‘Mishandled’ Brazil, Mexico production hurt sales: A Schulman CEO

02 July 2013 21:26  [Source: ICIS news]

HOUSTON (ICIS)--A Schulman’s streamlining of its operations in Brazil due to the country’s tepid economic conditions has caused disruptions to the US-based compounders’ customers that were greater than anticipated, a company executive said on Tuesday.

During A Schulman’s fiscal third quarter, which ended 31 May 2013, the company began consolidating two facilities in Brazil and providing products for the Latin America region out of its Mexico facility, said CEO Joseph Gingo during a conference over the compounder’s Q3 earnings.

Operating costs and longer lead times ensued, and some sales were lost, Gingo said. Operating costs in Mexico also were affected by an inaccurate forecast by the company for stronger local demand, he said.

Products for the Brazilian market should return to local production in the first quarter of fiscal 2014, the CEO said.

A Schulman reported that net sales in the Americas increased 3.7% year over year in Q3 2013, but that was due to incremental net sales of $9.8m (€7.5m) from the company’s 2012 acquisition of ECM Plastics.

Excluding the ECM impact, A Schulman’s gross profit in the Americas declined by 6.9% year over year, the company said.

Gingo called the issues that cropped up as a result of the Brazilian restructuring and the temporary move of production to Mexico a “surprise”.

“I think the situation in Latin America is really one that we mishandled,” he said. “It's not a demand issue, other than Brazil. Brazil is a demand issue, but I don't believe Mexico is.”

He addd: “Mexico was the manufacturing issue, an issue we got in with our plant costs. But I don't believe it's a demand issue in Mexico. Brazil's economy is still, as you know, just by reading the papers, there's a lot of difficulties going on there.”

A Schulman expects better business from Latin America in the coming quarters thanks to a heightened focus on recent problems, Gingo said.

“It's being addressed, and we've got action plans that are going to handle it,” he said.

($1 = €0.77)

By: Jeremy Pafford
+1 713 525 2653

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