Business News

PolyOne Announces First-quarter 2008 Results

Wednesday 07. May 2008 - - Revenues increase 8.5 percent to $713.7 million - Earnings quality improves significantly as Specialty platform income nearly triples - First-quarter 2008 earnings decline by $0.01 per share, with Specialty platform income growth largely mitigating a $13.3 million year-over-year decline in Geon Performance Polymers (formerly Vinyl Business) segment income - Company expects full-year 2008 earnings growth

PolyOne Corporation (NYSE:POL), a leading global provider of specialized polymer materials, services and solutions, today reported first-quarter revenues of $713.7 million, an 8.5 percent increase compared with revenues of $657.8 million in the first quarter of 2007. This increase includes benefits from the GLS acquisition and the translation effect of foreign currencies.

Net income was $6.5 million, or $0.07 per diluted share, for the first quarter of 2008 compared with $7.4 million, or $0.08 per diluted share, for the first quarter of 2007. Included in the results for both periods are special items equating to $0.01 per share (see Attachment 5).

On a comparable basis, after adjusting for special items, PolyOne reported $0.08 earnings per share in the first quarter of 2008 compared with $0.09 per share in the first quarter of last year. Also included in first-quarter 2008 earnings is a $1.6 million, or $0.01 per share, one-time purchase accounting charge related to the GLS acquisition. After adjusting for this additional item, year-over-year earnings were flat despite slowing demand in such key end markets as housing and automotive, as well as escalating raw material and energy costs during the 2008 first quarter.

“I am pleased the PolyOne team successfully overcame a $13.3 million year-over-year operating income decline in our Geon Performance Polymers business, enabling the Company to maintain flat earnings this quarter compared with the same quarter last year,” Chairman, President and Chief Executive Officer Stephen D. Newlin said. “The near tripling of our Specialty platform operating income — driven by organic earnings more than doubling and augmented by the GLS acquisition — offers further evidence that a meaningful shift in our earnings base is well under way. For the quarter, our Specialty platform earnings represented over 40 percent of total operating income from all segments.”

Newlin continued, “This performance, amid some of the toughest business conditions in a generation, clearly demonstrates our progress in executing our strategy and improving our earnings stream to one that is derived from a higher-quality, sustainable business mix, and building a platform that is separate from our historically cyclical end markets. Our success this year will depend on our cost management efforts and our ability to grow profitably by improving our sales mix and closing on new business. The successful execution of these initiatives gives us confidence that we will deliver growth in the near term and be able to accelerate this growth when the economy improves over the longer term.”

PolyOne’s Segments and Platforms

In the first quarter of 2008, PolyOne introduced Specialty Engineered Materials, a new reportable segment that comprises the former North American Engineered Materials business and GLS. The segment’s name reflects the strategic shift toward specialization that the engineered materials business has undergone.

In April, PolyOne renamed its Vinyl Business segment Geon Performance Polymers, building upon Geon’s renowned global brand, which is synonymous with excellence, quality and reliability.

PolyOne now has five reportable segments: Specialty Engineered Materials, Geon Performance Polymers, International Color and Engineered Materials, PolyOne Distribution, and Resins and Intermediates. In addition, PolyOne reports an All Other category which now includes North American Color and Additives, Producer Services, and Specialty Inks and Polymer Systems.

The Company frequently discusses its businesses in terms of three strategic platforms. The Specialty platform comprises International Color and Engineered Materials, Specialty Engineered Materials, North American Color and Additives, and Specialty Inks and Polymer Systems. The second platform is PolyOne Distribution. The third platform is the renamed Performance Products and Solutions, formerly known as the General Purpose platform, which consists of Geon Performance Polymers, Producer Services and Resins and Intermediates. This renaming better reflects PolyOne’s mandate to understand customer needs and provide them with unmatched, value-added services and solutions.

Outlook

The Company anticipates continued economic uncertainty as well as volatile raw material and energy costs. Based on early results, PolyOne anticipates second-quarter 2008 sales growth of approximately 6 percent to 8 percent, including organic sales growth in the low single digits, despite weak demand trends in the North American residential construction and automotive markets.

Geon Performance Polymers segment sales are expected to show sequential improvement from the first quarter, but decline 9 percent to 12 percent from the second quarter of 2007. International demand generally remains intact, although select pockets of softening are evident with customers who primarily export to North America.

Margin improvements in the Specialty and PolyOne Distribution platforms are expected to drive operating income growth for these platforms in excess of second-quarter 2007 levels. The Performance Products and Solutions platform operating margin is projected to increase sequentially, but remain below the year-ago level due to continued weak end-market demand. SunBelt Chlor-Alkali earnings are expected to be lower compared with second-quarter 2007 and first-quarter 2008 results, due to low incremental chlorine demand outweighing benefits from higher caustic pricing.

Based on these projections, PolyOne expects second-quarter 2008 earnings before special items to approach the level of second-quarter 2007 earnings before special items, and to increase sequentially versus first-quarter 2008 results.

For full-year 2008, based upon current North American demand levels, PolyOne has modified its projected sales growth to 7 percent to 10 percent, from the Company’s prior estimate of 10 percent to 12 percent. The Company continues to anticipate positive year-over-year earnings growth in 2008; however, the distribution of quarterly earnings is expected to be more heavily weighted toward the second half of the year