Drought takes toll on southeastern businesses
When Norcross, Ga.-based Pike Nursery filed for Chapter 11 bankruptcy last month, it became the first large retail business to fall victim to the Southeast’s worst drought in 100 years.
Landscape contractors, sod farmer and plant nurseries have been hardest hit by the severe lack of rainfall, which on Sept. 28 led the Georgia Environmental Protection Division (EPD) to declare Level Four drought restrictions across the northern third of the state, prohibiting most types of outdoor residential water use.
More than 14,000 people associated with Georgia’s estimated $8 billion gardening industry have lost their jobs, according to an online survey by the Georgia Urban Agriculture Council. And with forecasters predicting a dry spring, the news promises to get worse in early 2008.
Pike, which opened its first nursery in 1958 and says it’s the nation’s largest privately owned chain of garden centers, announced it had secured $11.75 million in financing to help it operate during the bankruptcy. All but two of the company’s 22 nurseries in Georgia, Alabama and North Carolina are expected to stay open, and the company plans to keep its more than 700 employees on the payroll. Unlike in past years, however, 200 extra helpers were not hired for the fall planting season.
“Pike is the first big one we’ve heard of, but day by day we are hearing of small retail garden centers cutting back and letting people go,” said Mary Kay Woodworth, executive director of the Metro Atlanta Landscape & Turf Association (MALTA). “I think come January and February, we’re going to be hearing of more companies closing their doors.”
Charmar Flowers of Athens, Ga., will become a casualty before then. The third-generation family run garden center is set to shut down operations Dec. 31 after 37 years in business. Owner Chris Butts attributed the closing to a combination of water restrictions imposed by Athens four out of the last five years, coupled with the dim prospects for rainfall over the next few months.
But Georgia isn’t the only state suffering because of the drought. Almost all the farmland in Virginia has insufficient topsoil moisture, while Kentucky’s rainfall is about 11 inches below normal — a condition not seen in more than 75 years. In North Carolina, some communities have only a three-month water supply, while 16 South Carolina water systems have banned outdoor watering and car washing, and 22 others have asked for voluntary curbs.
The impact of the drought extends beyond the nurseries. For instance, Ron Jarvis, senior vp-pro sales, tool rental and environmental innovations for Home Depot with responsibilities for the retailer’s tool-rental business, points to a drought-induced struggle in some rental categories. “Unfortunately, in the Southeast, lawn aerators have basically stopped being rented,” he told Home Channel News. “So, that’s a big business for us over the past couple of years, and we haven’t been able to enjoy hardly any sales or revenue from that this year.”
PPG Industries receives approval for major acquisition
PPG Industries will sharply expand its worldwide offerings when it acquires SigmaKalon Group, a Netherlands-based producer of architectural, decorative and protective coatings, as well as coatings for the marine and industrial markets.
The total transaction value, including assumed debt, is approximately 2.2 billion Euros (US$3.22 billion). PPG said it anticipates the acquisition will close within the next 45 days. The deal was approved this week by European Union regulators.
PPG employs more than 34,000 people worldwide with manufacturing facilities and other operations in 25 countries. SigmaKalon employs approximately 10,000 people and sells coatings in more than 40 countries worldwide.
SigmaKalon Group is owned by Bain Capital Partners, a private investment firm with interests in a number of home improvement companies. Bain Capital, along with Carlyle Group and Clayton, Dubilier & Rice, this fall purchased Home Depot’s HD Supply unit for $8.5 billion — the LBM unit of HD Supply has since been sold to Pro-Build. In October, Bain Capital also purchased the kitchen and bath assets of American Standard for $1.76 billion.
SigmaKalon makes decorative coatings under several international brands, including Avi, Eureka and Prominent Paints. SigmaKalon products are sold throughout Eastern and Western Europe, Africa and Asia. PPG brands include Pittsburgh Paints, Olympic, Monarch, Porter Paints and Manor Hill.
Idaho Veneer cuts back production
Poor market prices will lead Idaho Veneer to cut back lumber production at its Post Falls and Samuels facilities, according to a report in the Spokane, Wash., Spokesman-Review.
According to the report, company officials said the cutbacks won’t affect the approximately 100 workers at the Post Falls facility and 50 at the Samuels facility. Those employees will switch to veneer production.
Dan Malloy, company co-owner, said the veneer market has been stable while the demand for lumber has gone down sharply, due to the fact that fewer new homes are being built.
Idaho Veneer produces lumber, white pine, cedar and Douglas fir veneer for furniture at the two facilities.