DÜSSELDORF, GERMANY — Tom Waltermire had no illusions about the scope of the task that lay before him. A huge amount of work needed to be done to orchestrate the September 2000 merger of his Geon Co. and rival M.A. Hanna Co. into PolyOne Corp. Those efforts have been complicated by some of the worst business conditions in the past decade.
The jury is still out, but the PolyOne chairman and chief executive officer used the global stage of the K show in Dusseldorf to present evidence of significant progress. He provided updates on how the $3 billion, 9,000-employee, Cleveland-based compounder and resin distributor is forging ahead with its initiatives Project Triple Crown and ProjectOne.
The former is a two-year restructuring designed to streamline and modernize the North American manufacturing operations in its compounds and colorants business. The latter involves replacing 15 separate information-technology systems throughout the company with a single, integrated system.
Both plant closings and significant investments are part of Project Triple Crown. Before mid-December PolyOne expects to announce restructuring plans for its 13-plant PVC compounding business, but Waltermire would not tip his hand at this stage.
As recently reported, the firm is investing $4.3 million to upgrade and expand its Glendale, Ariz., color concentrates plant. Glendale is one of eight U.S. centers for color compounding that PolyOne is creating for $45 million. The network should be completed by the end of 2002 and the changes will result in pretax savings of $35 million to $50 million a year, he said.
Just as ambitious is the firm's ProjectOne information-technology overhaul. The former M.A. Hanna, built through a series of acquisitions, had multiple SAP software systems, as well as a J.D. Edwards software system for resin distribution. Geon had its own systems, and all needed to be integrated onto a common platform worldwide.
In May, PolyOne's North American vinyl plants made the transition, and in July the engineered materials business completed the shift. In September the company brought its North American color compounding and additives operations and the majority of its European color compounding group onto the system. The September actions alone involved 17 manufacturing sites, 8,600 customers and more than 40,000 products. At the end of December, the elastomers and polymer additives group will be converted, with the rest of Europe and Asia to follow.
Waltermire said the firm has spent $25 million on the project in 2001, and noted it is “on time and on budget.” He pointed out that Information Week magazine's editors selected PolyOne as having the top-rated information technology group in the chemicals industry, and ranked it 28th out of 500 overall organizations.
PolyOne has identified more than $200 million in annual cost-saving opportunities it expects to capture in 2003, according to Waltermire. He said that figure is four times greater than what management initially estimated when Geon and Hanna merged.
That progress will help drive future expansion.
“We want to ramp up the rate of new product development,” he said. “That's even more important than acquisitions.”
But, as evidenced by its pending purchase of Transcolor SA, based near Pamplona, Spain, acquisitions remain on the radar screen.
PolyOne now does about 25 percent of its business outside of the United States, of which 7 percent is in Canada.
“To get that up into the 30 percent-plus range, we clearly need to do some acquiring,” Waltermire said. “Once cash starts to flow again, we'll be back into that mode.”
PolyOne released its third-quarter financial results Oct. 30. The company reported profit of $2.9 million on sales of $659.6 million. Sales were down 15.3 percent compared with the pro forma third-quarter results for 2000.
“The third quarter is typically one of our strongest quarters of the year,” Waltermire said in a statement accompanying the results. “This year, however, the third quarter ranks as our worst quarter for sales because of reduced demand in the automotive, electronic and construction markets.”
He predicted that PolyOne's fourth-quarter sales will decline about 10 percent from the year-ago quarter, but said the firm still “anticipates reporting an operating income improvement.”