CLEVELAND — Although PolyOne Corp. is coming off a rough quarter and plans to announce further site closings by midyear, the Cleveland compounding leader expects that internal investments and a newly installed computer system will help return the firm to health.
"Polymer services is a bruising battleground," President and Chief Executive Officer Tom Waltermire said at the firm's annual meeting, held May 2 in Cleveland. "We can never and will never be complacent. We always have to find things that we do better than our competitors."
Waltermire and his firm are working to stay focused while sailing through some choppy waters. PolyOne — formed from last year's merger of PVC compounder Geon Co. and color compounder and distributor M.A. Hanna Co. — lost more than $21 million in the first quarter. A combined Geon/Hanna posted a profit of more than $26 million in the same period last year.
First-quarter sales were down 13 percent to $709.7 million in a slowing economic climate in which PolyOne struggled with high costs for energy and raw materials, officials said.
PolyOne will announce another round of plant closings by the end of June as part of a realignment that has been dubbed Project Triple Crown. The firm announced four closings in April, bringing its number of sites down to 30. That number is expected to be "in the low 20s" by the end of next year, officials said.
The company wants to focus on the investments it will make in its remaining plants instead of the job losses that will result from the closings.
"From a people standpoint, our objective isn't to close plants," Waltermire said. "Our objective is to create a network of truly outstanding facilities, and it doesn't make sense to have 34 of those. Once you do that, you're going to have some redundant facilities."
PolyOne is reviewing its remaining facilities "line by line, product by product and customer by customer" and plans to invest $35 million to $50 million in its remaining sites. Some sites could operate with fewer production lines, while others could receive brand-new lines, officials said.
The site review covers dozens of factors, including customer location, raw material sourcing, types of equipment, cost of living variables, and costs for overhead and utilities, PolyOne chief investor and communications officer Dennis Cocco said.
PolyOne also has pledged to install a "safety net," including outplacement services for employees who are let go.
"We're going to help everyone find their next job," Waltermire said.
The closings and job cuts are expected to save as much as $53.5 million annually.
PolyOne's film business will not be affected by future cuts, officials said. As announced in April, the $200 million-a-year business will lose 55 administrative and manufacturing positions by the end of the year. A films plant in Newton Upper Falls, Mass., was shut down earlier this year.
The new SAP-brand information technology system — which cost $25 million and was just launched — will be a big part of future improvements. The firm has identified $150 million in cost reductions, most of which will be enabled through the new system.
The system's first use came in PolyOne's PVC compounds and specialty resins unit, which represents 16 plants, 1,400 computer users and $1 billion in annual sales.
The new system matched inventory records to within 685 pounds — 0.03 percent of the previous total, officials said. It also flawlessly processed 99 percent of 2,100 product orders.
Other advantages could come through internal distribution of additives used in PolyOne's compounds. Waltermire said that can be achieved by buying larger quantities of pigments and other additives and distributing them from central sites, which would be more efficient than having each site negotiate its own buying.
PolyOne also is looking to expand a computerized business-to-business model used in its PVC compound business to other PolyOne business units. The model provides links with PVC maker Oxy Vinyls LP — of which PolyOne owns 24 percent — and additives suppliers such as Millennium Chemicals Inc., BASF Corp. and Rohm and Haas Co.
Longer-term, PolyOne expects the second quarter of 2000 to be slightly better than the first but still weak overall. The firm has set an aggressive earnings-per-share target of $2 for 2003. Per-share earnings totaled 26 cents in 2000.
"Right now, manufacturers are getting their inventories down," Waltermire said. "Once that happens, I think we'll see business pick up. We're not seeing big downdrafts in housing and car sales. I don't see any big drivers that are going to kill the economy."
PolyOne topped a recent industry ranking of U.S. compounders, with a market share estimated at 18 percent. The firm posted sales of $3.1 billion and profit of $52 million last year.