CLEVELAND, Dec. 18 -- PolyOne Corp. said that it expects to report a net loss before special items of between $16 million and $20 million for the fourth quarter, based on October and November financial results and a projection for December. This estimate equates to a loss before special items of $0.17 to $0.22 per share.
"We anticipated a seasonally weak fourth quarter in 2002, but the decline in our North American sales and in U.S. industrial production overall has been worse than expected," said Thomas Waltermire, PolyOne chairman and chief executive officer. "The decline has been broad-based across our industrial market segments. In particular, we experienced slowing from automotive and construction applications."
Most of the anticipated shortfall is attributable to slower-than-expected demand in PolyOne's North American Plastic Compounds and Colors (PCC) business group. The forecast for North American PCC shows sales in the fourth quarter declining 12 to 14% versus the third-quarter. The company said most PCC markets are driving inventories lower in response to both slowing demand and a focus on improving year-end working capital positions.
In its third-quarter outlook, PolyOne stated that the Resin & Intermediates equity contribution could decline between $9 million and $11 million in fourth-quarter 2002 compared with third-quarter 2002. It now appears that the reduction should be between $10 million and $13 million. This revised outlook is due primarily to lower polyvinyl chloride (PVC) resin shipments and market selling prices and lower-than-anticipated market price increases for caustic soda. Average quarterly market selling prices for PVC could decline between 2 cents and 3 cents per pound in the fourth quarter compared with the average for the third quarter of 2002, the company said.
PolyOne said it is taking steps in response to the poor performance. Among the measures:
- The company has targeted a reduction of $200 million to $300 million in its overall debt level. To this end, management is assessing alternatives for non-strategic assets;
- Effective with the first quarter of 2003, PolyOne will not pay out a dividend until its balance sheet and operating income performance improve;
- The company will limit capital spending to approximately $50 million in 2003 versus approximately $75 million in 2002;
- Management intends to reduce its selling, general and administrative (SG&A) costs to less than 10 percent of sales. The forecast shows that in 2002, SG&A costs will be about 12 percent of sales.
- To ensure that PolyOne's go-to-market strategy is targeting the appropriate customer base and is cost effective, management is reassessing its commercial organization. Already, the North American Plastic Compounds and Colors unit has taken steps to realign into three product-focused platforms: vinyl, engineered materials and color;
- A salary freeze for U.S. employees, started in 2002, will continue into 2003 until a clear recovery in the company's profitability becomes evident;
- The company is reviewing ways to reduce the cost of various U.S. employee benefit programs.