Consumables
PolyOne Announces Fourth-quarter and Full-year 2007 Results
Thursday 07. February 2008 - - Fourth quarter consolidated sales increase 6% despite economic headwinds - Non-vinyl business operating income more than doubles, reflecting effective specialization strategy execution - International Color and Engineered Materials segment delivers double-digit sales and earnings growth - PolyOne Distribution records strong sales and earnings growth - 2008 sales are anticipated to grow 10%-12% - Specialization strategy and cost savings expected to offset economic weakness to generate positive earnings growth in 2008
PolyOne Corporation (NYSE:POL), a leading global provider of specialized polymer materials, services and solutions, today reported fourth-quarter consolidated sales of $631.3 million, a 6% increase compared with $595.2 million in the fourth quarter of 2006.
Net income was $7.1 million, or $0.08 per diluted share, for the fourth quarter of 2007 versus $14.5 million from continuing operations, or $0.16 per diluted share, for the fourth quarter of 2006. Included in fourth quarter results were special items that equate to a $0.01 per share charge in 2007 contrasted to a $0.10 per share gain in 2006 (see Attachment 5).
On a comparable basis, adjusting for special items, PolyOne reported $0.09 earnings per share in the fourth quarter of 2007, a 50% increase compared to the $0.06 per share earned in the fourth quarter of 2006.
“We are encouraged that we delivered both top line growth and stronger earnings during the quarter, and are energized by the fact that never in PolyOne’s history have so many opportunities been present to affect change and drive cash flow and earnings, despite the economic uncertainty Corporate America faces near term,” said Stephen D. Newlin, chairman, president and chief executive officer. “We accomplished much in 2007, including materially reducing our historical earnings volatility by divesting our interest in OxyVinyls which deleveraged our balance sheet and accelerated our global specialization strategy.”
“We have prudently balanced commercial investment with productivity increases, positioning us to leverage our new commercial capabilities and focus our energy on profitably growing our businesses during this period of economic turbulence,” Newlin added.
International Color and Engineered Materials sales and operating income for fourth quarter 2007 increased 15% and 48%, respectively, compared with the fourth quarter of 2006. PolyOne Distribution sales increased 10%, while operating income rose from $3.6 million to $5.7 million, a 58% increase, in the fourth quarter of 2007 compared to the fourth quarter of 2006. Operating income for segments reported within ‘All Other’ meaningfully improved by $4.0 million to earn $1.5 million in the fourth quarter 2007, compared with the $2.5 million loss reported in the same period last year. For the fourth quarter of 2007, operating income for PolyOne’s non-vinyl businesses increased 175% compared with the same period a year ago. Non-vinyl businesses include PolyOne Distribution, International Color and Engineered Materials and All Other.
Fourth quarter Vinyl Business sales were flat while earnings fell $8 million, or approximately 70%, compared to the fourth quarter of 2006, in line with Company expectations, reflecting weak residential construction market demand and downward margin pressure resulting from higher raw material and energy costs.
“Earnings in the fourth quarter reflected an important and meaningful shift toward our specialty platform. The magnitude of our non-vinyl income growth reflects significant strides in building an earnings platform separate from the cyclical residential housing market. As we look ahead, we expect this base will continue to grow to become the primary source of earnings and earnings growth for the company,” stated Newlin.
Sales for the full year 2007 were $2.64 billion, up 1% from the $2.62 billion reported for 2006.
2007 Highlights:
— Divestiture of our 24% interest in OxyVinyls for $261 million,
eliminating a major source of earnings volatility.
— Financial profile strengthened with redemption of entire $241 million
balance of our 2010 senior notes, resulting in lowest outstanding debt
balance and leverage ratio in Company history.
— Announced the acquisition of GLS Corporation (which subsequently closed
on January 2, 2008), a leading North American business in the
$3.5 billion global thermoplastic elastomers (TPE) market.
— Established vinyl compounding foothold in China by acquiring the assets
of Ngai Hing PlastChem.
— Specialty platform businesses’ operating income more than doubled to
nearly $30 million in 2007 compared with 2006:
— International Color and Engineered Materials delivered strong sales
and earnings growth of 16% and 25%, respectively;
— North American Color reversed steep losses with a greater than
$9 million operating income improvement from 2006; and
— Specialty platform gross margin (see Attachment 10) as a percent of
sales increased 1.7% points to over 16% in 2007.
— PolyOne Distribution set an earnings record, posting a 16% increase
compared to 2006.
— Innovation processes are gaining momentum with 27 new commercial
launches in 2007.
— Increased commercial resources by adding 127 people since first quarter
2006 and upgraded talent level by investing in training to develop
sales skills and marketing processes.
2008 Outlook:
We anticipate 2008 total Company sales growth in the range of 10% to 12%, as a result of sales improvements in our distribution and specialty businesses, including sales from GLS, despite the likelihood of incremental degradation in the North American residential construction market. Similarly, PolyOne expects full-year earnings growth in 2008 even though near term economic conditions should remain challenging. Growth in PolyOne’s non-vinyl businesses, operating improvements and lower interest expense underpin current expectations. Beyond the broader economic conditions, raw material and energy costs remain a fluid dynamic that could impact the magnitude and direction of our preliminary forecast.