PolyOne covers recent deals, results on earnings call

AVON LAKE, Ohio—Materials leader PolyOne Corp. had a full agenda for its second-quarter earnings call.

Officials with the Avon Lake-based firm covered a pair of recent acquisitions, as well as a recent sale and some personnel moves. In their spare time, they addressed solid financial results for the quarter and for the first half of 2017.

PolyOne spent a total of $143 million to acquire Rutland Holding Co., a maker of plastisol compounds and printing inks, and color concentrates producer Mesa Industries Inc., officials said on the call. The Rutland deal was announced in early June, while the Mesa transaction followed in early July. Adding those two firms will increase PolyOne's annual sales by $75 million, they said.

In between those two deals, PolyOne on June 29 said it planned to sell its Designed Structures & Solutions unit — a major plastic sheet producer with annual sales of around $400 million — to Arsenal Capital Partners for $115 million.

DSS had struggled financially since PolyOne acquired it as part of Spartech Corp. in 2013.

DSS "had been disappointing in the last three years," Robert Patterson, chairman, president and CEO, said on the call. "We invested to improve its profitability, but we weren't successful. Selling to Arsenal was our best option."

Patterson also described Rutland and Mesa as "specialty bolt-on opportunities." He added that the three recent transactions were "an important inflection point" for PolyOne, which ranks as North America's largest compounder and concentrate maker and as one of the region's largest resin distributors.

Completing the deals "allows us to focus on our core areas of expertise, and to focus on accelerating innovation and service to our customers," Patterson said.

The Mesa deal was PolyOne's fourth color-based acquisition in eight months. Patterson said that the color market was "a highly competitive battle for consumer choice."

On the technology side, Patterson said that PolyOne already in 2017 is approaching the record number of patents it was granted for all of 2016.

Personnel moves for PolyOne included the June 1 announcement of the retirement of John Van Hulle, who had led the firm's Color, Additives & Inks unit. Van Hulle will be replaced by Mark Crist, who had been leading PolyOne Distribution. Crist, in turn, will be replaced by J. Scott Horn Jr., who has been with PolyOne and its successor companies for almost 40 years.

On the financial front, PolyOne's sales for the quarter and half both were up more than 7 percent vs. the same periods in 2016. First-half sales totaled just over $1.6 billion. Quarterly profit was down almost 1 percent, but was up almost 11 percent for the half.

For the second quarter, PolyOne will take a per-share loss of $2.20 related to the sale of DSS, which now will be billed as discontinued operations.

PolyOne's Specialty Engineered Materials unit led the way with first-half sales growth of almost 12 percent. Sales in Performance Products & Solutions—including PVC compounds—grew more than 8 percent, while Distribution sales were up 6.5 percent and Color, Additives & Inks sales ticked up more than 4 percent.

First-half operating income grew 10 percent for Distribution, 8 percent for Performance Products & Solutions and 1 percent for Color, Additives & Inks. Specialty Engineered Materials fell 2 percent in that category in the first half.

"I've never felt better about our financial position," Chief Financial Officer Bradley Richardson said on the call.

On Wall Street, PolyOne's per-share stock price began the year around $32.40 but was near $38.20 in late trading July 25, for an increase of almost 18 percent.