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Nordson executives say Xaloy, EDI hit soft patch

By: Bill Bregar

February 25, 2013

WESTLAKE, OHIO -- A slower global economy has impacted the Xaloy and EDI screw and barrel and flat die businesses, according to Nordson Corp. executives, but they expect sales to improve.

"We expect to see really improvement throughout the year," said Michael Hilton, president and CEO.

Nordson bought Xaloy and EDI in mid-2012 in a major play to invest into the broad plastics industry. They came up in Nordson's Feb. 22 first-quarter 2013 conference call to financial analysts. The quarter ended Jan. 31.

Gregory Thaxton, chief financial officer, reported softness in plastics processing and consumer durable goods end-markets. Citing a seasonal impact, he said the first quarter tends to be the weakest at Xaloy and EDI, as well as Nordson's existing, legacy businesses.

"But more specific to market trends, we are seeing softness in demand related to a slower global economy and a near-term mismatch in capacity relative to demand. The combination of these two factors resulted in weaker operating performance in the plastic processing area relative to expectations," Thaxton said. "We remain optimistic that our growth strategy within this plastics processing product line, including the development of new applications, will drive both near- and long-term sales growth."

Nordson Xaloy and Nordson EDI are included in the Westlake, Ohio-based company's adhesive dispensing systems segment. First-quarter sales for that segment increased by 33 percent, to $183.3 million, from $139.1 million in the first quarter of 2012. Segment operating margin was 24 percent, including the anticipated dilutive effect of the EDI and Xaloy acquisitions.

Hilton said Nordson has moved to "rationalize some sites in Europe" for the units. He thinks the plastics businesses should see higher volumes, thanks to growing orders new applications.

"We're experiencing a short-term supply-demand mismatch in certain applications within the plastics processing space," Hilton said. "However, we continue to be excited about the growth prospects for EDI and Xaloy, and the synergy potential."

"We expect a solid year from both of these businesses," he said.

Companywide, Nordson generated first quarter sales of $347 million, a 26 percent increase over the prior year's first quarter sales of $275.8 million. The sales improvement included an 8 percent increase in organic volume and an 18 percent increase related to the first-year effect year of acquisitions. Net income grew 9.6 percent, to $42 million, from $38.3 million in the earlier first quarter.

Nordson will hold its annual shareholders meeting Feb. 26 in Cleveland.