MOSCOW (MRC) -- PolyOne says it expects second-quarter sales to be down 20% year-on-year (YOY), on big declines in automotive production and consumer discretionary spending due to the coronavirus disease 2019 (COVID-19) pandemic, said Chemweek.
Sales bottomed out in May, chairman and CEO Robert Patterson told investors during a conference call today. However, sales still declined on a YOY basis in June, despite a small sequential improvement.
The May sales trough stands in contrast to many chemical makers, who saw sales bottom out in April. Sales related to the automotive sector are expected to fall by 40% YOY in the second-quarter, although such sales represent only 10% of PolyOne’s total, according to Patterson. “The balance is mainly due to a decline in demand for consumer discretionary items,” particularly athletic apparel—for which PolyOne produces inks—and off-road vehicles, Patterson says. The industrial, construction, and oil and gas markets also experienced lower demand this quarter.
Packaging and healthcare related end markets were a bright spot for PolyOne. Sales into packaging applications were up 5% YOY, while sales into healthcare applications were up 8%.
Regionally, second-quarter sales are expected to be down by 27% YOY in Europe and by about 20% in the Americas. In Asia, sales are expected to rise 10% YOY, due mainly to reopening in China. While sales are improving in Europe and North America, Latin America has been a laggard, as the pandemic has grown worse in the region over the course of the quarter. “For PolyOne overall, we view May as the trough, but we’re not sure we can say that about Latin America,” Patterson says.
“North America and Europe are likely starting to rebound, but demand trends in Latin America and India have yet to stabilize,” notes Laurence Alexander, an analyst with Jefferies (New York, New York).
Second-quarter sales in PolyOne’s distribution segment are expected to fall by 23% YOY, with sales 18% in engineered materials and 16.5% in the colors, additives and inks segment. The larger decline in distribution sales in mainly due to that segment’s greater exposure to the automotive sector and consumer discretionary spending.
Adjusted earnings for the quarter are expected to total 26 cents/share, including the impact of new share issuance and new interest expenses, according to Patterson. This compares with adjusted earnings of 48 cents/share in the second-quarter of 2019.
As MRC informed earlier, in December 2019, Clariant (Muttenz, Switzerland) agreed to sell its entire Masterbatches business to PolyOne Corp. (Avon Lake, Ohio). The transaction values the Masterbatches business at USD1,560 million, representing about 12.2 times the last twelve months reported EBITDA (ending September 2019) on a cash and debt free basis.
Meanwhile, the USD1.45-billion acquisition of Clariant’s masterbatches and color additives business is on track to close on 1 July. The deal will expand PolyOne’s colors, additives, and inks segment.
As MRC informed earlier, Russia's output of products from polymers grew in April 2020 by 11.2% year on year due to quarantine restrictions. However, this figure increased by 3.4% year on year in the first four months of 2020. According to the Russian Federal State Statistics Service, April production of unreinforced and non-combined films decreased to 107,000 tonnes from 110,400 tonnes a month earlier. Output of films products grew in the first four months of 2020 by 12.5% year on year to 402,800 tonnes.
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