AVON LAKE, Ohio—PolyOne Corp. is on track to close its $1.45 billion acquisition of Clariant A.G.'s masterbatch concentrates unit on July 1, even as the firm expects a 20 percent drop in second-quarter sales because of the COVID-19 pandemic.
"We've received all regulatory approvals (for the Clariant deal) and look forward to joining our two teams in specialty color and additives," PolyOne CEO Robert Patterson said on a June 16 conference call with stock analysts.
Avon Lake-based PolyOne, a leading compounder and resin distributor, announced plans in late 2019 to acquire the Clariant unit. The business has annual sales of $1.1 billion. With the Clariant operations, PolyOne will add 46 manufacturing sites and technology centers in 29 countries and about 3,600 employees.
PolyOne's expected 20 percent sales drop vs. the second quarter of 2019 is happening as COVID-19 has slowed economic activity worldwide. Patterson said PolyOne also expects adjusted earnings per share for the second quarter to drop to 36 cents from 46 cents, a decline of almost 22 percent.
Patterson said the firm has seen sales drop in automotive and consumer discretionary items.
"Auto makes up only about 10 percent of our sales, but it accounted for 40 percent of our sales decline," he said. "We also saw drops in specialty inks for athletic apparel and in off-road vehicles."
PolyOne's sales into industrial, consumer and oil and gas markets also were impacted to lesser extents. The firm's sales into the marine sector also declined. "People bought boats, but they weren't making any," Patterson said.
He added that PolyOne saw strong second-quarter demand in packaging—expected to be up 5 percent—and health care, which is expected to be up 8 percent.
"We benefited in having our products used in medical applications like face masks, beds and test kits and in packaging for fresh food and increased shelf life," Patterson said.
Among PolyOne's business units, Patterson said that second-quarter distribution sales are likely to be down 23 percent, with specialty engineered materials down 18 percent and color, additives and inks down 16.5 percent.
During the second quarter, PolyOne closed five of its 61 production plants for a short time, but all five are now operational again. Those plants were in Elk Grove, Ill.; Toluca, Mexico; Milan; Pune, India and Lima, Peru. Patterson added that although some of the firm's customers are seeing financial trouble because of the pandemic, none have filed for bankruptcy.
First-quarter sales at PolyOne were down 5 percent to $711.5 million, as quarterly profit declined 14 percent to $32.8 million. Patterson said he was proud of how his team at PolyOne has put safety first during the pandemic and has adapted well to new procedures, including working from home.
"We have to continue to take care of our associates and of each other," he added. "It's not just about returning to normal—it's figuring out what the new normal is."
Like many public firms, PolyOne's per-share stock price has been battered by the effects of COVID-19. The price began the year near $37 but fell to almost $10 in mid-March. It had recovered to $25.50 in late trading June 18, but remained more than 30 percent below its Jan. 1 level.
PolyOne employs 5,600 worldwide and posted sales of $2.9 billion in 2019. The firm is a founding member of the Alliance to End Plastic Waste