Royal Group Announces Board Approval of Management's Improvement Plan
23 September 2005 - 8:14AM
PR Newswire (US)
- Discloses certain plan objectives - Updates on sale process
TORONTO, Sept. 22 /PRNewswire-FirstCall/ -- Royal Group
Technologies Limited (RYG-TSX; RYG-NYSE) today announced that its
Board of Directors has approved a comprehensive improvement plan,
which was formulated over the past two months under the direction
of Lawrence J. Blanford, who was appointed CEO of Royal Group on
May 13, 2005. A premiere global strategic consulting firm supported
by PricewaterhouseCoopers has assisted Royal Group to expeditiously
assemble the plan. On July 14, 2005, Royal Group announced that it
had begun the planning process and that its Board had approved the
four-part management plan framework involving: - Business unit
portfolio restructuring; - Pursuit of cost and margin
opportunities; - Full potential strategic plans for core business
units; and - Exploration of options to refinance the Company. Royal
Group's plan is intended to support either the sale of the Company,
or its continuation as a public entity should an acceptable offer
not result from the previously announced sale process. The Company
opened a data room on July 25, 2005 containing historical
financial, operational, legal and human resource information for
potential bidders to peruse. Elements of the management plan will
be included in a confidential information memorandum to be provided
to potential bidders in the coming weeks. Thereafter, qualified
bidders will be invited to management presentations of the plan and
be given an opportunity to propose offers for the company. At this
time, no offer has been made to purchase shares or assets of Royal
Group and there can be no assurance that such an offer will be
made. "Our plan is founded on clear, achievable goals, which have
been established by those managers who will drive plan
implementation"," said Mr. Blanford. "We are narrowing the focus of
Royal Group to best leverage our financial and human resources, to
better control costs, to position our product offerings, to
maximize profitability, and to create a financial structure that
will allow us to attain the full potential of our core businesses,"
added Mr. Blanford. Details of Management's Improvement Plan
include: 1. Business unit portfolio restructuring, involving
actions to divest non-core operations and actions to recast or
divest of non-performing operations On July 28th, the Company
announced its intention to divest of certain subsidiaries deemed to
be non-core, including Baron Metal Industries, Royal Alliance and
Roadex Transport. In addition, the company announced its intention
to divest of its unprofitable Polish subsidiary. Discussions with
potential acquirers of these business units are active, with
several letters of intent to potentially acquire Baron Metal
Industries having been received. Royal Group is presently
concluding reviews of certain other business units, which may be
divested of if they are found to be non-core or non-performing. 2.
Actions to secure cost and margin opportunities, divisionally and
across the enterprise The Company's plan includes a number of
initiatives to streamline its production processes and reduce
costs, including: - Introduction of operator-employed statistical
process control (SPC) techniques to approximately one third of
extrusion lines by the end of 2006 and 50% by the end of 2007. -
Refitting about 20% of extrusion lines with high-speed tooling by
the end of 2006, thereby further improving efficiencies. -
Rationalization of 400,000 square feet of manufacturing space over
the planning period, in excess of the plant space that will be
eliminated through divestitures. - Increase use of global
operations to assist in the procurement of materials and
manufacturing of certain commodity products for the North American
market. - Analyses of profit by product and customer in all
divisions, driving profit improvement actions to be implemented
throughout 2006. In addition to the foregoing initiatives, Royal
Group will increasingly centralize its purchasing function to
better leverage the purchasing power of the entire organization,
engage in more coordinated logistical planning and raw material
formulations across the manufacturing organization to improve
efficiencies and attain cost savings. 3. Pursuing the strategic
full potential of core business units Management's strategic
imperatives were determined through careful assessment of several
key issues or questions for each of Royal's core businesses.
Outcomes from these analyses were then used to guide the strategic
direction of each business and the enterprise. Consistent with the
strategic direction, initiatives, programs and projects were
identified and outlined. There are many initiatives, including: - A
focus on cellular and composite technology. In fact three new
cellular and composite products will be introduced this year and
fully commercialized in 2006. - Accelerated development of the
Royal brand supported by enhanced strategic marketing capability. -
Cross marketing and bundling of Royal's divisional product
profiles. Finally, well defined financial targets for each business
and the enterprise were established, drawing on cost, margin and
strategic initiatives to calibrate the full potential of the Group.
4. Exploration of options to refinance the Company The Company is
in active discussions with a number of potential lenders to put in
place a more efficient capital structure, create additional
liquidity and capital to take advantage of growth opportunities
that may arise during the planning horizon. Refinancing plans will
be developed and vetted over the next two months, so that they may
be quickly executed should the company remain independent. "The
broader environment for our products remains positive. We believe
that we are well positioned to take advantage of the opportunities
afforded by an aging housing stock and aging homeowners with the
resources to finance renovations", concluded Mr. Blanford. About
Royal Group Technologies Royal Group Technologies is a manufacturer
of innovative, polymer-based home improvement, consumer, and
construction products. The company has extensive vertical
integration, with operations dedicated to provision of materials,
machinery, tooling, real estate, and transportation services to its
plants producing finished products. Royal's manufacturing
facilities are primarily located throughout North America, with
international operations in South America, Europe and Asia.
Additional investment information is available on Royal Group's web
site at http://www.royalgrouptech.com/ under the "Investor
Relations" section. The information in this document contains
certain forward-looking statements with respect to Royal Group
Technologies Limited, its subsidiaries and affiliates. These
statements are often, but not always made through the use of words
or phrases such as "expect", "should continue", "continue",
"believe", "anticipate", "suggest", "estimate", "contemplate",
"target", "plan", "budget", "may", "will", "schedule" and "intend"
or similar formulations. By their nature, these forward-looking
statements are necessarily based upon a number of estimates and
assumptions that, while considered reasonable by management, are
inherently subject to significant, known and unknown, business,
economic, competitive and other risks, uncertainties and other
factors affecting Royal specifically or its industry generally that
could cause actual performance, achievements and financial results
to differ materially from those contemplated by the forward-looking
statements. These risks and uncertainties include the ongoing
shareholder value maximization process and its outcome; the ongoing
internal review and investigations by the Special Committee of the
Board of Directors and its outcome; the outcome of the ongoing
assessment and review of the Royal Building System's compliance
with the smoke generated elements of the US building code and the
safety of buildings constructed with the Royal Building System;
fluctuations in the level of renovation, remodeling and
construction activity; changes in product costs and pricing; an
inability to achieve or delays in achieving savings related to the
cost reductions or increases in revenues related to sales price
increases; the sufficiency of our restructuring activities,
including the potential for higher actual costs to be incurred in
connection with restructuring activities compared to the estimated
costs of such actions; the ability to recruit and retain qualified
employees; the level of outstanding debt and our current debt
ratings; Royal's ability to maintain adequate liquidity and
refinance its debt structure by April 30, 2006, the expiry date of
its current bank credit facility; the ability to meet the financial
covenants in our credit facilities; changes in product mix; the
growth rate of the markets into which Royal's products are sold;
market acceptance and demand for Royal's products; changes in
availability or prices for raw materials; pricing pressures
resulting from competition; difficulty in developing and
introducing new products; failure to penetrate new markets
effectively; the effect on foreign operations of currency
fluctuations, tariffs, nationalization, exchange controls,
limitations on foreign investment in local business and other
political, economic and regulatory risks; difficulty in preserving
proprietary technology; adverse resolution of any litigation,
investigations, administrative and regulatory matters, intellectual
property disputes, or similar matters; changes in securities or
environmental laws, rules and regulations; currency risk exposure
and other risks described from time to time in publicly filed
disclosure documents and securities commission reports of Royal
Group Technologies Limited and its subsidiaries and affiliates. In
view of these uncertainties we caution readers not to place undue
reliance on these forward-looking statements. Statements made in
this document are made as of September 22, 2005 and Royal disclaims
any intention or obligation to update or revise any statements made
herein, whether as a result of new information, future events or
otherwise. DATASOURCE: Royal Group Technologies Limited CONTACT:
Mark Badger, Vice President of Marketing and Corporate
Communications, Royal Group Technologies Limited, Phone (905)
264-0701
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