Spartech aims for growth with focus on customers, packagingSpartech aims for growth with focus on customers, packaging

At Spartech Corp.'s new technology center in Maryland Heights, MO, there's room on the sprawling manufacturing floor for customers to work alongside Spartech scientists and engineers to develop and test new plastic products.
In a nearby studio, customers can work with the company's in-house design staff to develop packaging, which can then be weather and burn-tested in an adjacent lab.

Including customers in each step of manufacturing -- all under one roof and earlier in the design process -- is a strategy that Vicki Holt has championed since she was named president and chief executive of the plastics maker in September.

"This is a huge step forward for us and a new way of working," she said.

The shift follows broader restructuring Spartech embarked on three years ago to turnaround disappointing financial results.

In fiscal 2008,as demand from automotive and building materials customers waned during the economic downturn, Spartech lost $192 million. That was followed by an $8.3 million profit from divesting some businesses units in 2009, but weakened global economic conditions helped push Spartech to post a loss of $50.3 million in fiscal 2010 ended Oct. 30. Spartech's stock -- trading at nearly $30 a share in 2006 -- closed at $4.16 on Thursday.

Holt, a former senior vice president at PPG Industries in Pittsburgh, had been on Spartech's board since 2005 before being tapped for the top job last year. Her work at PPG included a turnaround of the Pittsburgh-based company's glass and fiberglass businesses.

The heightened focus at Spartech on packaging and customer service is showing results. In July, Spartech was named supplier of the year by yogurt company Danone Canada for developing new packaging that reduced plastic by 25 percent.

Spartech did this by adding air bubbles to the plastic, which used less material than solid plastic.
Spartech's three business units -- custom sheet and rollstock, packaging, and color and specialty compounds-- process a billion pounds of plastic resins, alloys and compounds a year for customers worldwide.

As more consumer products companies move toward packaging that decreases their carbon footprints, Spartech is working on developing "green" materials that degrade more quickly in landfills than other plastics or use less raw materials.

Lindsay Beck, senior packaging engineer at ConAgra Foods, said Spartech is collaborating with the food giant to make plastic containers for pudding cups that use less material.

"Our customers are making decisions on perceived green-ness of our products," Beck said. "But consumers don't want to pay more for a more environmentally friendly package or plastic."

Holt views packaging as a prime area for growth. Packaging currently accounts for a quarter of sales and 35 percent of Spartech's earnings.

"We want to grow it faster than our other businesses; it's less cyclical," she said.

Under Holt's watch, Spartech recently opened its $5.5 million technology and innovation center in Maryland Heights, consolidating research and development staff previously scattered at manufacturing sites across the country, including Indiana and Pennsylvania.

The 90,000 square foot facility is four times larger than the space Spartech previously had for R&D efforts, emphasizing the focus the company with $1 billion in annual revenue has put on innovation.

The technology facility currently has 30 employees and will double within the next three years, said Executive Vice President and Chief Financial Officer Randy Martin. Spartech has 2,400 employees worldwide, including 100 at its Clayton headquarters.

Spartech recently launched its 'IQ PKG' creative design group -- a new service. Holt said the group will allow its customers to save costs by working with its packaging designers early in the process.

"The majority of customers, when they're launching new products, (are asking) -- can they use less materials, can they be more environmentally friendly, and can they generate less waste," Holt said. "We have to find the right solutions that don't cost the customer more money."

Packaging isn't the only focus. Spartech is investing in other capital improvements, including a $6 million expansion of an extrusion line at its Cape Girardeau, Mo., plant that makes plastic automotive parts. The company also is planning $6 million in packaging equipment and capability expansions at facilities in California and Mexico.
The automotive sector has picked up some compared to 2009, but demand for Spartech's products from other sectors, such as compounds for siding and roofing materials for the commercial construction industry, remains weak.

As part of its restructuring effort, Spartech decreased its number of plants from 42 to 30 during the past three years and sold off some business units.

"We had gone through a lot of change, which caused a lot of disruption," Holt said. "Now we're back to basics in operations, with better trained employees to delight customers, and are more customer-oriented."

The reorganization has translated to sales gains. Spartech boosted its net sales to $517.3 million for the six months that ended April 30, up from $493.7 million for the same time period a year prior. Analysts say the changes will help better position Spartech for the future.

"The groundwork they have laid in engaging customers on a higher level I think it will eventually lead to higher selling, but it will take time," said Dmitry Silversteyn, senior research analyst with Longbow Research in Independence, Ohio.

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