A. Schulman Inc. has wrapped up a 2008 fiscal year that produced mixed results — sales at the Fairlawn-based compounder and resin distributor were up 11 percent to almost $2 billion, but profit tumbled 18 percent.
The European market continued to dominate Schulman's sales in fiscal 2008, accounting for 76 percent of sales for the fiscal year ended Aug. 31. North American compounding contributed 17 percent of sales; resin distribution and the Invision plastic sheet business, the remainder.
Europe also accounted for almost all of Schulman's operating profit in the fiscal year, with North American compounding posting a small operating loss and Invision losing $6.4 million. Schulman also recorded an operating loss of $15 million after closing a facility in St. Thomas, Ontario, and selling a plant in Orange, Texas.
Fiscal 2008 proved to be tumultuous. Board member Joseph Gingo replaced the firm's longtime chief executive officer, Terry Haines, in January. Investors had criticized Haines and Schulman management for alleged poor performance. Longtime executives Barry Rhodes and Gary Elek also left the firm.
Under Gingo — a 41-year veteran of Goodyear Tire & Rubber Co. — Schulman quickly announced the St. Thomas closing and the Orange sale, and reversed earlier plans to open a sheet production plant in Findlay, Ohio. Former Goodyear executive Gary Miller joined Schulman as vice president of global supply chain and chief procurement officer.
And if that wasn't enough, Schulman in fiscal 2008 also hired UBS Investment Bank, based in Zurich, Switzerland, to explore selling the company or various individual businesses.
Schulman also put the Invision business up for sale and announced plans to spend $10.5 million to expand and renovate a facility in Akron, Ohio, to make additive compounds for film and packaging markets. A decision on the future of Invision is expected in the first quarter of 2009, officials said.
But Schulman is apparently not done with such moves. In an Oct. 22 interview in Fairlawn, Gingo said the firm would take ``a medical approach'' to reducing its engineering resin compound capacity in North America and eliminate some concentrate capacity in Western Europe as well.
Doing so is likely to remove lines from plants in Bellevue, Ohio, and Nashville, Tenn., though Gingo does not expect any site to be fully closed. Details about the cuts are expected by year's end.
``We'd have to be deeper into this economic downturn for site closures,'' he said. ``There are profitable products at both of those plants, but the machinery is different. Engineering plastics can help you, but you don't want to be dependent on it. You have to be a niche player and be able to move nimbly and anticipate the market.''
Much of Schulman's engineering resin work is in automotive. Gingo has set a goal of refocusing Schulman's U.S. business from automotive to packaging, making it similar to the firm's European and Mexican models. He cited Clarix-brand thermoplastic olefins as an automotive product likely to remain, while ``low-end'' products like mineral-filled polypropylene will play less of a role in the future.
Gingo also confirmed that during the summer an unidentified buyer made an offer to acquire some or all of Schulman. He did not provide details, but the firm determined the offer was not adequate. Schulman will continue to work with UBS, remaining open to offers or to making acquisitions of its own.
Although Gingo said he's confident the St. Thomas and Orange moves are right for Schulman, he has become less confident of meeting his goal of having North American operations break even during fiscal 2009.
``Nobody anticipated the decline and spread of economic problems in all markets,'' he said. ``Somebody might have — but I wasn't that guy.''
Companywide, Schulman's 85 percent capacity utilization rate for 2008 was down from 90 percent in 2007. European operating rates fell 6 percent. Utilization rates for engineering resin compounds in North America were down 4 percent, but color and additive concentrates production remained at full capacity in the region.
On Wall Street, Schulman's per-share stock price bounced between $20 and $24 for much of calendar 2008, before falling under $16 as part of the big Wall Street sell-off that began in September. Schulman stock stood at $14.88 in early trading Oct. 23.
The firm has set annual sales records in each of its last six fiscal years, but 2008 profit was its lowest since 2003.
This year also was an unexpected ride for Gingo. In late 2007, he was looking forward to retiring from Goodyear in a year or two when he got the offer from Schulman — the firm where his father, Joseph Gingo Sr., worked for almost 40 years.
Gingo has tried to make the most of the opportunity.
``If a company decides to go outside of the company for a new CEO, there's a reason for it,'' he said. ``But being on the board, I understood what the issues were. This company can be a big player in masterbatch and a quality niche player in engineering plastics as well.''