A. Schulman lowers 2016 earnings forecast
The material supplier cited deteriorating market conditions in the U.S. and Europe as the cause of the downgrade.
As the result of what it calls “deteriorating market conditions facing the industry in…U.S. and Europe”, material supplier A. Schulman Inc. predicted its net income from 2016 will be lower than previously expected.
In a statement, the Akron, Ohio-based company reduced its forecast for adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to between US$225 million to US$230 million, down from US$245 million to US$250 million.
“At the beginning of the quarter, our key end-markets in the U.S. and Europe did not present notable headwinds; however, as the quarter progressed we saw double-digit volume contraction,” said Bernard Rzepka, Schulman’s president and CEO. “This softness has continued into August. Our top line was particularly impacted in our Masterbatch Solutions, Engineered Plastics and Engineered Composites product families driven by softness in multiple markets. Similarly, the continued volatility in our major raw materials due to lower oil prices has created further caution in our customers and a reduction in orders. Unfortunately, the weak demand environment has overshadowed the positive impact of several cost reduction and synergy programs that we have been executing throughout the year.”
But the company’s cash flow remains strong, Rzepka continued, and Schulman continues to make good strides in paying down its debt. “In July we paid down an additional US$18.2 million of debt,” he said. “Gross debt is now US$967 million at the end of July, down 14% from the peak of US$1.1 billion in June 2015. This progress, combined with over US$300 million of available credit under our current credit facility, positions us well to withstand this challenging economic climate as we enter our next fiscal year.”