Avient Corp. posted a small sales gain in 2022 even as profit declined.
For the year, sales at Avon Lake, Ohio-based Avient were up more than 2 percent to almost $3.4 billion. But the firm's annual profit plunged almost 46 percent to $82.8 million.
Avient officials had advised investors in September to expect lower earnings because of challenging economic conditions. In a news release, Chairman, President and CEO Robert Patterson said that Avient's orders in Europe and Asia "were slightly better than expected at the end of the year … [and] demand for composites including Dyneema [fiber] applications for personal protection were also higher."
He added that, vs. 2021, global demand conditions and inventory destocking "negatively impacted nearly every industry and region during the [fourth] quarter."
"We focused on controlling costs and reducing working capital, generating an additional $90 million of free cash flow above our previous projections. … I'm incredibly proud of the two transformational portfolio enhancements completed during 2022," Patterson said.
"We bolstered our composites business with the acquisition of APM and divested our distribution segment. We then paid down $950 million of debt, providing us a strong balance sheet to navigate through this period of macroeconomic uncertainty," he said.
Avient made two transformational deals in 2022. In April, the firm acquired DSM's protective materials business — including Dyneema-brand fiber — for nearly $1.5 billion. That deal continued Avient's focus on advanced composites, a strategy the firm has been pursuing for 10 years. The transaction includes all of DSM's protective materials activities, the most important of which is Dyneema, an ultrahigh-molecular-weight polyethylene and the strongest human-made fiber in the world.
Estimated sales for the Dyneema business in 2022 are approximately $415 million. The business includes six production facilities, four research and development centers and approximately 1,000 employees.
Then in August, Avient sold its resin distribution unit — one of the largest in North America — to private equity firm HIG Capital for $950 million in cash. The unit posted 2021 sales of $1.63 billion and distributes resin and compounds for 21 suppliers, including Dow Inc., BASF SE and LyondellBasell Industries. HIG Capital now operates the unit as Formerra.
Avient predecessor M.A. Hanna Co., which became PolyOne following a merger with Geon Co. in 2000, formed the distribution unit beginning in the mid-1980s by acquiring and combining regional distributors Plastic Distribution Corp. of Ayer, Mass.; Bruck Plastics Co. of Romeoville, Ill.; and Fiberchem Inc. of Seattle into a single business.
In 2022, Avient's Color, Additives & Inks unit posted sales of $2.36 billion, down almost 2 percent vs. 2021, as operating profit essentially was flat at $301 million. Sales at the firm's Specialty Engineered Materials unit were up almost 15 percent for the year to $1.04 billion, with operating profit up 12 percent to $140 million.
Looking to 2023, Jamie Beggs, senior vice president and chief financial officer, said that Avient will remain focused on integrating the DSM business and will be "proactive in optimizing our cost structure. … This includes restructuring actions to accelerate the remaining synergies associated with the Clariant Color acquisition, particularly in Europe."
She added that, in the first quarter, Avient "expects to experience similar demand conditions as in the fourth quarter of 2022, driven by negative consumer sentiment, rising interest rates and a slow restart of China."
"We do expect conditions to improve in the second half of the year driven by performance in our key growth drivers, particularly sustainable solutions and composites," Beggs said.
Stock analyst Frank Mitsch said Avient's purchase of the DSM business and sale of its own distribution unit "provides a favorable setup for 2023 and beyond, which ought to lead to a higher valuation/trading multiple." Mitsch is the president of Fermium Research in New York.
On Wall Street, Avient's per-share stock price began 2023 near $34 but was at $38.70 in early trading Feb. 15 for an increase of almost 14 percent.