NEW YORK Encore Wire Corp. plans to expand its aluminum building wire facility in McKinney, Texas, the copper and aluminum wire maker said July 30.
The 250,000-square-foot addition should double aluminum wire production capacity at the facility, vice president and chief financial officer Frank Bilban told AMM.
The project will cost between $41 million and $46 million, including related upgrades to Encores McKinney complex. This is in addition to a 202,000-square-foot facility that was built last year.
In its earnings release July 24, the company said its profitability depended on the spread between the cost of copper and the cost of copper wiring, which narrowed 9.9 percent year over year in the second quarter. Even so, the company believes that copper wiring remains a profitable business.
"If you look at the traditional measures of margin per pound or margin per sales on aluminum, youd probably like it better than copper, because its light," Bilban said. "However, if theres a new construction project, well make more on copper than aluminum."
The introduction of aluminum products to Encores product mix has been a profitable move for Encore Wire and is credited with increasing demand for the companys copper cable and wire products.
"Customers like to one-stop shop, and customers like free freight" Bilban said. "But in order for me to pay the freight, (the customer) has to order at least 5,000 pounds of product."
"Before we had aluminum, we knew we were losing orders to others who had both," he said. "What we know is, last year, our copper unit volumes were up 10 percent, while the industry was up 3 to 4 percent. So the addition of aluminum was accretive to sales."
"The aluminum building wire sales have exceeded our expectations, with gross sales totaling over $100 million in the last 4 quarters," Daniel Jones, Encore Wire chief executive said in a statement. "With the demand for these products clearly exceeding our capacity, we have decided to go forward and expand the plant to accommodate increased production."