Low demand, Katrina, gas & ethylene costs disturb PolyOne's Q3 result
14 Sep '05
3 min read
European demand is tracking earlier expectations, and the Company continues to experience strong shipment growth in Asia.
The immediate impact of Hurricane Katrina is reflected largely in lowered Resin and Intermediates (R&I) segment earnings expectations. The SunBelt Chlor-Alkali plant in Macintosh, Alabama, lost a week of production, and operations going forward are dependent upon railcar availability. Further, Oxy Vinyls, LP in particular faces hurricane-driven natural gas and ethylene cost increases, which are resulting in significantly higher operating costs and pressure on product spreads. PolyOne expects logistical cost increases, including fuel surcharges and rail system dislocations, to negatively affect all North American operations for the near future.
As a result of these factors, PolyOne expects that R&I segment operating income should decrease significantly more from the second-quarter level than previously thought. Hurricane Katrina's impact on the industry is dynamic and continues to evolve.
The July 28, 2005, outlook for PolyOne's discontinued operations, Specialty Resins and Engineered Films, is unchanged.
In the third quarter, the Company expects to generate positive operating cash flow, although the level remains subject to the unknown variables described above. Additionally, the recently amended credit facilities (as described in the second-quarter 2005 Form 10-Q) assure adequate liquidity.
PolyOne Third-quarter 2005 Earnings Release and Conference Call
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