AFG Reports Record ’87 Earnings, Predicts Even More Growth in ’88
AFG Industries, the Irvine-based glass manufacturer, reported record 1987 sales and earnings Monday and predicted that continuing expansion efforts will produce even more growth during 1988.
The company said sales increased 20.3% to $488 million in 1987, compared with $406 million in 1986. Earnings rose 9.4% to $58.4 million from $53.3 million the previous year.
Analysts attributed AFG’s performance to strong demand in the flat-glass business, particularly in the house remodeling market. Demand for its products enabled the company to increase prices by roughly 7%.
Upgraded Equipment
Equally important, analysts said, was the company’s $200 million investment in upgraded plant and equipment. The program allowed AFG to increase its margins by offering more kinds of specialty glass.
The company also benefited from relatively low-cost natural gas, a major component of glass production costs. AFG signed long-term fuel purchase contracts in late 1985 and early 1986, when gas prices were at rock bottom.
“AFG has had one hell of a good year,” said Larry Selwitz, an analyst with Bateman Eichler, Hill Richards, a Los Angeles securities firm.
Selwitz predicted an equally strong performance in 1988, as the company benefits from two plant openings, a wider distribution network and diversification into the auto glass replacement market.
In an interview, AFG Chairman R. D. Hubbard said the company’s national market share increased to 20% from 18% last year and predicted that sales will jump 30% to 40% in 1988.
AFG acquired a Ford Motor Co. auto glass subsidiary in late 1987 and began operating the facility this month. In December, the company began production at a factory in Victorville capable of producing 500 tons of flat glass per day. Another such plant under construction in Kansas will begin production later this year. The bulk of AFG’s operations are located on the East Coast.
Retail Outlets
AFG has been moving aggressively into the retail auto glass replacement business, purchasing 85 auto glass stores in 1986 and 1987. Analysts projected that the expansion will increase revenue by $25 million in 1988 and noted that auto replacement glass has higher profit margins than flat glass.
AFG reported a $25 million gain from securities investments in 1987. The sale of stock acquired last spring as part of an unsuccessful $2.2-billion bid for GenCorp, an Ohio-based conglomerate, accounted for $14 million of that gain. The rest resulted from the company’s investments in Lear Siegler, a Long Beach aerospace and manufacturing firm that rebuffed an AFG-orchestrated takeover bid in 1986, and Merabank, an Arizona-based financial institution.
Hubbard said AFG will not engage in any hostile takeover activity in 1988, a reiteration of a pledge he made last year.
“We are not interested in any takeovers for the foreseeable future,” he said. “We’ve got our hands full with the expansion we’ve got going.”
AFG stock closed Tuesday at $24.75, down $1.375 for the day.
AFG INDUSTRIES AT A GLANCE AFG Industries is a manufacturer of glass products used in housing construction. The Irvine-based company is perhaps best known for its takeover attempts of Lear Siegler and GenCorp in 1986 and 1987, respectively. AFG recently began operation of a 500-ton-per-day glass factory in Victorville and will open another such facility in Kansas later this year.
Year ends December 31
(in millions) 1987 1986 1985 1984 1983 Revenue $488.4 $405.9 $320.0 $281.9 $213.7 Net income $81.7 $62.9 $21.1 $18.1 $14.1
Assets $519.7 million
Number of employees 6,250
Shares outstanding 29,779,003
52-week price range $32.25-$19.125
Tuesday’s closing price (NYSE) $24.75, down $1.375
Chief executive R.D. Hubbard
