PolyOne's April orders down 15% on low auto demand, consumer spending: CEO

Houston — PolyOne, a specialty polymer producer and resin distributor, has seen April orders decline by about 15% year on year, due to lower automotive demand and less discretionary consumer spending amid shutdowns and other fallout from the global coronavirus pandemic, CEO Robert Patterson said on Tuesday.

Patterson said during the Avon Lake, Ohio-based company's quarterly earnings call that lower prices for resins like polypropylene and polyethylene and other raw materials also gave PolyOne a benefit of $5.5 million to $6 million that he expects to last through the second quarter.

"Sales declined 4%, and nearly all of that was due to a decline in automotive demand," Patterson said. "Some of this is likely pre-existing weakness we saw in the second half of last year, particularly in Europe, but we also started to see the impact of coronavirus-related shutdowns."

However, packaging, consumer and health care markets have fared better, either up or holding steady, he said. For example, PolyOne has rushed orders to support ventilator production and medical masks that use the company's materials. PolyOne has also supplied high-strength materials for parts of hospital beds, and is involved in fulfilling demand for COVID-19 test kits, Patterson said.

Major vehicle manufacturers such as Ford, GM, Volkswagen and Fiat-Chrysler have shut factories, slashing demand for products used to build cars and trucks, in response to the pandemic. More than 22 million jobless claims filed since March in the fallout of pandemic-related business shutdowns was also expected to sharply reduce discretionary consumer spending.

"I am sure none of this comes as a surprise to anyone when you consider what has unfolded in the last six weeks, with stay-at-home orders across the world and significant slowdowns and even shutdowns of certain industries," Patterson said.

Dependence on construction, automotive markets reduced in last decade

The company also buys polyvinyl chloride, a construction staple, but PolyOne's efforts to diversify its offerings in the past decade has reduced dependence on the construction and automotive sectors, increasing ability to weather coronavirus fallout, Patterson said.

PolyOne reported net income of $32.8 million in the January-March period, down 14% year on year.

Patterson said he expects coronavirus impact on demand to be higher in the second quarter amid economic uncertainty, with shutdowns extended through April, and some in to May.

"I hope China serves as an example of how the early steps of recovery can take place and how the coming demand declines we expect in Europe and the Americas too shall pass soon," Patterson said.

Of PolyOne's 61 manufacturing facilities worldwide, two have been shut, one in Italy and the other in Peru. The company's facilities in India, where a 21-day lockdown was extended last week to May 3, have operated at rates as low as 10% to 20%, Patterson said. Many other plants have been running at 75% to 85%.