Applied Extrusion Expects Loss - Higher Resin Prices Blamed
BOSTON, Jun 29, 2000 - Applied Extrusion Technologies, Inc. (NASDAQ NMS: AETC) today announced that earnings for fiscal 2000 and fiscal 2001 would be lower than expected as a result of rapidly escalating raw material costs. While the OPP films industry has been recovering from an overcapacity situation experienced over the past few years, it has not reached a level sufficient to pass on all of the major cost increases.
"The price of polypropylene resin, our primary raw material, has increased 74 percent from the second quarter of fiscal 1999 and 25 percent over the past four months," said Thomas E. Williams, President and Chief Executive Officer. "The cost of polypropylene is driven by the price of crude oil, which has increased dramatically and is not projected to abate in the near term. Although the OPP films industry has been recovering from a serious overcapacity situation, the industry has not yet reached the utilization level necessary to support price increases sufficient to offset the rapid, large escalation in costs, and therefore, only a portion of the resin cost increases have been successfully passed on to the Company's customers in the form of price increases. While AET offers a broad and differentiated OPP films product line, sales in the more price sensitive low-end of the market are currently greater than normal, as a result of our 60 percent increase in capacity over the past four years. Nonetheless, our differentiated product line and efficient assets will still allow the Company to generate EBITDA margins of approximately 15 percent, well in excess of the industry average. However, earnings will remain under pressure until industry utilization rates reach levels needed to fully support further price increases, or until resin costs decline. Although the Company expects to be profitable for the full year, we do expect to report a small loss in the second half, and earnings for fiscal 2001 are anticipated to be lower than previously expected. We estimate that industry utilization levels, together with our improving product mix will support price recovery twelve to eighteen months from now," concluded Williams.
Applied Extrusion Technologies, Inc. is a leading developer and manufacturer of highly specialized plastic films used primarily in consumer products labeling, flexible packaging, filtration and health care applications. Through its technological innovations, AET is a leader in the North American oriented polypropylene and apertured films markets.
Except for the historical information contained herein, the matters discussed in this release are forward-looking statements that involve risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, including those risks related to the timely development and acceptance of new products, fluctuations in raw materials and other production costs, the loss of one or more significant customers, the impact of competitive products and pricing, the timely completion of capital projects, the success of the Company's efforts to access capital markets on satisfactory terms, and to acquire, integrate, and operate new businesses and expand into new markets, as well as other risks detailed in Exhibit 99 of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1999 and from time to time in the Company's other reports filed with the Securities and Exchange Commission.
CONTACT: Applied Extrusion Technologies, Inc., Anthony J. Allott, Vice President and Chief Financial Officer, (978) 538-1516
