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August 12, 2016 02:00 AM

A. Schulman cuts earnings forecast, cites 'deteriorating market conditions'

Scott Suttell
Crain's Cleveland Business
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    FAIRLAWN, Ohio—Materials giant A. Schulman Inc. warned Aug. 11 that its net income from 2016 will be lower than previously expected due to “deteriorating market conditions facing the industry” in the U.S. and Europe.

    The company lowered its full-year 2016 adjusted net income guidance range to $1.90 to $1.95 per diluted share from its previous guidance of $2.40 to $2.45 per diluted share. It also reduced its forecast for adjusted EBITDA to $225 million to $230 million from $245 million to $250 million.

    “At the beginning of the quarter, our key end-markets in the U.S. and Europe did not present notable headwinds. However, as the quarter progressed, we saw double-digit volume contraction,” said Bernard Rzepka, president and CEO of Schulman, in a statement.

    He said the softness in the business then “continued into August,” particularly for the company's Masterbatch Solutions, Engineered Plastics and Engineered Composites product lines.

    “Similarly, the continued volatility in our major raw materials due to lower oil prices has created further caution in our customers and a reduction in orders,” Rzepka said. “Unfortunately, the weak demand environment has overshadowed the positive impact of several cost reduction and synergy programs that we have been executing throughout the year.”

    He noted, though, that Schulman's cash flow “remains strong, and we continue to make good strides in paying down our debt.”

    In July, Rzepka said, Schulman paid down an additional $18.2 million of debt. Gross debt was $967 million at the end of July, down 14 percent from the peak of $1.1 billion in June 2015.

    “This progress, combined with over $300 million of available credit under our current credit facility, positions us well to withstand this challenging economic climate as we enter our next fiscal year,” he said.

    Schulman expects to release fiscal 2016 fourth-quarter and full-year results as well as fiscal 2017 earnings guidance after the market closes on Oct. 26.

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