Nova Chemicals Corp. apparently has grown tired of its money-losing styrenics business dragging down its profitable performance materials unit.
Pittsburgh-based Nova announced June 26 that it will split off its North American solid polystyrene and styrene monomer assets, as well as its stake in a European styrenics joint venture with Ineos Inc., into a separate unit known as Styrenix.
Styrenix will remain part of Nova, although spokesman Greg Wilkinson said the firm will continue to look at a number of possible actions, including a sale or joint venture.
Nova's expandable polystyrene and performance materials businesses - including Arcel-brand PS/polyethylene interpolymer and Dylark-brand styrene maleic anhydride copolymer - will report results separately.
``This increased transparency will make it easier to see what these [EPS and performance materials] businesses have accomplished,'' Wilkinson said.
Styrenix will include solid PS manufacturing in Decatur, Ala.; Springfield, Mass.; and Montreal; as well as styrene monomer production in Bayport, Texas; and Sarnia, Ontario.
The move is expected to save Nova $50 million per year, mainly by eliminating 250 jobs and a good deal of corporate support services such as human resources and accounting. The firm already announced expected annual savings of $15 million from the closing of its plant in Chesapeake, Va., which will eliminate 125 jobs.
Between 2001 and 2005, Nova's styrenics business lost about $700 million, while its olefins/ polyolefins unit posted a profit of about $500 million. The styrenics business also lost $45 million in the first quarter of 2006.
In the first four months of 2006, U.S./Canadian PS sales were down about 6 percent, according to the American Plastics Council in Arlington, Va. Sales into the domestic market were down a similar amount.
PS sales into food service dropped almost 5 percent in the four-month period. That segment accounted for almost 40 percent of total U.S./Canadian PS sales during the quarter.
In a recent interview with Plastics News, Nova President and Chief Executive Officer Jeff Lipton said new products developed by the firm's styrenics business will help ``turn things around.''
``I don't know whether it's courage or necessity, but we've decided to bet on the styrenics market,'' Lipton said.
In the same interview, Lipton said resin makers ``have lost a tremendous amount of money trying to be successful in the styrene business.''
``This situation demands that we continue to reduce costs, and consolidation is a significant part of that,'' Lipton said. ``We're going to see more shutdowns, more acquisitions and more combinations of joint ventures [in the industry], particularly in poly- styrene, which has been a miserable business.''
On Wall Street, the announcement led Nova's per-share stock price to rally more than 3 percent to $28 in after-hours trading June 26. The stock had been as high as $35 in early May.