MorrisAnderson

State of the Industry

• Factors such as end use, resin, equipment and methodology affect the current success of plastics companies.
• Plastics are not biodegradable, so U.S. Environmental Protection Agency trends favoring paper packaging are reducing their use in the fast-food industry.
• In a paradigm shift, General Electric sold its plastics division for $12 billion in 2007.
• Certain plastic product sectors, such as caps and lids, are doing well, yet investment in new equipment is needed to make some of these products.
• Health-care products and components are also doing well, although because of the strict regulatory nature of the medical field, it is harder for companies to get a foothold.
• There is a trend of having tools made in China for 20% of what it would cost to manufacture domestically, then bringing them back to the United States for use.
• The Saudis are also starting to manufacture plastic as a way of adding value to their petroleum exports
• Resin, petroleum and natural gas prices are currently increasing at 5 percent to 8 percent, so manufacturers need to have price-escalation clauses in their contracts.
• Automotive tools cannot be moved to other machines, they must be re-certified.
• The resale market for equipment is unfavorable, making liquidation unattractive; long-term restructuring or consolidation may be a better option.

6- to 12-month Outlook

• Generally speaking, appliance and automotive sectors within the plastics industry will remain flat or suffer, while food and medical will improve.
• There is a trend toward more capital investment – better, more technologically advanced machines producing lower volumes.
• The secondary market for equipment makes liquidation relatively unattractive, so long-term restructuring and consolidation is possible.