Weak Market, Rising Costs Battering Olson Industries
When will Olson Industries, a Sherman Oaks-based maker of plastic containers, make a profit again? “Sheer speculation,” its chairman, John W. Buffington, said last week.
“We’re doing everything we can,” Buffington said in an interview after Olson’s annual meeting Friday. The company continues to be hampered by rising prices for resins, the raw material Olson uses to make its egg cartons, sandwich trays and other plastic products.
Moreover, Olson has been unable to raise prices for many of its products--which include the trays used for McDonald’s hamburgers--without risking the loss of sales to competitors who have been holding or lowering prices, Buffington said.
Packaging prices are particularly soft in the egg-carton sector because egg production this year is a “very unprofitable, sick industry and people can’t pay more right now,” he said.
Olson formerly was in the egg-production business, but it sold that division last year--at a $3.6 million loss--to concentrate on plastics. The loss contributed to Olson’s total 1987 loss of $7.4 million on sales of $62.7 million. In this year’s first quarter, Olson lost an additional $415,000 on sales of $17.5 million.
To help improve its financial position, Olson is negotiating with its lenders to restructure its debt. The company also recently sold two non-operating assets: a 260-acre ranch in the San Joaquin Valley for $445,000, and a loan payment due Olson that the company sold for $1.75 million.
Olson hopes to bolster its balance sheet by selling an equity stake in its plastic-products unit, Dolco Packaging. “We’d like to sell less than half so we can retain control, but depending on who the partner is, I guess we’d entertain anything,” Buffington said.
