It was three years ago this month when Thomas A. Waltermire, the newly-crowned CEO of the world’s largest polymer services company, PolyOne Corp., rang the bell to signal the start of trading at the New York Stock Exchange.
PolyOne’s stock launched at $9 a share and peaked at $13.40 in May 2002. Since then, the stock price — as well as the polymer giant’s sales — have weakened due to a prolonged recession and struggling manufacturing industry. Last month, PolyOne’s stock slipped to around $4 a share on news that its earnings would not meet estimates for the second quarter of 2003.
“The slow demand we observed in our North American sales for April continued into May and June, when we normally experience seasonal pickup,” Waltermire told investors in July. “… [T]he U.S. Industrial Production Index (less the high-tech component) is below the trough level we experienced in the fourth quarter of 2002.”
Today, Waltermire is faced with his company’s first major crisis since it was born as the result of a merger between Avon Lake-based Geon Co. and Cleveland’s M.A. Hanna Corp. But it is at these times that innovation is so critical.
“Our challenge is to bring this company back to profitability,” PolyOne CFO W. David Wilson told analysts in the company’s most recent quarterly report. “We’re not seeing the economy improve; we’re not seeing market conditions favorable … [W]e have to take aggressive, decisive steps.”
Waltermire and his executive team have already taken aggressive action to return the $2.5 billion company to profitability in the face of a still-uncertain economy. Those actions include several plant closings and employee cuts — common with a merger of two major corporations — but PolyOne has also streamlined its operations, made acquisitions and formed partnerships in high-growth areas.
Cost-cutting alone will not lead to growth.
Last year, PolyOne consolidated and modernized its vinyl compound, color, and additives and engineered materials businesses, which the company reported would save $50 million annually. But it was more than a cost-cutting move; PolyOne invested $45 million to streamline the facilities to create a more efficient and more profitable manufacturing base.
This year, it extended its global IT system into its facilities in Singapore, Thailand and Spain to speed sourcing, logistics and production planning, and to provide consistent and real-time customer data and financial information.
Responding to its continued sales growth in its international operations, PolyOne grew its Asian business by expanding four plants and opening a customer support laboratory and sales office in southern China. In another move to strengthen its international business, PolyOne acquired a color concentrates producer in northern Spain to increase its product base in the growing region.
Stateside, PolyOne and Bayer Polymers LLC announced in April the formation of a joint venture to develop and market polyurethane systems. The new enterprise, BayOne Urethane Systems LLC, began operating in June from headquarters at a PolyOne facility in St. Louis.
The joint venture will focus primarily on markets in the United States and Canada for carpet backing and related applications, nonautomotive flexible molded foam, footwear, instrument panels and filters.
PolyOne’s distribution business, which makes up 20 percent of the company’s sales, added a vinyl compound to its product offering, which prompted a 12 percent increase in sales over the previous year. It also opened its first raw material distribution warehouse, which will allow it to more cost-effectively purchase smaller quantities of materials such as pigments.
Within the last two years, PolyOne invested $150 million in companywide infrastructure improvements, a major part of that to upgrade its U.S. manufacturing assets. With those improvements complete, Waltermire expects a 3 percent to 5 percent growth in sales by the end of this year, assuming a flat economy.
“We are confident that we are maintaining our share of targeted markets in an intensely competitive environment,” Waltermire told investors in the company’s second quarter statement.
“Each of our business units and functional areas has prepared a second-half business plan outlining specific, measurable improvement actions. We will implement individual actions as quickly as possible.” How to reach: PolyOne Corp., (216) 589-4000