UPDATED — PolyOne Corp. is closing a plant in Quebec and adding capacity at a plant in Ohio as it continues to integrate the assets of Spartech Corp.
PolyOne's sheet and rollstock plant in Granby, Quebec, will close, with production shifting to other PolyOne plants, officials said in an Aug. 18 news release from the Avon Lake, Ohio-based firm.
The Quebec closing will result in 70 job cuts and is expected to be completed by the end of the year.
Capacity will be added at PolyOne's sheet plant in Greenville, Ohio. Those moves will include the addition of glycol-modified PET and Royalite-brand sheet production beginning in 2016.
Both plants are part of PolyOne's Designed Structures & Solutions unit, which includes the sheet business that the firm acquired when it bought Spartech Corp. for almost $400 million in early 2013. The sheet business ranked 14th in the most recent Plastics News ranking of North American film and sheet manufacturers.
But the business has faced some challenges since the acquisition. Several plants already had been closed, and the unit's sales for the first half of 2015 were down 32 percent compared to the year-ago period. DS&S posted first-half 2015 sales of less than $231 million. Full-year sales for 2014 were almost $618 million.
In May, specialty chemicals veteran Richard Altice was hired to lead the DS&S unit, replacing Julie McAlindon.
“Compared to the early part of the year, our recent performance in key metrics such as on-time delivery and scrap rates is improving,” Altice said in the Aug. 18 release. “I'm encouraged by our team's initiative, our customer interactions and new business gains.”
President and CEO Robert Patterson added in the release that a core focus in transforming DS&S “is aligning our manufacturing assets with the voice of the customer while continually making investments for the future.”
“Our latest actions provide a more streamlined and sustainable manufacturing footprint from which we can better serve our customers,” he said.
In July 2013, PolyOne announced it would close plants in Warsaw, Ind.; Evanston, Ill.; Portage, Wis.; Cape Girardeau, Mo.; Donora, Pa.; and Lake Charles, La. Those closings eliminated about 250 jobs and produced $25 million in annual savings. They were completed by the end of 2014.
The Warsaw and Evanston plants made sheet, while the Portage plant made packaging, primarily film. The Cape Girardeau and Donora plants made color and engineered materials. The Lake Charles plant did contract manufacturing.
Spartech had operated two plants each in Portage and Cape Girardeau. PolyOne closed only one plant at each site. Sheet operations remained open at both sites.
A PolyOne spokesman in June confirmed that the firm had added about 70 jobs and installed new equipment at the Greenville plant since early 2014. Many of those new jobs and some equipment transfers came from Spartech plants that had been closed.
As of June, PolyOne had invested $12 million on the equipment transfer and on new equipment in Greenville. At that time, the site employed about 170. The JobsOhio state agency is providing PolyOne with a $100,000 grant to assist with job training in Greenville.
The Greenville location is unlike other Spartech sheet and rollstock plants because it was built from the ground up to optimize plant layout and raw materials handling systems, according to Phil Karig, a former Spartech executive who is now managing director of the Mathelin Bay Associates consulting firm in St. Louis.
“Greenville was originally conceived as a central production point for polyolefin sheet … but the plant was always large enough to physically accommodate other products,” Karig said in an email. “PolyOne seems willing to make additional capital investments in Greenville to allow them to move additional products from other plants that may have higher production costs … or less than optimum plant footprints.”
Going forward, Karig added that the challenge for PolyOne will be to balance the cost savings achieved through consolidating multiple product lines in Greenville against the complexity of running a large and varied product slate under the same roof.
Kevin Hocevar, an analyst who covers PolyOne for Northcoast Research in Cleveland, said that although PolyOne “is trying to fix the problem [with DS&S] … it's going to take time.”
He added that PolyOne needs to improve some key metrics at DS&S, such as on-time delivery, before investors can really start to see improvements in its business fundamentals. “I think between the actions PolyOne is taking to fix the business and some recent new business wins, we should start to see improving performance sequentially as we progress through 2015,” Hocevar said.
Another market watcher was more blunt in his assessment of PolyOne's integration of Spartech. “They knew they had to go in [to Spartech] with a chainsaw,” he said. “There were some badly run businesses that were focused more on volume than on profitability.”
PolyOne “had to tighten their belt and fire some [Spartech] customers,” the source added. “I think they thought they had the skills to turn around the sheet business. They're not walking away from it, but it's been harder than they expected.”
By comparison, the contact said that PolyOne's other large acquisitions of materials makers GLS and ColorMatrix “went seamlessly” and quickly produced financial growth for the firm.
On Wall Street, PolyOne's per-share stock price tumbled in late July after the firm narrowly missed second-quarter earnings expectations. It was above $40 as recently as late June, but has bounced between $33 and $35 since the earnings miss. The price closed at $33.50 on Aug. 20.