BUSINESS
COMPOUNDING PROBLEMS
SPARTECH
ble consolidation moves in the future. “We have to be sure we have the right people and the right capacity,” Odaniell says. To grow and build the North Americanfocused firm for the long term, he says, he’ll look at opportunities in Asia. And he hopes to push the firm further into unique highMakers of PLASTIC COMPOUNDS feel squeezed margin products with a renewed emphasis between high costs and stalled selling prices on research and development. MARC S. REISCH, C&EN NORTHEAST NEWS BUREAU At Schulman, Joseph M. Gingo joined the firm as CEO in January and then promptly lost his initial bid for a seat on the firm reports lower operating income and the company’s board of directors. Ramius CHEMICAL MAKERS have had a difficult continued weakness in its vinyl compounds Capital Group, an activist investor that time during the past two years passing on business, its largest business unit, accountowns 7.6% of Schulman stock, succeeded in increases in the price of raw materials. But ing for about one-third of 2007 sales. placing its own nominee on the board in an some of their customers—companies that effort to force management to explore straact as the middlemen between chemical tegic alternatives, including a possible sale producers and end users—have really been THE DIFFICULT PROFIT picture is forcing of the firm. Schulman, like its competitors, caught in a bind. change at compounding firms. Spartech has had problems increasing prices to cusTake, for instance, companies that make brought in Myles Odaniell as its new tomers to keep pace with the rising costs of and distribute plastic compounds. Firms president and chief executive officer at the raw materials. such as A. Schulman, Spartech, and Polybeginning of this year to lead a turnaround Gingo, now a member of the newly exOne buy resins from Dow Chemical, Eastcharge. After a bruising fight with sharepanded board, says he is committed to a man Chemical, and others. They blend the holders, Schulman also has a new CEO and 100-day plan that will return North Ameriresins with additives, fillers, and pigments a 100-day plan to improve profitability. can operations to profitability, and then sell them to customincrease profits in Europe and ers that mold detergent bottles Asia, reduce costs, and broaden or make plastic toys. Owing in the company’s customer base bepart to their vulnerable position yond automotive markets. in the supply chain, these firms As for PolyOne, Stephen D. have had a particularly hard Newlin, who joined the firm as time passing price increases to chairman, president, and CEO customers. in February 2006, recently told “Pricing is always more difinvestors at a meeting in New ficult the closer you are to the York City that he’ll be looking to end customer,” explains John E. prune unprofitable businesses, Roberts, a chemical stock analyst improve inventory controls to at Buckingham Research Group. save $50 million, and focus more Middlemen like plastic comeffort on specialty products such pounders “are caught between a as thermoplastic elastomers. rock and a hard place, between In its still-important vinyl OPEC and Wal-Mart, which rarebusiness, Newlin said, PolyOne ly raises its prices,” he says. would penetrate specialty niches Financial results bear this out. COLOR BLENDS to improve performance. But he Schulman’s net income in its fiscal year And PolyOne has divested its 24% can do little more than wait for that ended Aug. 31, 2007, slipped more than interest in the OxyVinyls polyvinyl Compounders add pigments better conditions in the building 30% to $23 million on sales of $1.8 billion. chloride joint venture to partner to “plain vanilla” and construction market, a heavy The firm did a little better in the first quarOccidental Chemical and has polymers. user of vinyl windows and moldter of its new fiscal year, earning $10 milbeefed up emphasis on its specialty ings. When that market does lion on revenues of $496 million, but it still compounds operations. rebound, he said, PolyOne’s vinyl netted only a 2% return on sales. In its last Odaniell tells C&EN that business will be well-positioned to benefit. fiscal year ending Nov. 3, 2007, Spartech Spartech has had to deal with “steady and Squeezed between rising raw material earned $34 million, 13% less than the year substantial feedstock cost increases” while costs and customers unwilling to accept before, on sales of about $1.4 billion. it fell behind in its ability to increase prices price increases, plastic compounders are PolyOne, meanwhile, reported net into customers. And “clearly, the company’s doing what they can to stabilize profits come of just $4 million on sales of $2 billion recent financial performance has been disin a difficult environment. But until raw for the nine months ending on Sept. 30, appointing,” he says. But “given time, we’ll material prices come down, these middle2007. The results were held back by special be able to catch up.” men will have a challenging time satisfying charges, such as more than $60 million for He says he’ll spend time assessing how investors. ■ environmental remediation costs. However, Spartech organizes itself and hints at possiWWW.C E N- ONLI NE .ORG
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