DUPONT’S NEW POLY DEAL

Byline: Scott Malone

NEW YORK — The deals come, the deals go.
DuPont on Monday said talks to form a polyester filament joint venture with Akra-Teijin SA de CV covering all of the Americas had collapsed. In place of that move, the Wilmington, Del., fiber giant has formed a polyester “manufacturing alliance” with Unifi Inc.
As part of DuPont’s highly visible efforts last year to move the bulk of its polyester business into joint ventures, the company last April signed a letter of intent with Akra-Teijin to form a filament joint venture.
In a Monday conference call with reporters, Harry Parker, vice president and general manager of DuPont Dacron, said, “We just were not able to consummate the joint-venture deal. The difficulties of the market just would not allow us to come to an agreement around valuation. The other issue is the overall complexity of trying to have a three-partner deal.”
Akra-Teijin is a 50-50 joint venture of the Mexican chemical company Alpek SA de CV and Teijin Ltd., a Japanese fiber producer.
The bulk of DuPont’s polyester staple operations in the NAFTA region are in a joint venture with Alpek. All of DuPont’s polyester film operations are in a joint venture with Teijin.
The manufacturing alliance with Unifi, based in Greensboro, N.C., is to become effective June 1. Under the terms of the alliance, DuPont will manage the production planning and scheduling at its partially oriented yarn plants in Kinston and Wilmington, N.C., and at Unifi’s POY plant in Yadkinville, N.C.
Ownership of the three plants will not change, manufacturing employees will remain on the payrolls of their current employers, and sales efforts will not be affected by the alliance, the companies said.
In the same conference call, Willis C. Moore, Unifi’s executive vice president and chief financial officer, said the two companies had agreed not to disclose any information about projected cost savings resulting from the alliance.
Unifi, a yarn texturizer, produces POY as a raw material; it does not sell it to other companies. It also buys POY from DuPont.
The alliance will give Unifi access to DuPont’s larger production capabilities, while it will help DuPont run those plants at closer to full capacity, the executives explained.
“It is no secret that we were not operating at 100 percent in our partially oriented yarn business,” DuPont’s Parker said.
The companies said that, together, they would have a combined POY capacity of 800 million pounds per year. Unifi’s existing capacity was 180 million pounds; the balance was DuPont’s.
According to Parker, the Kinston plant currently employs 1,500 and the Wilmington plant employs 2,000. Unifi’s Moore said the Yadkinville plant employs 157.
Parker said there was a high probability the Wilmington plant’s workforce would be cut as a result of this deal. Moore said that as the companies increase the output of specialty product at Yadkinville, there was a possibility of adding more jobs at that facility.
DuPont’s joint-venture strategy was adopted as a way for the company to remain involved in the polyester game — which last year produced $2.65 billion in revenue, but recorded a $119 million aftertax operating loss — without heavily investing in that business. The model the company was arguing for was that it would contribute its large facilities and experience to the joint ventures, and its partners would contribute money for plant modernization and other purposes.
At this time, in addition to the North American staple and worldwide films businesses, the company’s European, Middle Eastern and African fibers, resins and intermediates businesses are in a joint venture with Haci Omer Sabanci Holding AS, a $10 billion Turkish conglomerate.
The remainder of DuPont’s polyester resin businesses, filament businesses, Asian intermediates businesses and branded specialty businesses are not in joint ventures. However, the company last year said it did not intend to move its specialty fibers businesses — including Coolmax and Thermax fibers — into joint ventures.