which have felt the full brunt of the historic drop-off in consumer demand.

PCRS decided to revisit this business, not so much to chronicle past conditions, but to accurately and candidly project likely future conditions. Over the period September-November 2009 Dr Mooney conducted a telephone-based survey of officials at companies with profile extrusion operations as well as consulting officials at leading suppliers of extrusion machinery. Overall PCRS were able to collect and distill information from over 100 companies in this field and supplement the data and insights gained from these interviews with historical data and forecasts generated by organizations tracking developments in all the major markets for profile extruders.

The peak of the North American profile extrusion business was reached in 2005 when aggregate industry sales crested at $13.9 billion. Largely due to the collapse of the U.S. housing industry and the erosion of the regional automotive industry predating the recession, the value of profile extruded output declined to $11.9 billion in 2008. Based on our interviews, we estimate this total declined a further 14% to $10.2 billion in 2009. However, this is the nadir of this destructive business cycle. PCRS envisages the value of output of this industry rising at an average annual rate of 6% to basically regain the 2005 peak sales level by 2014. Some of the major markets for profile extrusion will have fully recovered prior to 2014.

As one would expect the hierarchy of players in the regional profile extrusion business has been transformed over recent years as some companies were unable to survive the dramatic decline in demand for their products and services. There has been significant corporate consolidation among the surviving companies. Yet remarkably there has been a noticeable number of new entrants into this business, either focusing on new niche applications or introducing innovative products to establish a position in existing applications. Meanwhile the survivors in this business are hardly standing idly by, waiting for government stimulus packages and bank bailouts to “lift all boats”. They are devoting sales/marketing resources to secure their position in traditional markets as well as diversifying into new ones with strong growth prospects such as medical equipment. And beyond the resin standard-bearers such as PVC and the other commodity thermoplastics, many companies are investing in the machinery and manpower required to process high-performance engineering resins.

The business mantra of the moment is innovation. Going forward it is incumbent on regional profile extruders to innovate in their product lines and in their utilization of manpower and machinery in order to raise their productivity to better compete on domestic and international markets. One of the features of this report is an analysis of operations across the industry – for example, average sales accruing to captive, custom and proprietary profile extrusion operations, the number of extrusion lines and employees per plant, the number of employees per extrusion line – that processors can utilize to benchmark their own operations.

INTRODUCTION

Background and Objectives of the Research Program

Survey Scope and Results

EXECUTIVE SUMMARY

The Recent and Current Growth Dynamic in Profile Extrusion

The Likely Future Growth Dynamic in Profile Extrusion

PART I: THE EVOLVING STRUCTURE OF THE PROFILE EXTRUSION BUSINESS

The Profile Extrusion Process

Long-standing and New Entrants to the Business

Recent Corporate Consolidation in the Business

The Distribution of Custom, Proprietary and Captive Operations

The Pattern of Sales Revenue from Custom, Proprietary and Captive Operations

Alternative Plastics Processing Capabilities among the Profile Extruders

The Distribution of Regional Profile Extruders by Country

The Distribution of Regional Profile Extrusion Plants by State and Province

The Degree of Capital- and Labor-intensity in Profile Extrusion Plants

PART II: THE PROFILE EXTRUSION SUPPLY BASE

Suppliers of Profile Extrusion Machinery

The Palette of Resins in Profile Extrusion

Recent Patterns of Technological Change in Profile Extrusion

Energy Star Standards

Green Materials

PART III: MAJOR AND NICHE MARKETS FOR PROFILE EXTRUDERS

The Distribution of Major Markets

Appliances

Leading Extruders of Appliance Profiles

Automotive

Leading Extruders of Automotive Profiles

Building and Construction

Leading Extruders of Building and Construction Profiles

Evolving Material Options: Solid, Cellular and Composite Materials

Decking, Fencing and Railing

Siding

Window and Door Lineals

Other Building and Construction Profiles

Furniture

Leading Extruders of Furniture Profiles

Marine Products

Leading Extruders of Marine Product Profiles

Medical Equipment

Leading Extruders of Medical Equipment Profiles

Pallets

Leading Extruders of Pallets

Signs and Displays

Leading Extruders of Signs and Displays

Niche Markets

Leading Extruders of Profiles Calling for High-performance Material

The Past, Current and Likely Future Growth in Major Profile Extrusion Markets

PART IV: EXPOSURE OF REGIONAL PROFILE EXTRUDERS TO INTERNATIONAL TRADE

Import Competition Confronted by Regional Profile Extruders

Export Opportunities Open to Regional Profile Extruders

PART V: PERSPECTIVE OF THE PROFILE EXTRUDERS

The Hierarchy of Companies in Profile Extrusion

Views of over 100 Profile Extrusion companies