AEP Industries Exiting OPP Film Business, Sells Certain Assets to AET

AEP Industries Inc. today reported it is exiting the OPP films industry and closing its Proponite business located in North Andover, MA, which has approximately 45 million pounds of annual production capacity, or 6% of the total North American OPP films capacity. In a separate announcement today, Applied Extrusion Technologies Inc. said that it has entered into an agreement to purchase selected manufacturing equipment and certain other assets of AEP's Proponite OPP films business.

It is anticipated that the Proponite production facility of AEP Industries will be closed by the end of this month. AET intends eventually to move some of the manufacturing assets to existing AET facilities. The remaining lines will be permanently dismantled. The purchase price for the assets is $13 million in cash, and the transaction is expected to close by the end of April.

"The consolidation of the OPP films industry has finally begun," says Thomas E. Williams, chairman and CEO of AET. "The North American OPP films industry is approaching its lowest utilization level in 10 years, as all seven of the new OPP production lines planned in North America have been placed in service and are now operational. As a result of the low utilization level, OPP films have suffered unprecedented price deterioration."

Williams says the exit of AEP's Proponite business is evidence that the current pricing level is not only below reinvestment thresholds, but it is also below a sustainable level for less-efficient manufacturers to generate positive cash flow. "We believe this, as well as other likely consolidations, will result in an increased capacity utilization level and a stronger OPP films industry," he says.

Williams adds that in the past three years, AET has built state-of-the-art manufacturing assets, invested in research and development, and assembled a world-class sales organization — investments that he says position the company well to weather what he calls "the current cyclical trough" and to benefit from the inevitable market recovery.

Applied Extrusion Technologies Inc. is a leading developer and manufacturer of highly specialized plastic films used primarily in consumer product labeling, flexible packaging and healthcare applications with a focus in the North American oriented polypropylene and apertured films markets.