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Schulman opens year by buying business and upping earnings forecast

By Jim Mackinnon
Beacon Journal business writer

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Fairlawn polymer company A. Schulman Inc. is celebrating the start of the new year with an acquisition, a strong first quarter and higher anticipated earnings for the full year.

Shares of Schulman on Tuesday rose $1.53, or 4.5 percent, to $35.43. The company released its first-quarter earnings report after the stock market closed Monday and followed up with a conference call Tuesday morning with industry analysts.

“The positive contributions of our marketing initiatives, cost control efforts and the solid contribution of our recent acquisitions provide us the confidence to raise our expectations for 2014 adjusted net income guidance to a revised range of $2.13 to $2.18 per diluted share,” Joseph Gingo, chairman, president and chief executive officer, said in a statement. “While we are encouraged by the strong fiscal first-quarter performance, we believe it is wise to approach the rest of the year with cautious optimism as our markets remain competitive and the visibility of future demand is limited.”

Schulman previously forecast adjusted earnings of $2.08 to $2.13 per share. Analysts estimated the company will earn $2.10 per share for the current fiscal year.

Gingo cautioned that raw material costs may rise more than anticipated and that the global company has not seen a complete rebound in all of its markets.

Schulman reported earning $15.07 million, or 52 cents per share, on revenue of $585.4 million for its first quarter ending Nov. 30. Revenue was up 10 percent from $532.1 million a year ago, while net income was up 27.9 percent from a year ago. Sales beat analyst estimates of $572 million for the quarter.

Schulman on Tuesday said it bought Tennessee-based Prime Colorants Inc., which makes custom colors and additive concentrates, for $15.1 million. The company’s pelletized color products are used in the automotive, building and construction markets.

“This latest acquisition is part of our ongoing strategy to grow our custom color capabilities in the United States as well as transform our U.S. operations from commodity products to a business focused on specialty products and services,” Gingo said in opening comments in Tuesday’s conference call. “Color remains an area of opportunity for us in the U.S. and the acquisition of Prime will enable us to serve customers better by offering color expertise in an area of the country where we were not previously located.”

Chief Operating Officer Bernard Rzepka said Schulman has been emphasizing color globally in recent years.

Chief Financial Officer Joseph Levanduski said Schulman will be able to continue to buy other businesses.

“Looking at our balance sheet, our strong financial position continues to support our strategy of acquisitions and organic growth,” he said. “We anticipate using our new credit facility to continue our active campaign of acquisitions and supporting our internal marketing efforts.”

Schulman on Monday announced the hiring of former Cliffs Natural Resources executive James Irwin to the newly created position of senior director of corporate business development. Irwin will report to Gingo and oversee potential mergers, acquisitions and divestitures.

Gingo told analysts Schulman will target medical markets with new products, including an environmentally safe flame retardant material.

“Flame retardant is a very big market for me. Medical is an emerging market,” Gingo said.

Jim Mackinnon can be reached at 330-996-3544 or at jmackinnon@thebeaconjournal.com.


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