Ropak Corp. Going Places With Plastic : Fullerton Firm Poised for Lead Role in Making Shipping Containers
A small Fullerton company that began making plastic paint pails eight years ago has quietly positioned itself as a contender for leadership in what could become a multibillion-dollar industry.
And not content with the possibility of dominating the domestic market for plastic shipping containers, Ropak Corp. now is expanding its reach into the Far East.
With the purchase of Tokyo Kaken Co. Ltd., a small Japanese producer of plastic floats for fishing nets, Ropak is continuing a flurry of buying that has netted it five acquisitions in two years, including two in the last week. William Roper, the company’s chairman and chief executive, says he intends to make at least two more acquisitions within the next year.
On June 30, the company, which has plants in several major regions of the United States and Canada, completed the purchase of D & D Container Corp., a small Texas-based producer of plastic containers. The Tokyo Kaken purchase agreement was signed July 1.
Roper, who has been involved in the plastic container industry for more than two decades, said he has taken the company on the acquisition path primarily to reduce shipping costs by establishing operations within the regions the company serves.
Income Doubled Since ’83
The growth strategy also has more than tripled sales and nearly doubled income since 1983. One analyst who follows the shipping container industry said Ropak, by concentrating only on plastic containers while its chief competitors continue offering metal or fiberboard containers as well, is poised to become the industry leader as plastic continues to increase its share of the market.
Plastic containers--first introduced in the 1960s--currently account for only about $250 million in annual sales, said Arthur Charpentier, an analyst with Goldman Sachs & Co. in New York. He said, however, that their acceptance has increased steadily and that they should continue increasing their market share in the multibillion-dollar shipping-container industry.
Charpentier, an unabashed fan of Ropak, said in a recent investment analysis report that the company is one of six market leaders in the plastic shipping container segment and that, as the only company dealing exclusively with plastics, it “simply does a better job.”
While plastic containers are more expensive than their metal and fiberboard counterparts, they are more serviceable.
And Ropak’s strategy of growth through the acquisition of regional companies has helped it keep a lid on product costs, not only by cutting the cost of shipping product to Ropak’s customers, but, Roper said, by avoiding “the losses normally associated with cold start-ups.”
Despite a $12,000 loss in the fourth quarter of 1985--pinned on a cyclical lull in the agricultural industries serviced by the two companies it acquired that year--Ropak posted net earnings of $1.3 million for the year, up 125% from $577,000 in 1984. Revenues of $32.2 million were up 119% from $14.7 million in 1984.
For the first quarter of this year the company’s net earnings of $186,000 were down 40% from $312,000. Ropak officials said at the time that earnings for the 1985 first quarter were inflated by a one-time currency exchange gain of $136,000 taken in the acquisition of a Canadian company. Without that gain, first-quarter 1985 earnings would have been $126,000, or 32% below the 1986 first-quarter figure. And revenues for the first three months were up 43% to $8.3 million from $5.8 million in 1985.
Ropak was founded in 1978 in La Mirada by Roper and his brothers, Robert--the company’s president and chief operating officer--and C. Richard, vice president of engineering and corporate secretary. The three started the company with $750,000 raised from family funds and several private investors. The Ropers moved their corporate headquarters to Fullerton in 1984.
The company went public in December, 1981, but it wasn’t until mid-1983 that a market developed for the company’s stock, which began selling at about $2 a share, Roper said. Its common stock currently sells in over-the-counter trading for $19.25 per share.
Roper declined to discuss his expectations for the company’s earnings for the rest of the year but did say he anticipates that the company’s latest acquisitions will boost Ropak’s sales by approximately 20% in each of the next two years--to $50 million this year and $60 million or more in 1987.
Investment analyst Charpentier said the company’s acquisitions should have no adverse impact on Ropak’s financial performance. The deals, he said, all were “pretty well thought out” and should not weaken the company.
He said the plants that Ropak has obtained should enable the company to make inroads into new markets.
In his investment research report on Ropak, Charpentier praised the company as a leader in the growing plastic container industry. He described it as a “highly profitable, rapidly growing, relatively undiscovered niche company” with “superior past and expected future earnings growth and return on investment.”
A major factor in Ropak’s successes is that the company’s expansion plans have made it into a national supplier while most of its competitors are regional, the analyst said.
The location of Ropak’s factories make its products more price-competitive because, Charpentier said, shipping costs become prohibitive beyond an 800-mile radius of the factory.
Ropak built the La Mirada plant with which it started in business, then acquired a plastics company and its manufacturing facility in Chicago a year later, in 1979. In 1984, Ropak built a plant in Dayton, N.J.
Since then, the company has added five manufacturing facilities, but all have been through acquisitions. The plants are in Kent, Wash.; New Westminster, British Columbia; Springhill, Nova Scotia; Mansfield, Tex., and, with the Tokyo Kaken acquisition, Tokyo, Japan.
Each company Ropak has acquired has specialized in the manufacture and marketing of plastic containers, many of which are used for the shipping and storage of items such as foodstuffs and various chemicals and liquids.
Together, the plants employ about 480 people, and William Roper said there have been no layoffs at any of the facilities the company has acquired. Instead, he said, Ropak has added staff at each plant.
Roper said the company currently is looking for two plants to acquire within the next year--one in either Georgia or Florida and one in the area of Toronto, Canada. If no acceptable facilities are found, he said, Ropak will build the new plants. With the addition of those factories, Ropak will be present in every major region in North America, he said, adding that Ropak currently has no plans for expansion into Europe.
To acquire an outlet in the Far East, Ropak paid $437,000 in cash plus $273,000 in three-year, 5% notes for 91% of Tokyo Kaken, which had revenues of $2.5 million in its last fiscal year. Roper said his company is in the process of acquiring the remaining 9% of the Japanese company’s stock and plans to resell up to 20% of its stock to local management and associated interests in Japan once it has acquired the remainder of the company.
While Tokyo Kaken will continue to produce plastic floats for fishing nets, Roper said the primary reason for acquiring the company was to use it as a vehicle for introducing Ropak’s packaging techniques into the Orient. He said that packaging design and materials have not kept pace with other technological advances in the Far East.
