AERT ending alliance on Jan. 1
Posted on Saturday, July 26, 2008
SPRINGDALE — Advanced Environmental Recycling Technologies Inc. ’s relationship with paper products giant Weyerhaeuser will end Jan. 1, top executives told investors this week.
Weyerhaeuser represented 75 percent of the Springdale manufacturer’s 2007 sales. AERT is the exclusive maker of ChoiceDek deck boards, which are sold to Weyerhaeuser and distributed through Lowe’s Companies Inc.
In a related move, AERT said it will acquire the Federal Way, Wash.-based business’s brand for an undisclosed amount.
About 70 people gathered Thursday night at the Holiday Inn Convention Center in Springdale for AERT’s annual meeting, at which 2007 financial results were presented and nine shareholder proposals were approved.
Joe Brooks, the company’s chairman and chief executive officer, gave few details about the change at the meeting.
Afterward, he said AERT will acquire Weyerhaeuser’s ChoiceDek inventory starting in September, with the transaction to be completed by the end of the year.
AERT will now directly deal with Lowe’s, a relationship started in the early 1990 s.
Keith Johnson, an analyst with Morgan Keegan & Co., said AERT will still sell the same amount of product, but will have less flexibility with its cash flow.
The cyclical nature of the home remodeling industry means deck manufacturers such as AERT must build up their inventories during the winter.
The buildup puts a squeeze on cash since peak selling season isn’t until the spring and summer months, Johnson said. “But AERT is getting rid of the middleman, who receives some sort of payment, so that improves margins,” he added.
AERT claims about 8 percent of the composite lumber market, Johnson said.
Brooks declined to say how much the company will save by eliminating Weyerhaeuser.
The changes are related to the pending settlement of lawsuits that named Weyerhaueser, AERT and Lowe’s, he said. Plaintiffs claimed black spots appeared on ChoiceDek boards that were touted as maintenance-free.
Brooks said more details about the settlement are to come.
After the 90-minute event, AERT shareholder Ken Forrester said he felt cautiously optimistic about the coming changes.
Investors also learned that AERT is proposing to resell recycled plastic.
Officials said its Watts, Okla., facility, which is set to open in early 2009, is the “key to the future” since that’s where plastic reprocessing will take place.
Forrester, of Maumelle, said he’ll feel better about the company after Watts is “up and going.”
AERT officials said projected sales and savings activity from the Watts plant could result in another $ 8 million ) to $ 11 million in annual revenue.
The internal changes are expected to help boost its stock price above $ 1 per share. AERT must raise its stock price before Dec. 18 or face delisting from the Nasdaq stock exchange. Right now, the company is not in compliance with the electronic exchange’s regulations. AERT’s shares rose 2 cents, or 3. 23 percent, to 64 cents Friday. Its stock has traded as high as $ 1. 65 and as low as 50 cents over the last year.
To contact this reporter: lwhalen@arkansasonline. com
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