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There's been a change at the top at Spartech Corp., with board member Victoria Holt replacing Myles Odaniell as the firm's president and CEO.
The change was announced Sept. 8 — the same day the firm released poor third-quarter financial results that sent its stock price tumbling more than 30 percent.
Holt, 52, had been senior vice president at paint, glass and coatings maker PPG Industries Inc. of Pittsburgh. She has been a member of Spartech's board since 2005.
“I've watched the company begin to transform itself into a solutions provider,” Holt said during a Sept. 9 conference call. “We've done well to weather the economic storm, but we've stalled in our effort to create sustained value for shareholders.”
“The board has faith in our employees and core businesses and in the changes made to enhance competitiveness, but we've failed to fully execute our strategy. We must refocus on customers and markets to capitalize on the steady recovery in the economy. My focus in the next quarter will be on execution.”
Odaniell had led Clayton, Mo.-based Spartech — a major producer of plastic sheet and a maker of color compounds and concentrates — since January 2008. Holt now becomes Spartech's fourth president and CEO in the last six years. In mid-2005, longtime Spartech chief Bradley Buechler was replaced by George Abd, who held the job for about two years before leaving. Chief Financial Officer Randy Martin held the job on an interim basis for the second half of 2007.
The firm posted a loss of $192 million in fiscal 2008 before recovering to post a $2 million profit in 2009. Combined profit for 2006 and 2007 had been almost $73 million. Since early 2008, Spartech has closed a dozen plants in North America and Europe and has eliminated more than 700 jobs. Even now, after those closings, the firm ranks as North America's seventh-largest film and sheet maker and is among North America's top 30 compounders and concentrate makers, according to recent Plastics News reports.
Dmitry Silversteyn, a market analyst with Longbow Research in Independence, Ohio, said Spartech's change at the top “is a comment on the fact that the board isn't satisfied with the pace of progress.”
“Time will tell if this is a step in the right direction,” said Silversteyn, who covers Spartech and other plastics and specialty chemicals firms. “They're not really changing course, they're changing jockeys in the middle of the race.
“I don't think that Spartech's strategy is flawed, but its execution may have been better,” he added. “What they need to do isn't rocket science. We've seen other companies do it, so we know it can be done.”
Spartech also needs to look at how it interfaces with customers, according to market analyst Steven Schwartz.
“They need to convey to Wall Street what they have and what they're going to do,” said Schwartz, with First Analysis in Chicago.
“For the next six to 12 months, they need to get past their operating issues. If you're not getting deliveries out the door, that eats away at the confidence of your sales force,” Schwartz said.
Spartech reported annual sales of around $1.5 billion from 2006-08 before falling to about $927 million in 2009. On Wall Street, Spartech's per-share stock price bottomed out near $1.30 in March 2009 before bouncing back above $14 earlier this year. It opened near $9.30 on Sept. 9 but closed at $6.30 — a drop of 32 percent.
For the third quarter of fiscal 2010, Spartech lost almost $4 million even as quarterly sales grew almost 17 percent to nearly $270 million. The firm had shown a profit of $1.5 million in the same quarter in fiscal 2009, which ended Oct. 31
Third-quarter operating earnings in Spartech's custom sheet and roll-stock unit — which generated 53 percent of sales — fell more than 90 percent to $900,000. Operating earnings also dived for the firm's color and specialty compounds (down 50 percent to $800,000) and packaging technologies (down 16 percent to $6.7 million) units.
“Our performance in the third quarter is clearly unacceptable to the company's leadership team,” Martin said during the conference call.
“An increase in volume did not result in an earnings increase. We've had some operating issues, and it may take a couple of quarters to execute change. Some changes have been more challenging than we expected, and we need more time to translate it into appropriate results.”
Included on that list of challenges were machinery startup issues Spartech faced when trying to increase compounding capacity at its plant in Donora, Pa. The additional capacity was needed because of increased demand from the automotive sector. To meet customer orders, Spartech chose to pay for more expensive overtime work and to pay premium shipping costs.
Spartech also had to delay the start of new sheet capacity in Wichita, Kan. The firm is moving equipment to the Wichita site from a plant in Arlington, Texas. Martin said business from a large sheet customer has been “down significantly year-over-year.”
Sharp price increases for polycarbonate and ABS resins also have impacted Spartech's bottom line. The firm was unable to source less-expensive regrind material and now is looking at less-expensive alternate materials, officials said.
Holt tried to remain optimistic while facing an uphill climb.
“When you go through the amount of change that Spartech has gone through, you can become internally focused,” she said. “We want to renew our focus on the customer.”