AERT Expands Facilities With Increased Earnings

Advanced Environmental Recycling Technologies Inc. of Springdale is planning to build a $35 million recycling facility near Watts, Okla. The 20,000-SF facility is a testament to the company’s growth over the past year.

AERT, which manufactures composite building materials from recycled polyethylene plastic, had $87.31 million in sales for 2005, a 37 percent increase over 2004.

Robert Thayer, the company’s chief financial officer, said the new recycled plastic processing facility will showcase AERT’s new designs and technology.

A public hearing was held Aug. 14 in Stilwell, Okla., regarding the proposed plant on 20 acres near the Arkansas/Oklahoma state line. Thayer said there wasn’t much opposition from citizens regarding the AERT facility.

“There were some good questions asked, and we had some good answers,” he said.

What could have come into question is about AERT’s past problems with fires. In 1993, there were two fires at its Junction, Texas, facility. Chairman and CEO Joe Brooks said arson was involved. Then in 1996, two fires at the now closed Rogers facility also raised the question of arson. Operations at the Rogers plant moved to the Springdale plant near the Brooks family’s Razorback Farms, where yet another fire broke out. In all cases, none of them were deemed to be arson.

And the company took another blow with two other accidental fires, one in Junction in 2003 and one in Springdale in 2004.

The nature of manufacturing the wood fiber product creates an ever present risk of fire.

But the tiny town of Watts didn’t have any objections, according to Thayer. That means, barring any problems with regulatory approval, the plant will initially have 30 to 50 employees, and even more with future expansion.

If all goes well, Thayer said the facility could eventually expand to include an extrusion line. That could mean up to 300 jobs at the plant, almost as much as the population of Watts, which was 316 in 2000.

But even with the company getting back on track since the string of fires, nagging legal problems are still hanging around.

According to the company’s annual report, a court-ordered mediation in March between AERT and insurance underwriter Lloyd’s of London was unsuccessful and will now go to trial. The lawsuit filed against AERT claims the company didn’t rebuild its Junction facility as it existed before the 2003 fire. AERT then filed a counterclaim, seeking $1.8 million in fees and damages. A trial will be set for sometime next year, according to the Washington County Circuit Court’s office.

Rebuilding

AERT’s current and past nuisances haven’t stopped the company from growing. Construction should begin later this year on the Watts facility, and it should be operating by the first quarter of 2007.

The new Springdale facility, called Springdale South, is expected to increase the company’s extrusion production capacity by $80 million to $100 million over the next two years, according to the annual report.

AERT’s bottom line has kept increasing over the years, and for the first half of 2006, it shows to have another good year.

Second-quarter net income had a big boost, rising 88 percent to $1.72 million from $918,938 for the same quarter last year. Sales were $28.10 million, a 34 percent increase over last year’s second quarter of $20.95 million.

For the first six months ended June 30, AERT had $55.77 million in sales, a 36 percent increase over $40.89 million in sales last year for the same time period. Net income was $2.62 million, compared to $1.58 million for the first half of 2005, up 66 percent.

And the company expects the Watts facility’s new technological advancements and designs to increase profits even more by using less raw materials. The increasing costs of raw materials have kept profits down over the years.

“The overriding thing that we need to accomplish is to be able to source plastic at a lower cost than it is today,” Thayer said. “[The Watts] facility will be designed to process less desirable scrap plastics by cleaning it up and using it for our purposes … We want to use materials others don’t want.”