Gingo: Review allows Schulman to 're-set the company'

A. Schulman Inc. is heading in the right direction after a comprehensive review of its business, according to CEO Joseph Gingo.

Fairlawn, Ohio-based Schulman — a leading compounder in both North America and Europe — undertook the review after a series of financial shortfalls connected to its $800 million purchase of Citadel Plastics led to the ouster of CEO Bernard Rzepka and the return of Gingo, who had led the firm from 2008-14.

Schulman worked with financial firm Citibank of New York on the review, which included all possibilities, including the potential sale of the firm. In a Nov. 18 interview in Fairlawn, Gingo said that “anything is possible,” but that Schulman has a plan to move forward with its existing businesses.

“Citi did a good job for us,” he said. “As a bank, they were able to vet our numbers and projections in terms of our own business and our end markets.

“They looked at our number and refined our growth,” Gingo added. “That tempered our optimism a little. Now we can re-set the company.”

Schulman had made 10 acquisitions with Gingo at the helm, but the price tag for Citadel was bigger than the previous 10 deals combined.

“We had been growing slow but steady, then Citadel hit,” Gingo said. “Citadel was a big acquisition, and it looked like a good fit. We would have never bought Citadel if we had known about the fraud there.”

Schulman is seeking damages from Citadel's previous owners after concerns were raised about some materials made at Citadel's Lucent Polymers unit in Evansville, Ind. Recycled-content compounds made by Lucent were unable to be reproduced at other Schulman plants because of faulty data. Customer claims made about these materials also were never recorded, Gingo said, so there was no reason for Schulman to question the material testing.

Moving forward, Gingo said that Schulman will focus on higher-growth regions such as China and Turkey, while maintaining its business in lower- growth areas such as North America and Europe.

One of the ways that Schulman has changed its market approach is by reducing its number of product families per region from five to two. The firm also recently eliminated about 60 middle managers worldwide, but Gingo said additional sales reps will be hired. He added that these changes will give Schulman “a clear line of sight.

“Our bolt-on acquisitions were growing, but because of our organizational structure, we had three or four people going to the same customer,” Gingo said. “Now we want our sales people to be able to sell every product we have.”

Schulman also is creating the new position of chief commercial officer. Gingo interviewed a candidate for the job just before his interview with PN. He described the position as “a functional head of sales” that will help the firm “transform how we go to markets and streamline our customer focus.”

Moving ahead, Schulman also may look at additional plants closings to improve how it uses its manufacturing footprint, Gingo said. Selling off parts of the company might not be a good strategy because of tax implications and because it's already paying low interest on its debt load.

On a personal level, the 71-year-old Gingo's plan is to stay through his two-year contract — which ends in August 2018 — and possibly stay on a year after that to help the firm transition to a new CEO.

Schulman's 2016 fiscal year ended Aug. 31. The firm's annual sales grew 4 percent to $2.5 billion, but it posted a loss of more than $350 million because of a charge of just over $400 million taken as a result of the Citadel deal.