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AFG Industries Predicts Jump in Profit : Irvine Glassmaker Also Expects Quarterly Revenue to Increase

June 19, 1986|MICHAEL FEIBUS | Times Staff Writer

AFG Industries Inc., a highly profitable glassmaker forged from two ailing Southern companies eight years ago, said it expects profit this quarter to leap by 65% to 75% above the $4.8 million posted a year ago.

The gain for the period ending June 30 is due in part to profit from stock sales, to record demand for construction glass and to competitors' production woes, according to company Treasurer Gary Miller.

Irvine-based AFG, which analysts say is the fastest-growing glass producer in the United States, also expects revenue for the quarter to be 30% to 35% above the $74.7 million it recorded a year ago. The firm also is projecting that earnings for all of 1986 will be 45% to 50% above the $21.2 million it recorded in 1985. Annual revenue is expected to increase 25% to 35% from the $324.4 million posted last year.

Earnings for the first quarter this year were $5.8 million and revenue was $85 million.

According to AFG, the company's blistering earnings growth rate is being padded this quarter by proceeds from the sale of stock in Merabank, an Arizona savings bank. AFG will make $2.5 million before taxes on the stock sale.

Heavy Demand

In addition, heavy demand for glass in the construction industry has been pushing sales higher this quarter, according to Miller. And AFG has picked up extra business from Ford Motor Co.'s glass division. Ford lost about half of its production capacity because of an accident at its Tulsa, Okla., plant. Miller said he hopes that AFG will be able to keep at least some of Ford's customers after the Tulsa plant is running full-force again.

AFG also has picked up some business from Guardian Industries, which is the target of a labor strike, according to analyst Joan Towles of Robinson Humphrey/American Express in Atlanta.

All of AFG's manufacturing sites now are east of the Rocky Mountains, but the company is planning a $50-million plant in the San Bernardino County community of Victorville. The company wants to begin construction late next summer, Miller said. AFG also is planning to build a $50-million plant in Dallas beginning in 1988.

The burgeoning company, which was formed from two floundering glass makers in 1977, moved its corporate offices to Orange County in October of 1984. Today, the company is one the largest U.S. glass producers and has about 18% of the nation's glass business, including 24% of the market in construction glass. Towles said she believes the company's stock now is undervalued. She predicts that AFG's earnings will continue to accelerate into next year.

'Phenomenal' Growth

"They've grown to 24% market share from 20% (at the end of 1985)," she said. "That's phenomenal. They've only been in the business since 1977. To have about one-quarter of the business in the country is amazing."

She said the company's key to success is that it continues to offer fast turnaround time for orders it receives.

Miller said that a key to AFG's continuing profitability is that 55% of its sales are in higher-profit specialty products, such as solar and aquarium glass and tinted glass for appliances.

Unlike commodity flat glass--mostly windows and windshields--specialty glass isn't dependent on the health of the construction and automobile industries. Miller said that AFG wants specialty glass to account for 60% of its sales within the next two years.

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