FAIRLAWN, OHIO (UPDATED Aug. 26, 4:15 p.m. ET) — Materials firm A. Schulman Inc. plans to close its compounding plant in Nashville, Tenn., in a move that will eliminate 60 jobs.
To replace work done in Nashville, Fairlawn, Ohio-based Schulman plans to spend $7 million to expand compounding capabilities at its plant in Akron, Ohio. The Akron expansion is expected to create 20 jobs, Schulman officials said in an Aug. 25 news release.
Schulman “has taken several actions over the past few years to replicate our profitable European engineered plastics business model in North America by eliminating U.S. commodity capacity and shifting our focus to more profitable technical compounds,” Chairman, President and CEO Joseph Gingo said in the release.
Some work done in Nashville also will be moved to a Schulman plant in Bellevue, Ohio. Some equipment from Nashville will be moved to Akron and Bellevue as well, Schulman spokeswoman Jennifer Beeman said in an Aug. 26 phone interview.
The Nashville plant will close by the end of February. The site had annual compounding capacity of about 24 million pounds on four extrusion lines, although Beeman said that the pland “hadn't been running at full capacity for some time.” After the Nashville plant closes, Schulman plans to sell the property and any remaining equipment, she added.
Compounding work done in Nashville was focused on polycarbonate, nylon and other engineering resins. Beeman emphasized that Schulman “isn't exiting those businesses” and that it's aiming to make the transition “with the least amount of disruption to our customers as possible.”
Work at the 164,000 square-foot Akron plant – that was relaunched as a manufacturing site in 2009 after serving solely as a warehouse for eight years – will include reconfiguring the site to house equipment from Nashvilee. Some new equipment may be purchased as well, Beeman said.
“Relocating some of the work to Akron is a good move for us,” she added. “It allows us to have some flexibility.”
The Akron site has added significance for Gingo, since it was run for many years by his father, Joseph Gingo Sr.
Closing the Nashville plant will create an annual pre-tax benefit of between $4 million and $5 million for the firm. Schulman also on Aug. 25 lowered its net income guidance for its 2011 fiscal year – which ends Aug. 31 – from $57 million to $62 million down to $50 million to $52 million. Officials said the adjustment was the result of two special charges totaling $5 million.
The first charge was described as being related to “a settlement involving a business relationship.” Beeman confirmed that the charge involved a lawsuit with a firm that Schulman still does business with, but she declined to provide more details.
The second charge was connected to “global excess and obsolete inventory,” officials said. The charge didn't involve any physical selling or moving of inventory and was more of an internal accounting measure, according to Beeman.
Schulman ranks as one of North America's largest makers of compounds and concentrates. The firm posted sales of $1.6 billion in its fiscal 2010.
In the first nine months of Schulman's fiscal 2011 – a period that ended May 31 – the firm's sales shot up almost 45 percent to more than $1.6 billion over the same period in 2010. But its profit fell about two percent to $35.1 million. Schulman's sales volume in pounds also grew 45 percent to more than one billion pounds during the period.
In that nine-month stretch, the Europe/Middle East/Africa region accounted for about 80 percent of Schulman's sales and 70 percent of the firm's operating income. The North/South America region was a distant second with 23 percent of sales and about 15 percent of operating income.
On Wall Street, Schulman's per-share stock price began 2011 around $22 per share and peaked near $26 in early July. But it's been in decline for most of the last two months, closing at a little less than $17 on Aug. 26.