Business News
PolyOne Updates Second-quarter 2008 Outlook
Friday 20. June 2008 - Company Expects Earnings Improvement
PolyOne Corporation (NYSE: POL) today updated its outlook for the second quarter ending June 30, 2008.
The Company expects second-quarter consolidated sales to increase 7% to 9% compared with the second quarter of 2007, despite challenging demand trends in the North American housing and automotive markets. This projection is slightly higher than the Company’s original estimate of 6% to 8% sales growth. Second-quarter 2008 earnings before special items are expected to show modest improvement over the same period a year ago earnings before special items and to increase sequentially from first-quarter 2008 earnings before special items.
Aggregate sales for PolyOne’s Specialty platform, including sales from GLS Corporation, are projected to grow nearly 25% in the quarter compared with the second quarter of 2007. GLS was acquired in January 2008 and represents approximately 60% of the Specialty growth for the second quarter, similar to the first quarter of 2008. PolyOne’s Specialty platform consists of International Color and Engineered Materials, Specialty Engineered Materials, North American Color and Additives and Specialty Inks and Polymer Systems. Operating income in the aggregate for these businesses is projected to grow significantly from the same period a year ago, reflecting both margin expansion and an increased sales base.
International Color and Engineered Materials sales in the second quarter are expected to demonstrate double-digit growth compared with the same period a year ago, primarily due to favorable foreign currency translation. While International demand is generally intact, sales in the latter part of the quarter could be adversely affected by delivery disruptions due to freight carrier strikes in Europe. In Asia, pockets of demand softening continue to be evident for customers who primarily export to North America. International segment operating income, driven by stronger operating margins, is expected to increase significantly compared with the second quarter of 2007.
For PolyOne Distribution, the Company anticipates meaningful increases in both sales and operating income during the second quarter of 2008 compared with the second quarter of 2007, with earnings impacted favorably by targeted growth efforts in key end markets.
Second-quarter 2008 sales for the Performance Products and Solutions platform are expected to decline 6% to 8% compared with the second quarter of 2007. The Performance Products and Solutions platform consists of Geon Performance Polymers, Producer Services and Resin and Intermediates. Operating income for Performance Products and Solutions is anticipated to be slightly above first-quarter 2008 performance, although significantly below the second-quarter 2007 level. This decrease is due primarily to lower demand in the North American housing, construction and automotive markets compared with the same period a year ago, and margin pressure caused by higher raw material and energy costs not fully offset by increased pricing.
SunBelt earnings are projected to increase sequentially compared with the first quarter of 2008, but decline compared with the second quarter of 2007. Strong chlor-alkali margins, driven by increasing caustic prices, are expected to be more than offset by weak end-market demand for chlorine derivatives compared with the same period last year.
Additional considerations:
— The Company expects second-quarter Corporate and eliminations to be between $11 million and $13 million, down from the prior-year quarter primarily due to adjustments in 2007 to associated operating reserves.
— The Company anticipates net financing expenses to be approximately $11 million in the second quarter of 2008. Second-quarter 2007 net financing expenses were $14.7 million, before consideration of a $1.1 million special item. The lower expense is due to the redemption in 2007 of $241.4 million of senior notes due 2010, partially offset by debt incurred in connection with the acquisition of GLS.
— The Company anticipates an effective tax rate between 33% and 35%.