For Trex, Selling Composite Has Been Tough

Trex, a manufacturer of decking materials made from reclaimed plastic and wood, can trace its origin to the other end of the recycling chain. Started by former executives at Mobil, the company was launched from a unit of the oil giant that produced plastic grocery bags.

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Today, the Winchester firm has come full circle and is the world's largest consumer of recycled plastic grocery bags. The company uses the plastic and reclaimed wood to produce composite decking, railing and fencing products that have turned up in such landmarks as the Theodore Roosevelt Island walking trails and the White House hot tub.

Yet its journey from plastics producer to environmentally conscious manufacturer has been tough, and its products have not attracted mainstream appeal, illustrating the challenges within the burgeoning green building materials industry.

Analysts said composite decking materials have significantly improved over the years but have been embraced by only a small segment of the market. Most consumers still seem to favor natural wood, which is cheaper, even if composite materials require less maintenance and are more environmentally friendly.

"It is not unlike the buyer of a Toyota Prius, who is sacrificing something -- style or price -- because they are buying it because it is quote-unquote green," said Eric Prouty, an analyst at Canaccord Adams in Boston.

Each year, Trex buys 1.3 billion recycled plastic grocery bags -- half of the world's supply -- and 300 million tons of reclaimed hardwood sawdust. Locally, it worked with grocery stores to collect used bags and recycle them for use in its decking and other products. Trex, which pays the grocers for the discarded bags, recycled 26 million sacks in Virginia last year. In Maryland, similar programs brought back 11 million used plastic grocery bags.

"By definition, we look for waste streams headed for the landfill that others don't want," said chief executive Andrew Ferrari.

The business, though, has been beset by quality and financial troubles over the years.

In early November, Trex said a small portion of its products manufactured at its Fernley, Nev., plant from 2003 to 2006 were beginning to peel two to three years after being installed. The company set aside $45 million in reserves to cover future losses from customers who might seek replacements.

In 2004, Trex settled a class-action lawsuit stemming from complaints that the company had falsely advertised that its products did not require maintenance. Consumers reported problems with fading, peeling and discoloration.

Analysts said that Trex's composite materials have improved significantly, and that the products more closely resemble natural wood. But the aesthetic improvements come as the national housing slump has depressed sales.

In September, the company said it closed an Olive Branch, Miss., manufacturing plant.

"The company has had one problem after another," said William Gibson, an analyst at Nollenberger Capital Partners in San Francisco.

Growth has been gradual, if steady. Composite decking materials captured 17 percent of the $3.3 billion market for decking products in 2006, up from 5 percent a decade ago.

And Trex, the pioneer, remains a dominant force in the segment.

"Many of those that joined the bandwagon are gone now," Prouty said. "The name Trex has come to define the total category."