Metalic Issues IPO

Stock offering expected to fuel the growth of Lake Erie Recycling and other Metalico divisions.

Lake Erie Recycling Corp. could expand its Buffalo facility following an initial public offering of its parent company's stock on the New York Stock Exchange.

Metalico Inc. of New Jersey has divisions that recycle metals and smelt aluminum in Western New York.

"This will give us more access to capital to grow the company," said Michael Drury, Metalico's executive vice president. "For Lake Erie Recycling, this means more opportunity for that market to grow and financial security for its employees."

Metalico bought out Lake Erie Recycling and Louis Levin & Co. in the late 1990s and added United Alloys and Steel two years ago, all under the name of Lake Erie Recycling. The backing of a national corporation allowed Lake Erie Recycling to buy more land and consolidate the three smaller operations into its 27-acre site on Fillmore Avenue.

Lake Erie Recycling purchases scrap metal from manufacturers, small scrap dealers, demolition contractors and peddlers. The scrap is sorted and prepared for sale to mills, furnaces and foundries. Metalico has an aluminum smelting facility and trucking company in Lackawanna, employing a total of 40.

A public offering means more oversight of a company's financial statements and could lead the company in a different direction, said one local financial expert.

"It creates more oversight of their financial operations because they have to be more open about their business," said Richard Schroeder, executive vice president of Schroeder Braxton & Vogt Inc., an investment management firm in Amherst. "It may make them less flexible. Companies that are public want to deliver a steady stream of rising earnings and may have to manage the business to satisfy the expectations of investors."

Foreign and domestic competition played another role in the company's decision to go public. Drury said Asian buyers in the domestic market are affecting prices and how Metalico divisions operate. A Western New York steel industry executive reaffirmed Drury's concerns.

"China is driving the market and is the economic engine that is thirsting for all of the scrap material in this country," said Richard Leed, vice president of Leed Steel Co. Inc., a distributor of specialty steels and alloys in the Town of Tonawanda. "When there is no scrap available you have to purchase ferral alloys, the elements that go into making steel. They have to be refined before being made into steel. That drives the cost up."

In 2003 Metalico installed pollution control equipment and a gravity driven waste recovery system for engine blocks, metal shavings and turnings. Oils, antifreeze and or solvents are separated from the scrap and collected by Noco Energy Corp. for recycling. Lake Erie also has a full-time environmental consultant on site.

Lake Erie Recycling spent nearly $200,000 on concrete in 2004 to cover its scrap yard operations to ease cleanups of harmful materials.

Company officials said the goal is to install more concrete in the majority of the yard for continued environmental control. - Buffalo Business First

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