As it sets sail for Germany and K 2010, PolyOne Corp. is hoping that its recent run of good fortune can continue.
The Avon Lake-based compounding and distribution firm is on track in 2010 to post its second straight profitable year. And while that may seem like faint praise, it is music to the ears of Chairman and CEO Stephen Newlin.
“We've done a whole culture transformation,” Newlin said in a recent interview in Avon Lake. “We're now focused squarely on our customers and have higher expectations and accountability. Our focus is on new customers and prospects, and we're driven around customer needs.”
Those changes also have produced results on PolyOne's bottom line. In 2007 — Newlin's first full year at the helm — the firm eked out an $11.4 million profit on sales of about $2.6 billion. The economic flameout of 2008 hit PolyOne hard, as the firm posted a loss of almost $275 million on sales of about $2.7 billion.
After making some tough choices in 2009 — closing a plant in Ontario and cutting almost 400 jobs companywide — PolyOne turned the corner in 2009, earning almost $70 million on a slimmed-down sales total of $2.1 billion.
The turnaround also has been reflected in PolyOne's stock price. When Newlin joined the firm in early 2006, the price was floating just under $9 per share. It bounced between $6 and $10 through mid-2008 before descending along with most other stocks, bottoming out under $1.50 in March 2009.
Since that point, PolyOne's stock price has been on a steady upward climb, closing Oct. 14 at $13.37.
“We did a customer survey right after I started, and a number of people said we were difficult to do business with,” Newlin said. “On product quality, nothing stood out. In delivery and innovation, we were right in the middle of the pack.
“That wasn't good enough. We wanted to be the best in all stages. Our on-time delivery ranged from 81 percent to the mid-90s. Why would you buy from us? We needed to capture what made our customers profitable.
“I don't think we were arrogant, but we had grown complacent with our customers. We used to go after volume. But that's not our game anymore.”
Newlin also made a number of moves which, he said, improved the caliber of PolyOne's management team.
“I believe that we have, bar none, the best management team in the industry,” he said. “We have a lot of ideas and energy focused on innovation.”
At the K show, PolyOne will be highlighting several new or recently introduced materials, including:
* OnColor Complete, an eco-friendly liquid colorant system that can help processors and original equipment manufacturers reduce their costs of operations while eliminating waste and enhancing employee safety, according to PolyOne.
* Edgetek AM-brand flame-retardant, non-halogen compounds, a new line of nylon-based compounds for thin-walled parts.
* OnFlex non-halogen flame-retardant, non-phthalate thermoplastic elastomers — a line from PolyOne's GLS unit aimed at the wire and cable market.
* Compounds, additive and colorant solutions for photovoltaics, for use in back-sheet laminates, wire and other applications in solar energy and related markets.
* Halogen-free Eccoh-brand compounds, which provide structural strength, antimicrobial controls and other properties to the medical market.
“The K show is important to us because we're a global player,” Newlin said. “There will be a lot of suppliers and business customers there. We want to support the industry and stay connected and have visibility.”
Regarding two of PolyOne's main end markets — automotive and construction — Newlin said the firm “is dealing with things we can control and influence.”
“We can't control how many houses or cars are built,” he said. “We'll never fully abandon these markets, but we need to find ways to grow when they're down.”
Newlin pointed out that the standard U.S. auto scrap rate — how many cars are taken off the roads each year — is 12 million. That's slightly ahead of the 11.5 million build number expected for this year.
“That's just treading water,” he said of those numbers. “Automotive is in the right zone globally, but it's still down in the U.S. We see continued growth in that market, but we've become more of a custom shop.”
Any U.S. construction market recovery “will take a while longer,” according to Newlin. Although the U.S. market eventually could get back to its 50-year average of about 1.5 million new units built per year, the peak of 2 million “won't be seen again,” he said.
Newlin also anticipates a change in the previously close relationship between housing starts and the performance of PVC-based products such as the compounds that remain a large business for PolyOne.
“People are going to have less to spend on a new house, and we need to match that,” he said.
PolyOne also is working in a challenging market space where it's entering into sustainable products while still being a major developer of PVC, a resin that's been targeted by environmentalists for many years.
“We need a sustainability line that goes all the way across our product line,” Newlin said. “But PVC is really difficult to replace unless you can replace its economics.
“Everybody's for green products — it's like apple pie — but they don't always want to pay a 30-40 percent premium. So there's not going to be a sea change. We'll continue to pursue parallel paths.”
Newlin also touched on PolyOne's recently introduced scorecard program, where the firm will assess 30 of its suppliers in a number of performance areas.
“It's not about beating our suppliers up on price,” he said. “We want them to understand where we're going with the company. We want to draw them in to technology, open the door and see what it means.”
Future growth also is on the minds of Newlin and other PolyOne executives.
“We've got the strongest balance sheet and finances in the history of the company, and we'll be gearing up our [mergers and acquisitions] activity,” he said. “We'll look to global growth in technology plays and bolt-on applications. We like our position in Asia, but we'll keep building on it, and also will look to South America.”
