Avon Rubber moving forward, back in black after tough stretch

By Mike McNulty (R&PN)

Melksham, England-Avon Rubber P.L.C. has changed significantly in the last 12 months and more moves are likely on the horizon.

In fiscal 2008, it was operating in the red, attempting to unload its European mixing facility, aiming to cut its debt, dealing with a high cost base in England and trying to resolve issues it had with its relatively strong dairy products operation, especially in Europe. Only its growing protection and defense products division in the US and England seemed to be on very solid ground.

Fast forward one year.

First and foremost, Avon has landed solidly in the black in fiscal 2009 after struggling in the red in fiscal 2008. And it did it through a number of initiatives aimed at paring down units that don't fit into its core operation and upsizing its primary businesses, which performed well in 2009.

Its latest move has been to place Avon Engineered Fabrications, based in Mississippi, on the selling block. The company said there's considerable interest in the subsidiary, which specializes in producing flexible goods from coated fabrics and other specialty formulations. Its products include hovercraft skirt systems and flexible storage tanks made from durable polymer-coated fabrics.

Avon's plan is to dispose of the business, but because it has returned to profitability, the company said it will only do so if the financial terms are good.

Key initiatives

If the company finds the right buyer for Avon Engineered Fabrications, the subsidiary will join the firm's former rubber mixing plant, which was not performing well and sold for about $3.3 million a year ago to take the company out of that segment of the industry and free up money for manufacturing.

“We sold it as a going concern,” said Andrew Lewis, the company's finance director. “It safeguarded some jobs and realized some cash for us.”

Avon's dairy division, although doing well in the US and still considered one of the company's core operations, is going through major changes, including the relocation of its European rubber products manufacturing unit to the Czech Republic from its plant in Wiltshire. The move is expected to be complete in the first half of 2010.

The firm is turning production over to a subcontractor because it said the cost of manufacturing in England is too high and the United Kingdom segment has not performed as well as its counterpart has in the US Outsourcing will help get the unit's cost base on the right path, CEO Peter Slabbert said.

However, the US rubber dairy goods unit, based in Wisconsin, has gone through its own series of changes. These include the sale and leaseback of a dairy liner production facility in Wisconsin and a warehouse in California, which has resulted in a $6 million profit that the company is using to reduce debt and strengthen its balance sheet.

Demand for milk fell toward the end of 2009, but Avon officials said in the company's fiscal year-end financial report that its Milk-Rite brand of products, including its automated milking process, has increased its market share in all regions despite tough economic conditions in the dairy industry. The firm anticipates it will make new gains in 2010 as it continues to introduce products.

Ups and downs

Meanwhile, the company's protection and defense division has been busy fulfilling a number of respiratory protection product contracts it landed in the US and England throughout fiscal 2009, which ended in September, to keep its manufacturing facilities in Cadillac, Mich., and Wiltshire operating at a high rate.

Avon made significant investments in the Cadillac plant in 2008, boosting capacity to deal with increased respirator mask orders. The firm plans to hike filter production capacity further in 2010 to meet anticipated demand, Lewis said.

The moves Wiltshire-headquartered Avon has made throughout the year, coupled with its efforts to create a lean manufacturing culture, create a platform for future growth, Slabbert said.

The downside of the firm's current operation has been its International Safety Instruments self-contained breathing apparatus business it purchased in mid-2005. The unit makes SCBA and other systems for the fire, law enforcement and industrial markets.

Based in Lawrenceville, Georgia, the business has not performed well, company officials said. Its cost base has been reduced and a new general manager has been brought on board to provide greater focus on industrial and defense related opportunities that the firm hopes will lead to an improved performance in fiscal 2010.

After suffering a loss of about $6.6 million in 2008, Avon came back with $7.6 million in profits in fiscal 2009 on a 68-percent increase in revenues to about $152.5 million, the company said. The firm's protection and defense division led the way with a 105-percent jump in sales to $111.3 million while the dairy division's revenues rose 13 percent to $41.2 million.

From Rubber & Plastics News (A Crain publication)