Citing markets, Trex to delay Arkansas campus completion

Facing sluggish sales of its plastic-wood composite lumber, Trex will hold off on construction until at least 2026. | Courtesy of Trex

One of North America's largest polyethylene film recycling companies is pushing back the expected opening year for its third recycling and composite lumber production campus.

Trex, a huge manufacturer of plastic-wood composite lumber, was originally planning to open its $400 million Little Rock, Ark. recycling and production campus in 2024. During a recent call with investors, executives said market conditions prompted a delay in the opening.

"While we are committed to the build-out of the Arkansas facility, we expect the build-out will extend beyond the originally planned 2024 timing with gradual manufacturing ramp starting with processing of recycled materials and then moving to decking manufacturing currently estimated to start in early 2026," Trex CEO Bryan Fairbanks said during the Feb. 27 call with investors.

Headquartered in Winchester, Va., Trex recycles hundreds of millions of pounds of recovered PE and wood fiber into composite decking each year. Scrap plastic sources including commercial films, such as stretch wrap, and plastic bags collected at stores. Its plants are located in Winchester and Fernley, Nev.

Like many other manufacturers, Trex has been facing softening demand for products as interest rates rise and inflation persists. In response, it started reducing production levels and cutting costs last fall, including by laying off employees at both its Winchester and Fernley, Nev. plants.

In the press release, Bryan Fairbanks, Trex president and CEO, noted that the cost-cutting measures helped boost the profit margin in the fourth quarter of 2022.

For the year, the company's consolidated net sales totaled $1.1 billion, down about 8% from 2021. Net income for 2022 was $185 million, down 11% from the year before, according to a press release.

Looking toward the longer term, company officials say they’re still committed to the Little Rock project, which will give the company plants in the West, East and Midwest/South regions. During the conference call, Dennis Schemm, chief financial officer for Trex, said the company spent $176 million in capital expenditures in 2022, mostly related to building out the Arkansas campus. According to the Trex's annual financial filing, build-out of the campus, which will sit on 300 acres, began during the second quarter of 2022.

In the financial results press release, Trex estimated that its total capital expenditures in 2023 would be in the range of $130 million to $140 million, also focused on building the Arkansas facilities.

Schemm added that the total investment in the Little Rock plant is still around $400 million, but the spending will be stretched out over a longer time period. The company is conducting what it's calling a "modular build-out" of the site.

In other Trex news, on Dec. 30, 2022, the company sold its commercial products division for over $7 million, booking a non-cash loss of over $15 million on the sale. That business produced railings and stages for different types of large buildings and venues, including high-rises, stadiums and theaters. Those products didn't use recycled resin, although recycled aluminum was used in railing.

The commercial products business brought in a lot less money than Trex's residential outdoor decking business, and it was less profitable; in fact, the commercial products division has been a money-loser for Trex over the past two years.