Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, November 12, 1995 TAG: 9511100041
SECTION: BUSINESS PAGE: F1 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: RADFORD LENGTH: Long
In 1992, all but three of 200 buildings of Radva's "Thermastructure" construction on Guam survived a typhoon without significant damage. And recently a Radva-made building that houses a radio transmitter at Anguilla in the British West Indies came through the 175 mile-per-hour winds of September's Hurricane Luis with only minor damage.
"The only damage done to the building was when a 40-foot container sitting on the ground some 15 to 20 feet away from the north wall was ... thrust into the side of the building," Gary Hunter, construction contractor for Caribbean Beacon Radio wrote Radva President Luther Dickens. "The million-dollar transmitter installation inside suffered absolutely no damage," Hunter wrote.
Although the Caribbean sun still shines on Radva's island house, perhaps the brightest spot for the company lately has been in Russia, where building-panel sales have taken off at a factory owned by a joint venture among Radva and three Russian companies. That operation appears poised to do big business as the former Soviet economy converts to a free-market system.
The factory in the Russian town of Pereslavl-Zalessky, 85 miles northeast of Moscow, has a backlog of orders and recently moved to two production shifts. Radva owns 31 percent of the joint venture, called Radoslav.
Last week, Radva sold its U.S. manufacturing and licensing rights for its Thermastructure product, saying the deal would raise money to allow it to concentrate on its licensed operations in Russia and other foreign countries.
Despite testimonials from satisfied customers and the fact that homes made from the Radva panels have been built in most of the 50 states, the company's U.S. building-panel business had never been what Dickens would have liked it to be. However, the business in this country and abroad has been a growing part of Radva's income. Building-panel revenues from both sales and licensing increased from 17 percent to 31 percent of the company's total revenues between 1992 and 1994
Radva's major business, representing 69 percent of the company's $11.6 million in sales last year, is the manufacture of protective plastic-foam packaging used for things such as electronic equipment and medical supplies. The company, which has 150 employees at plants in Radford and Portsmouth, has reported profits for the last four years, a welcome turnaround following several years of losses, the last a $2.8 million loss in 1990. In 1994, the company reported profit of $524,000 but it has not paid cash dividends on its common stock since 1982.
The sale last week involved an 80 percent stake in Thermastructure Ltd., a wholly owned Radva subsidiary, to Ecological Systems of Sparta, N.C. Under terms of the sale, Thermastructure Ltd. will have the right to manufacture the building panels or license others to manufacture them in all areas of the United States except for California and a few counties in Nevada, where Radva previously sold a manufacturing license to another company.
Included in the transaction is a building next to Radva's Radford plant that it bought from the Inland Motor Division of the Kollmorgen Corp. The building is where Radva intended to relocate its panel manufacturing operations. The sale has speeded up those relocation efforts, Dickens said.
Ten Radva workers are being transferred to Thermastructure Ltd. Dickens will be a director of the new panel maker, in which Radva will retain a 20 percent interest.
The sale, whose value was not disclosed but which Dickens described as substantial, will provide Radva with the money it needs to expand its business elsewhere in the world and allow the company to focus on its four existing foreign license holders, Dickens said. Radva has kept the right to license the manufacture of its building panels outside of the United States and already has sold licenses in Australia, Guam, and Mexico.
|n n| Radva's building panels, which comply with national building codes, are made from closed-cell polystyrene foam and 24-gauge galvanized steel. They form the structural support for a building and allow a builder to frame, insulate and enclose a structure in a single step. Window and door openings are molded in the factory as are openings for electrical circuits. A standard panel weighs 45 pounds, meaning they can be handled without special equipment. Outside walls can be finished with siding, brick or stucco in a traditional manner.
Jeanne Stosser, a Montgomery County builder who put up Radva's first "research-and-development" house around 1977, is sold on the panels. "I'm very pleased with it," Stosser said of the Radva building system. "For custom-built construction, I would recommend it highly."
A Stosser family construction company building the Sleepy Hollow subdivision at Christiansburg recently switched to the panels after having problems acquiring the quality of lumber it needed at a stable price, Stosser said.
The panels are straighter than lumber. Although they may cost more than wood, they make up for the difference in the long run with energy savings of around one-third over traditional building systems, she said. To help bring the costs of the Christiansburg homes into line with those built of lumber, the company combined the panels with the use of steel studs on non-load bearing interior walls, Stosser said.
|n n| Production began in May 1993 at the Radva's joint venture operation in Russia. The plant employs 70 Russian office and production workers and produced more than a million square feet of building panels in 1994, Dickens said. It was "modestly profitable" that year, he said.
The history of the joint venture traces to 1986 when Dickens took part in a U.S. trade mission to Russia, then part of the former Soviet Union. He put together an exhibit for a Moscow trade fair the following year, which caught the eye of the Russians.
It's essential to have Russian partners to help navigate the Russian bureaucracy, Dickens said. Radva has three partners in Radoslav. Participants in the joint venture from the beginning were the Slavich Co., a 65-year-old maker of photographic paper and X-ray films and Pereslavl-Zalessky's biggest employer, and the Pereslavl-Stroi Trust, the city's general contractor. Argamak, a Moscow trading company, joined the partnership in 1992, when unstable economic conditions in Russia forced the partners to look for additional financing.
In the summer of 1992, Radva built three model homes next to its Russian factory site, using materials shipped from the United States.
That winter Radva shipped the equipment needed to get the Radoslav plant in operation. Radva has a subsidiary operation at its plant on 17th Street in Radford that builds the machinery used to make the building panels. Radva made a profit on the equipment sold to the joint venture, Dickens said.
Radva put $300,000 into Radoslav, Dickens said. Other financing, including $1.9 million for equipment, was arranged through a Russian bank with an 85 percent guarantee by the U.S. export-import bank.
On a trip to Russia in September, Dickens spoke at a seminar on lightweight construction materials that was attended by building specialists, including a delegation from Sakhalin Island over 7,000 miles east of Moscow off Russia's Pacific Coast.
That session paid off, Dickens said. The joint venture has already begun shipping panels to the Sakhalin and to the Black Sea region in southwestern Russia. So far most of the houses built with the joint venture's panels have been built in the region around Moscow.
Dickens visited on his recent trip with officials in the Krasnodar region of South Russia near the Black Sea, an area that Michael Farrell, Radva's Russia program manager, said "offers a particularly fertile market for housing."
The region, which has more of a tradition of single-family housing than other parts of Russia, has a mild climate and is attracting retirees from northern parts of the country, who will need housing. Also, new ports are planned in the region to replace those lost to Russia in the breakup of the Soviet Union; and the population is expected to double within the next two to three years, Farrell said.
When Radva first moved into Russia, the company expected the market for its panels to be in the construction of public housing. But it discovered that the financially troubled Russian government was not in the market for housing.
The newly wealthy Russians who were looking for housing wanted housing on a larger scale, Farrell said. Contractors working with the joint venture have been building homes of roughly 3,000 square feet. The homes are as much as a third larger than the typical American house and sell for the equivalent of about $300,000.
About 40 houses are currently under construction in the Moscow area by crews trained by Radoslav, Dickens said. He said, though, that not all the houses are large. Those being built with the company's panels range in cost from $30,000 to $500,000.
"There's an incredible amount of construction going on in Russia," Dickens said. The economy is recovering faster than some thought and people are tired of living in small apartments, he said.
New energy conservation standards in Russia are also helping create a demand for Radoslav's building panels, Dickens said. Using the traditional brick or reinforced concrete construction, houses must have walls that are 3 feet thick to meet the new standards. Radoslav's plastic-foam panels, which typically range from 31/2 inches to 51/2 inches thick, achieve the same energy savings at a much lower cost and with a savings of interior space, Dickens said.
Also, the need to upgrade and expand older apartment buildings also provides an opportunity for the Radva venture, Farrell said.
In Kostroma, a city of 300,000 about 180 miles from the Radoslav factory, city officials have decided to use Radoslav's building panels to add one or two floors to the tops of two existing apartment buildings. Making the addition with the lightweight Thermastructure panels requires little or no changes to a building's foundation, Farrell said.
"This type of construction represents a new direction for Radoslav, one with potential that would be difficult to overstate," Farrell said.
Because of the growth potential in the market, the joint venture is currently negotiating with the Russian government to open six new factories in different regions of the country.
Besides the money Radva has made from equipment sales to the joint venture, the company also is profiting by supplying American amenities for the houses being built in Russia with Radoslav's panels.
Radva is making trips to building materials retailers such as Lowe's and 84 Lumber, buying bathroom fixtures, carpeting, and shingles and packing them in containers and shipping them to Russia. "You name it and we've shipped it over there," Dickens said.
by CNB