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PolyOne Announces Second Quarter Results

Published on 2008-08-13. Author : SpecialChem

CLEVELAND -- PolyOne Corporation, a premier global provider of specialized polymer materials, services and solutions, has reported second quarter revenues of $748.1 million, an 8.6 percent increase compared with revenues of $688.8 million in the second quarter of 2007.

Net income was $8.8 million, or $0.09 per diluted share, for the second quarter of 2008 compared with a loss of $5.4 million, or ($0.06) per diluted share, for the second quarter of 2007. Included in the results for the second quarter of 2008 and 2007 are special items equating to ($0.03) and ($0.16), respectively.

On a comparable basis, before special items, PolyOne reported $0.12 earnings per share in the second quarter of 2008 compared with $0.10 per share in the second quarter of last year. Specialty platform operating income growth combined with lower corporate costs largely offset a decline in the Performance Products and Solutions segment due to slowing demand in the North American housing and automotive markets. PolyOne also benefited from lower interest expense in the quarter as a result of paying off its high yield 10.625% senior notes in the 3rd quarter of last year.

"Our second quarter results continue to demonstrate the success of our transformation strategy allowing PolyOne to report earnings growth despite very challenging economic and inflationary conditions," said Stephen D. Newlin, chairman, president and chief executive officer. Newlin continued, "Specialty platform earnings increased nearly 70% compared to the second quarter of 2007 - driven by the addition of GLS and organic growth expansion initiatives - and now represent 45% of total operating income from all operating segments."

Newlin continued, "We continue to position the company to grow profitably despite economic headwinds. Our focus on commercial and operational excellence is evident in our performance so far this year as we have been able to close new business and improve sales mix to drive operating margin improvements in our Specialty and Distribution platforms. We are also benefiting from our improved capital structure that allowed the company to report lower interest expense in the current period and gives us future flexibility to opportunistically pursue acquisitions."

PolyOne's Segments and Platforms

On July 1, 2008 PolyOne announced that during the second quarter of 2008, Producer Services, formerly included in All Other, was combined with Geon Performance Polymers to form the Performance Products and Solutions operating segment. In addition, North American Color and Additives and Specialty Inks and Polymer Systems, both formerly included in All Other, were combined to form a new operating segment named Specialty Color, Additives and Inks.

PolyOne now has six reportable segments: Specialty Engineered Materials; International Color and Engineered Materials; Specialty Color, Additives and Inks; Performance Products and Solutions; PolyOne Distribution; and Resin and Intermediates.

The Company frequently discusses its businesses in terms of three strategic platforms - Specialty; Performance Products and Solutions; and PolyOne Distribution. Performance Products and Solutions and PolyOne Distribution are also both reportable segments. The Specialty platform comprises Specialty Engineered Materials; International Color and Engineered Materials; and Specialty Color, Additives and Inks.

Outlook

The Company anticipates continued economic uncertainty as well as continued raw material and energy cost pressure. While second half 2008 revenues are expected to grow approximately 15% (including GLS) as compared to the second half of 2007, these aforementioned factors are expected to put downward pressure on earnings primarily in the Performance Products and Solutions segment.

Operating margin improvements in the Specialty and PolyOne Distribution platforms are expected to drive operating income growth for these platforms compared to third quarter 2007 levels. Third quarter 2008 operating income in the Performance Products and Solutions segment is projected to increase from the second quarter of this year but remain below the year-ago level due to raw material cost inflation and continued weak end-market demand. Resin and Intermediates operating income for the third quarter of 2008 is expected to approximate second quarter levels.

"Our specialty focus has allowed us to weather incredibly difficult market conditions, most notably a slowdown in the U.S. housing, construction and automotive industries along with unprecedented raw material and energy cost inflation," said Newlin. "We recently announced our plans to reduce capacity and realign assets in North America as these conditions may continue for the foreseeable future. We are also seeing signs that European demand growth may be slowing, but it is too early to tell what impact, if any, this will have on our near-term consolidated results."

"We anticipate the capacity reductions announced on July 28 will be fully implemented by the second quarter of next year, and we expect they will generate pre-tax savings of $17 million ($0.12 per share after-tax) on an annualized basis," said Robert M. Patterson, senior vice president and chief financial officer. Patterson added, "These actions are part of our previously disclosed operational excellence target of $50 million in cumulative identified supply chain savings by 2011."

Based on these projections, PolyOne expects full year 2008 earnings before special items to exceed prior year earnings before special items.

About PolyOne:

PolyOne Corporation, with annual revenues of more than $2.7 billion, is a premier provider of specialized polymer materials, services and solutions. Headquartered outside of Cleveland, Ohio USA, PolyOne has operations around the world.

Use of Non-GAAP Financial Measures

The non-GAAP financial measures include: free cash flow; special items in operating income; operating income before special items; total diluted per share impact of special items; and diluted earnings per share before special items. The most directly comparable GAAP financial measures are: net cash provided (used) by operating activities, operating income (loss) and income (loss) per share. PolyOne's chief operating decision makers use these financial measures to monitor and evaluate the ongoing performance of the Company and each business segment and to allocate resources. In addition, operating income before special items and free cash flow are components of various PolyOne annual and long-term employee incentive plans.

Forward-looking Statements

In this press release, statements that are not reported financial results or other historical information are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events and are not guarantees of future performance. They are based on management's expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historic or current facts. They use words such as "will," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance and/or sales. In particular, these include statements relating to future actions; prospective changes in raw material costs, product pricing or product demand; future performance; results of current and anticipated market conditions and market strategies; sales efforts; expenses; the outcome of contingencies such as legal proceedings; and financial results.

Source: PolyOne


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