Business News

PolyOne Announces Second Quarter Results

Thursday 07. August 2008 - - Net income exceeds prior year as revenues increase 8.6% to $748.1 million - Specialty platform operating income increases nearly 70% versus second quarter 2007 results - Company expects full-year earnings growth versus prior year

PolyOne Corporation (NYSE:POL), a premier global provider of specialized polymer materials, services and solutions, today reported second quarter revenues of $748.1 million, an 8.6 percent increase compared with revenues of $688.8 million in the second quarter of 2007.

Net income was $8.8 million, or $0.09 per diluted share, for the second quarter of 2008 compared with a loss of $5.4 million, or ($0.06) per diluted share, for the second quarter of 2007. Included in the results for the second quarter of 2008 and 2007 are special items equating to ($0.03) and ($0.16), respectively (see Attachment 1).

On a comparable basis, before special items, PolyOne reported $0.12 earnings per share in the second quarter of 2008 compared with $0.10 per share in the second quarter of last year. Specialty platform operating income growth combined with lower corporate costs largely offset a decline in the Performance Products and Solutions segment due to slowing demand in the North American housing and automotive markets. PolyOne also benefited from lower interest expense in the quarter as a result of paying off its high yield 10.625% senior notes in the 3rd quarter of last year.

“Our second quarter results continue to demonstrate the success of our transformation strategy allowing PolyOne to report earnings growth despite very challenging economic and inflationary conditions,” said Stephen D. Newlin, chairman, president and chief executive officer. Newlin continued, “Specialty platform earnings increased nearly 70% compared to the second quarter of 2007 – driven by the addition of GLS and organic growth expansion initiatives – and now represent 45% of total operating income from all operating segments.”

Newlin continued, “We continue to position the company to grow profitably despite economic headwinds. Our focus on commercial and operational excellence is evident in our performance so far this year as we have been able to close new business and improve sales mix to drive operating margin improvements in our Specialty and Distribution platforms. We are also benefiting from our improved capital structure that allowed the company to report lower interest expense in the current period and gives us future flexibility to opportunistically pursue acquisitions.”

PolyOne’s Segments and Platforms

On July 1, 2008 PolyOne announced that during the second quarter of 2008, Producer Services, formerly included in All Other, was combined with Geon Performance Polymers to form the Performance Products and Solutions operating segment. In addition, North American Color and Additives and Specialty Inks and Polymer Systems, both formerly included in All Other, were combined to form a new operating segment named Specialty Color, Additives and Inks.

PolyOne now has six reportable segments: Specialty Engineered Materials; International Color and Engineered Materials; Specialty Color, Additives and Inks; Performance Products and Solutions; PolyOne Distribution; and Resin and Intermediates.

The Company frequently discusses its businesses in terms of three strategic platforms – Specialty; Performance Products and Solutions; and PolyOne Distribution. Performance Products and Solutions and PolyOne Distribution are also both reportable segments. The Specialty platform comprises Specialty Engineered Materials; International Color and Engineered Materials; and Specialty Color, Additives and Inks.

Outlook

The Company anticipates continued economic uncertainty as well as continued raw material and energy cost pressure. While second half 2008 revenues are expected to grow approximately 15% (including GLS) as compared to the second half of 2007, these aforementioned factors are expected to put downward pressure on earnings primarily in the Performance Products and Solutions segment.

Operating margin improvements in the Specialty and PolyOne Distribution platforms are expected to drive operating income growth for these platforms compared to third quarter 2007 levels. Third quarter 2008 operating income in the Performance Products and Solutions segment is projected to increase from the second quarter of this year but remain below the year-ago level due to raw material cost inflation and continued weak end-market demand. Resin and Intermediates operating income for the third quarter of 2008 is expected to approximate second quarter levels.

“Our specialty focus has allowed us to weather incredibly difficult market conditions, most notably a slowdown in the U.S. housing, construction and automotive industries along with unprecedented raw material and energy cost inflation,” said Newlin. “We recently announced our plans to reduce capacity and realign assets in North America as these conditions may continue for the foreseeable future. We are also seeing signs that European demand growth may be slowing, but it is too early to tell what impact, if any, this will have on our near-term consolidated results.”

“We anticipate the capacity reductions announced on July 28 will be fully implemented by the second quarter of next year, and we expect they will generate pre-tax savings of $17 million ($0.12 per share after-tax) on an annualized basis,” said Robert M. Patterson, senior vice president and chief financial officer. Patterson added, “These actions are part of our previously disclosed operational excellence target of $50 million in cumulative identified supply chain savings by 2011.”

Based on these projections, PolyOne expects full year 2008 earnings before special items to exceed prior year earnings before special items.