UPDATED: On the same day that it announced financial results for fiscal 2015, materials firm A. Schulman Inc. said that it will close three compounding plants in Evansville, Ind.
Work done at those plants will be moved to other Schulman sites in Evansville, officials with Fairlawn, Ohio-based Schulman said in an Oct. 20 news release. Some engineered plastics compounding done in Akron, Ohio, also will be moved to Evansville, they added. The plant closings and the Akron move will result in a total of 26 job cuts.
The plants being closed were part of Citadel Plastics, the West Chicago, Ill.-based compounder and composites maker that Schulman acquired in an $800 million mega-deal in March.
“We are swiftly executing our integration of Citadel,” President and CEO Bernard Rzepka said in the release. “While these decisions are not easy for those impacted, the additional Citadel plants in the Evansville area required that we evaluate capacity utilization and manufacturing capabilities, and achieve efficiencies and cost savings.”
Two of the three plants being closed previously were operated by Evansville compounder Lucent Polymers, which Citadel acquired in 2014. Citadel's previous owners had bought two other Evansville firms — Matrixx Polymers in 2007 and QTR Inc. in 2010.
Schulman then in 2014 bought the specialty plastics business of Ferro Corp. — including an Evansville plant. As a result, Schulman found itself with seven production plants in Evansville. Four will continue to operate after the closings.
Officials announced the moves as they released full-year results for 2015. For the year ended Aug. 31, Schulman's sales fell 2 percent to just under $2.4 billion. Changes in foreign currency values affected the firm's sales in fiscal 2015, officials said.
Profit falls, volume grows
Schulman's fiscal 2015 profit fell 51 percent to just under $28 million vs. fiscal 2014. But the firm's annual sales volume in pounds of product sold increased 8 percent to almost 2.3 billion pounds.
Excluding the impact of foreign currency, Schulman now has posted three consecutive years of year-over-year growth in sales, gross margin and EBITDA.
“These results give us confidence that we have the team and the tools in place to deliver further profitable growth in fiscal 2016 and beyond,” Rzepka said in the release.
The Citadel acquisition — Schulman's 11th in the last six years — is expected to nearly double Schulman's U.S. sales and to increase its annual sales by $550 million overall. That amount would be an increase of more than 20 percent vs. Schulman's fiscal 2014 sales total. Citadel employed 1,200 at 21 plants, including 17 in North America.
By acquiring Citadel, Schulman “made significant strides toward our strategic vision of becoming the premier plastics solutions provider,” Rzepka said in the release.
Schulman's individual business units showed mixed results in fiscal 2015. Engineered Plastics and Masterbatch Solutions were the firm's two largest units based on sales. EP led the way with $787.3 million in sales — up 4.4 percent — for a 33 percent share of Schulman's fiscal 2015 sales. MS wasn't far behind with $741.4 million in sales — down 3.3 percent — for a 31 percent share.
Schulman's smaller business units faced sales challenges in fiscal 2015. Annual sales in Specialty Powders and Distribution Services each fell 16 to 18 percent, while sales in Custom Performance Colors grew less than 2 percent.
Sales volume in pounds for Schulman in fiscal 2015 also were highest at EP and MS. Both showed solid growth, due in part to the Citadel deal. MS checked in at number one with 751.9 million pounds sold — up 8.8 percent — representing 33 percent of the firm's annual volume. EP had sales of 580.4 million pounds — up 21.3 percent — for a cut of 26 percent.
Annual volume in pounds grew almost 19 percent for Custom Performance Colors, but fell 9 percent for Specialty Powders and more than 3 percent for Distribution Services.
In the fourth quarter of Schulman's fiscal 2015 — including sales from Citadel — the firm generated 62 percent of its sales from Europe, the Middle East and Africa; and 22 percent from the U.S. and Canada. The Asia Pacific and Mexico/South America regions each contributed about 8 percent of sales.
Looking to fiscal 2016, Rzepka — a 23-year Schulman veteran who became CEO on Jan. 1 — said that company officials “are excited about the opportunities that Citadel brings to us.
“We've taken a transformative step forward in achieving our long-term strategic goals, one of them being rebalancing our regional footprint,” he said in the release. “Given the current volatile markets, we expect another challenging year. However, we are committed to achieving further profitable growth through a focus on execution, including the continued seamless integration of Citadel.”
One market watcher told Plastics News that Schulman's fiscal 2015 results mostly were positive. But he also pointed out that the firm's earnings-per-share (EPS) guidance for fiscal 2015 was lower than investors had expected. Schulman's announced EPS range is $2.80 to $2.85. Investors were looking for a range of $2.97 to $3.
Schulman ranks as one of the largest makers of compounds and concentrates, both in North America and Europe.