Orders are up, capacity utilization improved and an important overseas venture is in the works at PolyOne Corp.'s Elastomers & Performance Additives Group.
That's a positive report from the head of the operation, John Quinn, especially considering the division is in the midst of a dramatic occurrence-its divestiture. PolyOne put the business, which generated $347.9 million in sales and $3.5 million in operating profits in 2003, up for sale last fall.
Quinn, vice president and general manager of the unit, can't talk about the potential sale. Since PolyOne is a publicly traded company, the best he can say is, "We are in the middle of the process." The parent company put no timetable on the divestiture, part of a plan to refocus itself as a global plastics compounding and color/additive masterbatch business.
The sale and actions taken to prepare the division for that event haven't hurt business, Quinn said. "Order rates in April are more robust than last year," he said. The division expects sales in the first quarter to be about 4 percent ahead of last year's results.
PolyOne made a tough choice in October to reduce the division's costs and improve capacity utilization when it decided to close plants in DeForest, Wis., and Wynne, Ark. Quinn said all but one customer served by the facilities stayed with PolyOne as the production was moved to sites in Burton, Ohio; Dyersburg, Tenn.; and Kennedale, Texas. The business also has a plant in Queretaro, Mexico.
"Our customers have been very supportive," he said. "We've been able to maintain our customer base, which is terrific."
Quinn said much of the work performed at the DeForest plant used to be done at the Burton facility. That meant the transfer back to Burton of tasks such as prework and testing was an easy change for customers that formerly were served by that location.
The shutdowns eliminated 230 jobs and resulted in a one-time charge of about $15 million to PolyOne. But bottom line, the closings are expected to yield annual pretax savings of $7.5 million and helped improve operating levels at the remaining facilities.
"All our plants are running at 80 percent of capacity now," Quinn said.
The executive said he's seen a steady increase in orders from customers that serve the construction, industrial and foreign-owned automotive markets, while business has lagged for companies dealing with the Big Three auto makers. He's hopeful but cautious about expectations that the long-awaited economic recovery is for real, recalling that the economy was strong in the first quarter of 2003, only to flatten out later.
One of the initiatives the company has pursued, dating back to 1998, is to convert rubber product companies that have captive mixing into PolyOne customers. The program has netted gains-last October Quinn said PolyOne had won 17 new customers contributing $80 million in new business-and the firm is continuing with the effort. However, overcapacity in the supply chain had a negative impact, as did a shifting of investment by rubber product makers from Northern U.S. states to the South and from the U.S. to Asia.
The trend of PolyOne customers setting up shop in China has prompted the company to embark on its first custom mixing operation in that nation. The division has leased a building and ordered machinery for a compounding plant in Shanghai, China.
"Currently we have five contracts in hand and are in discussion with over a dozen global companies that already are there or plan to go into China in 2004," Quinn said. PolyOne isn't starting the wholly owned facility just for the cost benefit, he said, but to serve its existing customers.
The plant will serve printing and industrial roller customers with Chinese operations.
"The industrial part of the Chinese rubber market is still in an embryonic position," he said. Some of the customers that will be served by the plant already are receiving compound shipped to China from the U.S.
Quinn said the business structure for compounding is different in China compared with other regions. Rubber product makers in China get their compound directly from polymer producers, which will make the PolyOne operation rather distinct.
"We're going slow," he said. "We're not going to build a Taj Mahal there. We're going in very modest."