For Panel Processing Inc., a panel component manufacturer based in Alpena, Mich., increased sales in 2005 were not a surprise. In fact, the increase was the result of years of careful planning and strategizing and included the acquisition of a plant with ties to the cabinet industry, and initiatives to increase its presence in a different panel market. In 2005, Panel Processing showed an increase of $16 million in sales over 2004.

"A large part of that increase came from the acquisition of Alabama Inter-Forest in late 2004, which affected 2005," says Bob Brown, national sales manager for Panel Processing. "The other part is a continued focus on some different directions that we'd taken with some products."

A key acquisition

Located in Eufala, Ala., Alabama Inter-Forest is a three-plant facility that has many of the capabilities of other Panel Processing facilities ability to manufacture both thick and thin board, edgebanding, cutting-to-size, coating, perfing and custom laminating. However, what makes AIF different is that it has a presence in some markets that Panel Processing has traditionally not had.

"AIF works with people who are buying components for kitchen cabinets, such as drawer bottoms and drawer sides," Brown says. "AIF put us into that market and gave us some capabilities that we did not previously have in our other facilities. Panel is very well-known in the marketplace for thinboard coating and punching, and we've been expanding into thickboard. The addition of AIF gives us additional capabilities in those areas and gives us an entree into the cabinet side of the market that we've never had before."

Manufacturing facilities

The purchase of AIF's three facilities brought Panel Processing's plant number to nine, including one each in Merrillville, Ind.; Alpena, Mich.; Jacksonville, Texas; and three plants in Coldwater, Mich. At the end of 2005, the company acquired its tenth facility, in Holland, Mich.

According to Brown, the Holland acquisition was a strategic one for further market penetration by Panel Processing. "We've made some investments in machinery that will be going into the Holland facility," Brown says. "The Holland facility will help us expand our presence in the slatwall market."

New market

Panel Processing has also recently begun to increase its presence in the thickboard market. Thickboard is a common component for displays and interior store work. "We've had our customers come in and we've worked with their designers and done the machining," Brown says.

Panel Processing has also begun doing some subassembly and packing out, which has helped its bottom line. "It enhances our overall capabilities," Brown notes. "That's had an impact into what we're doing."

Strong customer base

A rebounding customer base has also helped keep work coming for the company. "I think that the retail environment has finally been put in a position where they're able to do some of the expansions, retrofits and renovations that they've been looking to do for the past few years," Brown says. "The retail segment is spending money now, where in the past they were being very cautious about it. I'm not saying that they're not cautious now, but it appears there's a little more spending being done on those areas."

Brown adds that on the kitchen cabinet side of the business, work remains strong. "Housing starts, together unfortunately with the rebuild of the Gulf Coast and Florida from the hurricanes, is moving that market along."

Challenges

Despite the opportunities and new business Panel Processing is seeing, Brown admits there are some challenges they, and the industry, are facing. "You're seeing supply constriction in the thinboard and thickboard markets because of the Georgia-Pacific closing in Gaylord and the Tafisa explosion that took a lot of capacity out of the market in a very short period of time."

Brown says the overall increase in activity in several market segments has added to that constriction. "It's an obstacle potentially," he says, "but we've been very fortunate in that we've been able to manage with it and through it." Brown adds that they have been fortunate in that they have been able to grow and keep their relationships with suppliers strong.

Looking ahead

"2006 has been a very good year so far," Brown says. He adds that they have a number of initiatives planned for the year that they are working to get into place so they can focus on what they want to see happen in 2007.

"We have an aggressive agenda," Brown admits. "But we're looking to grow our business and get into some markets that we have been looking at for some time."