Omnova Focuses Efforts: Fairlawn Firm Touts Emphasis on Its Two Segments Where It is a Market Leader
By Marilyn Miller, The Akron Beacon Journal, Ohio
Feb. 14–Facing challenges, Omnova Solutions Inc. executives believe they have improved the company’s financial position in the past three years by focusing on their market leadership in areas that will increase profitability.
Omnova Chairman and CEO Kevin McMullen spoke about the company’s 2007 outlook to analysts and portfolio managers Tuesday at the Wall Street Analyst Forum in New York City.
Omnova, which is headquartered in Fairlawn and has a plant in Mogadore, was spun off in 1999 from GenCorp Inc., which began in Akron in 1915 as General Tire & Rubber Co. Omnova’s major products are used in paper and carpet products, commercial wallcoverings, laminates, coated upholstery fabrics and films used in hospitals, hotels and offices. Products provide finished surfaces for furniture, walls, vehicle seats and other uses.
“Our strategic intent… is to focus on those businesses where we have, or can create, leading market positions that can be leveraged for profitable growth, and where we can generate attractive returns,” McMullen said.
The company operates two business segments: performance chemicals and decorative products. A third segment, building products, which consisted of Omnova’s commercial roofing business, was sold in September.
“It was the best course for the company. We were only the No. 4 player in that business (out of six or eight players) in a weakening housing industry,” McMullen said. “We want to focus in areas we can grow and expand. We tend to be leaders in the other two areas we serve.”
McMullen said the paper and carpet industry generates two-thirds of the company’s revenue. The company calls itself the market leader worldwide in commercial wallcoverings.
He said not everyone has survived in the decorative market, where he has seen many fragmented competitors. “Some smaller companies could not withstand the market. Because some of the smaller companies have disappeared, Omnova has been able to pick up additional customers,” he said.
Rising costs of raw materials have posed a challenge because all are petroleum-based. Oil prices averaged more than $65 a barrel in the company’s fiscal year, and McMullen said that contributed to nearly $17 million in costs because of raw material inflation.
Another factor hurting the company has been a decline in hotel occupancy. McMullen said the hospitality market has rebounded and people are traveling more, which improves business.
Omnova shares closed at $6.33 Tuesday, up 4 cents. The company’s stock has traded in a 52-week range of $4 to $6.58.
In 2006, Omnova had sales of $699 million, down from $810 million in 2005.
The company employs 1,700 in America, Europe and Asia. That is down 20 percent from last year.
Omnova has expanded across Asia and Europe. Globalization is part of the company’s growth strategy: Joint ventures in China and Thailand have secured contracts in automotive and marine upholstery.
McMullen said that although the company is stronger and in a better position to increase its value to shareholders and customers, it has a ways to go.
“Make no mistake, we clearly have not reached our final destination, but we draw energy from each new milestone on our journey of performance improvement,” McMullen said.
Marilyn Miller can be reached at 330-996-3098 or 800-777-7232 or mmiller@thebeaconjournal.com.
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Copyright (c) 2007, The Akron Beacon Journal, Ohio
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