A Schulman stresses liquidity, long-term strategy amid crisis

03 April 2009 16:49  [Source: ICIS news]

TORONTO (ICIS news)--A Schulman’s liquidity remains strong, enabling it to withstand the economic downturn and realise its long-term strategy of becoming a leader in master batches and rotation moulding, the chief executive of the US-based plastics compounder and resin supplier said on Friday.

“With cash on hand of over $140m (€104m) and available credit lines of more than $300m, our current liquidity position can be fairly described as excellent, and we do not anticipate any liquidity problems,” Joseph Gingo told analysts during the company’s fiscal second-quarter conference call.

Schulman’s cash flow from operations for the six months ended 28 February was almost $90m greater than in the year-ago period, mainly due to an initiative to reduce working capital which the company started last year, Gingo said.

Schulman's liquidity gave suppliers and customers the confidence that the company would continue to invest in its business and be "around tomorrow," Gingo said. In the current crisis, "people become concerned about if you are going to be there tomorrow," he added.

While the crisis was clearly hurting Schulman, which reported a loss of $10.5m in its fiscal second quarter, up from a $3.8m loss a year earlier, the company remained focused on its long-term goals, he said.

He outlined four key planks to Schulman’s long-term strategy.

First, the company would continue to capitalise on its leading position in master batches in Europe and Mexico to become “number 1 globally.” Part of the strategy was Schulman's new master batch facility in the US, Gingo said.

Second, Schulman was looking at global growth opportunities in the rotation moulding market where it already had a strong position in the US.

In engineered plastics, Schulman was eying a leading role as a global “niche player”. The key was to diversify that business to customers from outside the automotive industry, Gingo said.

Lastly, he said, Schulman was determined to derive increasing benefits from its distribution business.

As for the near-term outlook, Schulman had seen some stabilisation in its master batches and rotation moulding compounding businesses in February and March, Gingo said.

However, in light of the high economic certainty and murky outlook, it was not possible to predict that Schulman would be able to record profits in the fiscal third and fourth quarters, he said.

Analysts on the call pressed Gingo for a more concrete assessment, but Gingo said he would not even use the word “expect” to describe his near-term view, preferring to use “hope”.

“We are hoping for a slow and steady recover from where we were in February,” he said.

Schulman's share price was down 8.8% to $13.48 in Friday morning trading in New York.

($1 = €0.74)

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By: Stefan Baumgarten
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