CLEVELAND — M.A. Hanna Co. of Cleveland, which ranks third among U.S. plastics compounders and distributors, is glad to leave a disastrous 1998 behind and is focusing on wire and cable, automotive and packaging markets to turn things around in 1999.
The firm expects to pick an outside candidate as its chief executive officer, as early as next month.
Just about everything that could go wrong did go wrong for Hanna in 1998, culminating in the October departure of Chairman and CEO Douglas McGregor after only 16 months at the helm.
Martin Walker, McGregor's predecessor who had spearheaded Hanna's transformation from mining to compounding, returned from retirement to lead the firm on an interim basis.
Decreased demand and problems in installing a new computer system hurt Hanna's plastics colorant, compounding and shapes businesses, which account for about 37 percent of sales.
Total profit for 1998, before an accounting change, was $30.3 million, down 53 percent from $64.6 million the year before. Sales climbed 4 percent, from $2.2 billion to $2.29 billion.
Hanna also closed four colorant plants in 1998 and sold one this year, eliminating 260 jobs, about 4 percent of its total work force, in the process. The firm also was affected by the departure of several key executives.
Industry analysts have said some of Hanna's problems stem from its acquisition of 26 companies in the past 12 years.
The firm's stock price began 1998 in the $25 range but plummeted to less than $10 in late summer. It since has rebounded and stood around $17 per share May 6.
At Hanna's annual meeting May 5 in Cleveland, Walker said that upon his return he realized some of Hanna's businesses ``had drifted off track.''
He admitted its colorants business had suffered as a result of not listening and reacting to what its customers wanted, and that its engineered materials unit had concentrated too heavily on winning large orders instead of the mix of small and medium orders that had driven its growth.
Walker said each of those units has altered its strategy and manufacturing operations recently, with positive results. Hanna's first-quarter sales of $580 million were up almost 9 percent from the fourth quarter of 1998 but were still down 2 percent from the same quarter last year.
The engineering materials unit, which compounds specialty grades of polyethylene and polypropylene as well as more high-end materials such as nylon and acetal, will focus in the near-term on small and medium-size injection molders. Longterm, it will continue working to gain a large share of business with original equipment manufacturers, Walker said.
With a market-focused approach to the $9 billion wire and cable market, Hanna hopes to replicate the success it has enjoyed in that field in Europe. The firm also will increase its efforts in the automotive and packaging markets.
Wire and cable now accounts for less than 10 percent of Hanna's overall sales, while automotive and transportation contribute about 20 percent and packaging about 10 percent.
``The net result is, we're going to have more feet on the street and more people touching the customer,'' Walker said.
Walker also brushed off industry speculation that Hanna's best chances for long-term survival are to merge with a similar firm such as A. Schulman Inc., an Akron, Ohio, firm that ranks fifth in the U.S. compounding market.
``We believe in consolidation — we started the trend before it was trendy — and the specialty chemicals industry does need more consolidation,'' Walker said. ``But our goal is to be the consolidator and not the consolidatee.''
Walker also said he isn't concerned about launching the new market focus before Hanna's new CEO is selected.
``I can't imagine a CEO coming in who wouldn't like to see these initiatives ongoing,'' he said.
At the request of Hanna's directors, Walker will remain chairman for 12-18 months after the new CEO is selected, to help with the transition.