Compounder Avient Corp. posted lower sales and a major drop in profit in the second quarter of 2023.
Sales for the quarter at Avon Lake, Ohio-based Avient were down 7.5 percent to $824.4 million vs. the same quarter in 2022, with profit plunging 74 percent to $22.3 million.
In a July 27 news release, Chairman, President and CEO Robert Patterson said Avient's adjusted earnings per share for the quarter exceeded the firm's guidance. He added that improvement resulted from raw material deflation and an "improving mix" from composites and sustainable solutions that "positively impacted the quarter and more than offset weaker demand conditions."
Patterson said that quarter to quarter, Avient "has seen modest improvement in Asia, but demand across other regions remains sluggish, particularly in Europe, as consumers remain cautious with continued inflation and rising interest rates."
He added that he was "pleased with how well we have executed through the first half of the year despite persistent demand weakness and customer inventory destocking." Sales of Avient's specialty materials into defense, energy, and transportation end markets "have shown resilience during these challenging times," Patterson said.
In a report to investors, research firm Fermium Research of New York said that, despite disappointing demand, Avient “has shown itself to be capable of pulling internal levers to deliver results” and that the firm “maintains a focus on cost reduction /restructuring actions as well as on working capital management.”
Fermium added that Avient has seen raw material deflation primarily in polyethylene and polypropylene resins, although other materials are starting to moderate as well. In Avient’s CAI unit, Fermium said that the biggest arena for revenue synergies is likely in sustainable solutions, which have posted 11 percent organic annual growth since 2016.
For Avient, sustainable solutions include light-weighting - largely auto but also packaging - and recycled content/recyclability, according to Fermium. They added that Avient “is seeing continued growth opportunities in food and beverage packaging (the largest part of sustainable solutions), with a great amount of consumer pull for eco-conscious offerings.”
As in the first quarter of the year, results were up at Avient's Specialty Engineered Materials unit, but those efforts were eclipsed by lower performance in the firm's larger Color, Additives & Inks business.
Second-quarter CAI sales were down more than 19 percent to $524.5 million, with operating income down 27 percent to $68 million. SEM went in the other direction, with sales up 24 percent to $300.8 million and operating income up 11 percent to $39.7 million.
In 2022, Avient, one of North America's largest compounders and concentrate makers, made two major deals. In April 2022, it acquired DSM's protective materials business — including Dyneema — for nearly $1.5 billion.
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. The unit posted 2021 sales of $1.63 billion. HIG Capital now operates the unit as Formerra.
Avient's per-share stock price was down more than 3 percent to $40.45 in early trading July 27. The price began the year near $34 and peaked above $44 in early March.