Avient (US:AVNT)2020-04-21 16:57Financial Data and Key Metrics Changes - The company reported adjusted EPS of $0.53, a 23% increase over the prior year first quarter and $0.05 better than expected [8][12] - GAAP earnings per share from continuing operations were $0.38, with special items resulting in a net after-tax charge of $8.6 million [12] - Sales declined 4% on a constant currency basis, primarily due to a decline in automotive demand [10][13] Business Line Data and Key Metrics Changes - The SEM segment grew operating income by 9% on slightly lower revenue, driven by strong performance in healthcare and consumer applications [13][14] - The Color, Additives, and Ink segment saw operating income grow 3% on 3% lower revenue, with healthcare positively impacting results [16] - The PolyOne Distribution segment delivered sales of $290 million, a 9% decline versus the prior year, but margins expanded to a record 6.7% [17] Market Data and Key Metrics Changes - Sales in Europe were down 7%, primarily due to weak demand in automotive applications and unfavorable foreign currencies [13] - Asia sales were down 6%, with foreign currencies negatively impacting sales by 3% [13] - North America sales were down 4%, related to weaker demand in automotive end markets and lower average selling prices [13] Company Strategy and Development Direction - The company is focused on essential supply chains during the COVID-19 pandemic, with a commitment to reduce discretionary spending and administrative costs [19][20] - The Clariant acquisition is expected to enhance the company's presence in high-growth regions and less cyclical end markets, with over 70% of Clariant's sales in packaging, consumer, and healthcare [22][24] - The company aims to become a truly global specialty organization, reducing exposure to cyclical end markets like automotive and construction [24][25] Management's Comments on Operating Environment and Future Outlook - Management expects the impact of COVID-19 on demand to be greater in the second quarter, particularly for transportation and consumer discretionary items [19] - The company plans to provide a mid-quarter update to offer more clarity on market conditions and their impact on financial performance [22] - Management remains optimistic about the recovery in China and its implications for the global economy [9][19] Other Important Information - The company ended the quarter with $1.28 billion in cash, exceeding total debt obligations of $1.2 billion [17] - The defined benefit plans in the U.S. are overfunded at 108%, positioning the company well to navigate challenges [18] Q&A Session Summary Question: What is the visibility on demand decline by geography? - Management noted that April orders are down about 15% year-over-year, primarily driven by declines in automotive demand and consumer discretionary items [30][31] Question: How is the debt market for financing the acquisition? - The debt markets have improved recently, and management is closely monitoring the situation for potential issuance [32][33] Question: How does the current downturn compare to the last one? - The current portfolio is less exposed to building and construction and automotive markets, with only about 18% of sales affected compared to over half in the last downturn [35][36] Question: What is the status of the Clariant transaction? - The earliest closing date remains June 2, pending regulatory approvals in Morocco and Russia [42][43] Question: How are healthcare sales performing? - Healthcare sales were flat in the first quarter, with certain sub-segments up by 50%, but offset by declines in elective surgeries and other devices [49][50] Question: What are the trends in raw materials? - Key raw materials like Kevlar and carbon are up year-over-year, while Nylon 6 and 66 are down slightly [68][69] Question: What actions can be taken to offset reduced demand? - The company can flex its workforce and reduce administrative costs, with significant savings expected from travel reductions [70][71]