PolyOne updates second half 2008 outlook
PolyOne Corporation updated its outlook for the second half of its fiscal year ending December 31, 2008.
The Company expects second half consolidated sales growth of 8-10% versus the second half of 2007, below management's previous expectation of 15% sales growth. This revision is largely driven by the following factors, including:
• Weakened European demand, previously mentioned in PolyOne's August 7, 2008 earnings release, has worsened.
• European sales growth is expected to be further reduced by the recent weakening of the Euro which has lost approximately 10% of its value relative to the U.S. Dollar.
• Demand and pricing trends in the North American housing and automotive markets are more challenging than expected in the Company's Performance Products and Solutions segment.
In addition, the Company temporarily shut down production at two of its facilities in Texas as a direct result of Hurricane Ike. While the Company expects its affected plants to be operational by the end of this week, the full impact that the hurricane has had on customers and suppliers is not yet clear. The Company expects it will experience customer order delays and is already aware of logistic disruptions related to the supply of raw materials.
“First and foremost, we're relieved to report that our employees and their families were unharmed,” said Stephen D. Newlin, chairman, president and chief executive officer. “We exercised the appropriate safety precautions by closing our plants in advance of the hurricane, and we are now working to restore power and repair what appears to be only minor facility damage. We are concerned about potential delays in customer orders and raw material supply directly related to the storm.”
Commenting on the trends noted above, Mr. Newlin added, “August was a difficult month and early indications are that these industry conditions may continue. Furthermore, while the end result of the unprecedented financial industry crisis and ongoing tight credit policy in the U.S. has not fully played itself out, it is reasonable to expect that it will provide further headwind to near-term economic growth.”
Newlin further stated, “During our second quarter 2008 earnings conference call we noted our concern about a possible slowdown in Europe however at that time we did not yet have visibility relative to the magnitude of any such decline which is now becoming apparent.”
Discussing North America conditions, Mr. Newlin continued, “We are disappointed that PolyOne has thus far been unable to capture meaningful selling price improvement in our Performance Products and Solutions segment, despite unprecedented increases in raw material and energy costs.
While oil and natural gas prices have recently declined, we have not been a beneficiary of this trend, and we further believe that end users were shielded from much of the previous increases in raw material and energy costs by compounders like PolyOne, who have so far absorbed much of these elevated costs.”