Ashland Inc. is weighing the future of several of its underperforming units, including plastic resin distribution leader General Polymers.
GP is part of Ashland Distribution, a Dublin, Ohio-based Ashland unit that barely broke even in the firm's just-completed fiscal 2002, as sales dropped 11 percent to $2.5 billion. The unit posted a profit of $1 million in fiscal 2002 after clearing $35 million in 2001.
In addition to Ashland Distribution, Ashland is reviewing its specialty chemicals and road construction businesses. Although selling off the units is a possibility, Ashland Distribution spokeswoman Lisa Houston said the distribution unit ``is working on improving the business'' through a reorganization that took effect Oct. 1.
During a conference call with investors and analysts in late October, Ashland Inc. Chief Executive Officer James O'Brien - who assumed the firm's top spot Oct. 1 - said that as the review process is completed, Ashland executives ``are likely to identify assets within these divisions that ... would add more value to another organization than to Ashland.''
Ashland Distribution no longer operates GP, chemicals, composites and environmental services as separate units. Instead, four U.S. regional offices and one international office now report directly to Ashland Distribution President Hank Waters. Three other business-focused vice presidents - including former GP head David Bening, who is now Ashland Distribution's sourcing VP - also report to Waters.
``We wanted to set up more accountability,'' Houston said of the reorganization. ``Each region will have individual sellers focused on plastics and chemicals and the other segments.''
``We'll still use the GP name, but the unit itself no longer exists,'' she added. ``There should be no change to our suppliers or customers.''
Employee levels at Ashland Distribution won't be affected by the reorganization, Houston said. The company also plans to continue to operate its 22-warehouse system in North America, which distributes materials for 26 resin makers and compounders.
Ashland does not split out GP's share of Ashland Distribution's sales or profit. In the past, it has assigned a generic annual sales number of $1 billion to GP, meaning it would account for about 40 percent of Ashland Distribution's total sales.
The distribution unit's 2002 shortfall can be attributed to a weakening overall economy and some growing pains from installing a new enterprise resource planning computer system.
``We were rolling out a system that's working to standardize our business,'' Houston said. ``Sometimes when that happens, there's uneven acceptance within the unit. But everything's been resolved and we don't expect that to affect us in 2003.''
GP also was impacted in 2002 by PolyOne Corp.'s decision to take all of its PVC compound distribution in-house. Geon Co., which merged with M.A. Hanna Co. to form PolyOne in 2000, previously had done a substantial part of its sales through GP.
According to one industry estimate, GP's share of Geon's PVC compound business may have been as high as 500 million pounds annually.
GP moved quickly to replace PolyOne's PVC compounds with those produced by Georgia Gulf Corp., but Ashland officials confirmed the move did have an impact on results.
``Any time you have a disruption like that, there's going to be an impact on business,'' Houston said. ``But we think we've found a better, stronger long-term partner in Georgia Gulf.''
Plastics industry consultant Margaret Baumann, president of G.H. Associates in Lebanon, N.J., said it may be unfair to lay most of Ashland Distribution's problems on GP, since 2002 has been a rough year for chemicals and composites distribution as well.
``Volume may be up a little [in resin distribution] this year, but nobody was happy in 2001,'' Baumann said. ``But the other [Ashland Distribution] units probably didn't do that great either.''
If Ashland does decide to unload Ashland Distribution, Baumann said it probably would do so piece by piece, since it's unlikely a buyer could be found for the combined resin, chemicals and composites network. Ashland Distribution was the second-largest business unit for Covington, Ky.-based Ashland in fiscal 2002.
Overall Ashland sales for fiscal 2002 were about $7.5 billion, down more than 2 percent from 2001. Ashland's profit plunged 72 percent to $117 million in fiscal 2002.