Wellman Inc.'s board is exploring alternatives, including a possible sale, after the firm recorded another quarterly loss.
The Fort Mill, S.C., company announced Oct. 30 that it has hired Lazard Freres & Co. LLC to help it evaluate its options. Wellman said it hopes to conclude the evaluation before it refinances debt in 2008.
The PET resin maker and plastics recycler reported a loss of $26.3 million for continuing operations for the quarter ended Sept. 30, compared with a loss of $37.9 million a year earlier. At the nine-month mark for 2007, Wellman's loss is $66.1 million, a slight improvement over the nine-month loss of $68.7 million a year ago.
Wellman said its results were affected in the third quarter by competitive pressures as new PET resin capacity became available in North America.
In the midst of an oversupplied market, PET selling prices are weak and affecting sales revenue, noted Edgar Acosta, a market analyst with DeWitt & Co. in Houston.
``Companies are sacrificing price for market share,'' Acosta said in a telephone interview. Selling prices for PET are actually lower than published figures, he added.
Chase Willett, an analyst with Chemical Market Associates Inc. of Houston, agreed that the PET market suffers from overcapacity. ``We expect consolidation and some rationalization,'' Willett said. ``Even then it will take several years of good growth to bring capacity in line with demand.''
Acosta said companies in Asia and the Middle East could be among those most interested in buying Wellman.
Wellman had been exploring alternatives for its recycling unit, which mainly is involved with nylon resin resold into the injection molding market. In 10-Q statements, the company has called that recycling business noncore.
The firm's shares tumbled on the news about its exploratory program. As of 2:30 p.m. Oct. 30, the share price had plummeted to 66 cents, down from the Oct. 29 close of $1.79. For the past year, the price had varied between $1.48 and $4.10 per share.
Wellman continues to streamline operations and expects to reduce costs by $20 million to $25 million in 2008. The firm recently sold its European PET resin business and used proceeds to help it reduce debt by $21.2 million.