Specialty polymer producer and resin distributor PolyOne expects its second-quarter sales to be down 20%, reflecting demand contraction growth as the coronavirus pandemic spread globally, CEO Robert Patterson said June 16.
PolyOne temporarily shut five facilities for varied lengths of time during the quarter, which ends in June, "either due to local government regulations or to help ensure the health and safety of our associates," Patterson said during a call with analysts. "As of today, all of our facilities are operational."
PolyOne held a call with analysts to discuss business performance in light of the pandemic and provide an update on its $1.6 billion acquisition of Clariant's masterbatch business, which is slated to close in July. Masterbatch is an additive used to color plastics.
PolyOne saw sales fall 15% in April, driven largely by automotive manufacturing shutdowns. As the pandemic spread in Brazil, India and Mexico in May, the company saw steeper demand destruction.
Patterson said automotive-related sales make up about 10% of the company's total sales, but it accounts for nearly 40% of total year-over-year second quarter sales declines.
The other major hit stemmed from "consumer discretionary items" such as screen printing inks for athletic clothing and off-road vehicles.
"We think and hope we're at bottom as June looks sequentially better than May," Patterson said. "We continue to see strong demand for packaging and healthcare applications, which have proven to be our best two performing markets throughout the pandemic response and recovery."
Sales for those two markets were expected to be up 5% and 8%, respectively, in the second quarter, he said.
Healthcare needs have involved rush orders for medical masks, ventilators, hospital beds and test kits, while packaging has involved more demand to increase foods' shelf life amid shutdowns and stay-at-home orders, Patterson said.
China business up, but emerging cases a concern
Regionally, Patterson said PolyOne expects second-quarter sales to be down 27% in Europe and 20% in the US, where the company has its highest concentrations of automotive-related operations. Asia business -- primarily China -- is expected to be up 10% in the quarter, "which is hopefully a good sing for the global economy," he said.
However, recent news of more COVID-19 cases emerging in China is a concern, he said. As economies increasingly reopen. a "great fear that many of us have" involves further spread of the virus that could prompt more lockdowns.
"I think that could happen," he said.
Patterson noted that sales in Latin America region were down more than any other currently, as shutdowns remain in place in several countries. While PolyOne viewed May as the bottom for the overall quarter, "I don't know that we can say that yet about Latin America, and June is still going to be down. I would not say that we are at the same inflection point," he said.
Regarding the Clariant deal, Patterson said the companies had received all necessary regulatory approvals, and were working through other remaining conditions to close. He said some travel restrictions were expected to remain in place after the deal closes, but regional leaders will work together in their areas.
