A stable construction industry translates into a steady-as-she-goes outlook for extruder manufacturers as 1998 begins.
Housing starts, which drive the U.S. construction industry, used to move along a boom-and-bust cycle. The ripple effect extends down to extruders of vinyl siding, pipe, windows and fencing — and eventually hits their machinery suppliers.
In recent years, however, housing starts have moderated and stayed between 1.3 million and 1.5 million a year.
``Remodeling is still strong, and housing starts are promising. It looks like we will have a good first half of 1998,'' said Hans-Jurgen Matthesius, vice president of Krauss-Maffei Corp.'s extrusion division. But construction could slow down in the second half, he said.
The National Association of Home Builders predicts a decline of about 5 percent for 1998, followed by a small recovery in 1999. Starts were off about 2 percent in 1997, ending at 1.45 million.
When new construction is down, remodeling is up, and that helps ``balance the market,'' said Tom Brown, general sales manager for extrusion systems at Cincinnati Milacron Inc.
Both Brown and Matthesius said the pipe sector seems a bit off going into 1998. Siding, Matthesius said, ``had an extremely strong start [in 1997] and then a weak finish.''
Brown said vinyl fencing, which took off in 1994 and then seemed to decline, is back. Fence extruders are adding capacity again, he said.
Larger extruders of vinyl windows have boosted output of their machines, through tooling improvements and better compounded resin, Matthesius said.
``So customers can utilize installed capacity better, but that doesn't necessarily lead to more machine sales,'' he said.
Other major sectors of the U.S. economy have mirrored construction's moderate year-to-year pace. Davis-Standard Corp. has enjoyed growth in automotive and packaging, too. ``Our activity in those markets has been strong this year,'' said Fred Bartkiewicz, vice president of sales and engineering at Davis-Standard.
Davis-Standard had been on a buying spree in recent years, buying eight companies or product lines from 1991 through 1996. The company took a break from acquisitions in 1997 — but it did invest $3 million to expand its headquarters factory in Pawcatuck, Conn. Another $2 million went to buy a new whirling machine for cutting screws.
Davis-Standard is the dominant force in single-screw extrusion, with more than 50 percent of the U.S. market. The company expanded its twin-screw offerings last year with a new, high-output compounding extruder.
For Davis-Standard , a division of Crompton & Knowles Corp., 1997 was a year to rebound after a poor 1996 that saw flat sales and a 40 percent decline in operating profit. Through the first nine months of 1997, sales rose at Davis-Standard to $230.8 million, up nearly 9 percent from $212.1 million in the year-earlier period. Operating profit jumped back 43 percent, to $25.9 million, from $18.1 million in the first nine months of 1996.
The company credited a 12 percent increase in unit volume, cost reductions and an improved product mix for the turnaround.
A smaller maker of single-screw extruders, Processing Technologies Inc. in St. Charles, Ill., enjoyed a 40 percent sales increase in 1997, according to President Dana Hanson.
``This is primarily due to expansion in market segments that we serve, including growth in compounding, foam sheet, sheet lines, pipe and coextrusion systems,'' he said. ``We also had an expansion in fiber applications.''
PTI has become more aggressive in foam sheet. Hanson said the company built a tandem foam line for Tenneco Packaging, with an 8-inch extruder feeding a 10-inch extruder, to make polyolefin foam. Hanson said the machine is one of the largest tandem foam systems in the United States.
Other PTI markets include sheet for food packaging, high density polyethylene pipe and single-screw compounding. Privately held PTI does not release sales numbers.
Last June, NPE 1997 provided a boost to the extrusion industry. Davis-Standard reported it generated $25 million in sales at the Chicago show. A few months before NPE, Cincinnati Milacron Inc. and HPM Corp. announced a jointly developed extrusion system for thin-gauge packaging, called the Alliance System.
At NPE, HPM exhibited a huge-output machine in a small package. The Mount Gilead, Ohio, firm showed a machine with a 21/2inch-diameter screw running at 2,500 pounds an hour.
Another Ohio firm, Akron Extruders Inc. in Canal Fulton, is busy.
``Our backlog is extremely strong, and I don't see any weakening through calendar year 1998 at this time,'' Don Sproule, vice president of sales and marketing, said in December. The company makes screws and single-screw extruders.
Akron Extruders used to make only standard machines. But about two years ago, it expanded into customized machines, including multilayer systems.
``About 30 percent of our business base is customized extruders, and we want to keep it at that level,'' Sproule said.
The blown film extrusion sector has one fewer player, as the Sano line of machines will no longer be manufactured. Early in 1997, Black Clawson Co. moved its Black Clawson Sano Inc. business from Amelia, Ohio, and into the Fulton, N.Y., plant of its sister company, Black Clawson Converting Machinery Corp. Black Clawson bought Milacron's Sano blown film business in 1994.
Now Black Clawson has stopped making new Sano systems, though the company will continue to support machines in the field, said Laurie Beth Tyldesley, marketing manager for Black Clawson Converting.
``We decided to only serve the existing customer base that we had for Sano, and we're not pursuing any new customers, other than with our winding technology,'' Tyldesley said.
Black Clawson Converting is a major supplier of cast film and extrusion coating equipment, and Tyldesley said those businesses are growing, especially for wider films, like stretch film.
Harold Wrede, president of Battenfeld Gloucester Engineering Co. Inc., expects 1998 to be ``at best flat compared to 1997.'' He said the economic problems in the Far East ``definitely will have an impact on our ability to book orders.''
The Battenfeld unit, based in Gloucester, Mass., generates about 30-40 percent of its sales from exports — and lately the Far East has been a hot market, as firms such as blown film makers have upgraded their plants with sophisticated equipment.
But Wrede expects that sales in that sector will cool, since key markets like South Korea and Southeast Asia have seen their currency values drop significantly against the U.S. dollar.
``Europe is, generally speaking, recovering from its doldrums,'' he added, and the U.S. market, with the exception of stretch film, will start to pick up later this year.
Some bright spots, Wrede said, include cast polypropylene film machines, foam extrusion units, dies, and a new cooling screw.
For Reifenhauser Inc. in Lawrence, Mass., demand for PP sheet extruders has been strong, according to John Wise, sales manager. The sheet gets thermoformed into cups, deli containers and packaging, often replacing polystyrene sheet, he said.
Sales at Reifenhauser have been balanced between sheet, blown film and cast film, he said.
A new extruder company started in 1997, American Kuhne in Norwich, Conn. David Citron, director of sales and marketing, said the company exceeded first-year projections, but he declined to give a sales figure. ``We have firm commitments for two sheet lines right now,'' he said in December.
Sandy Guthrie, president of Merritt Davis Corp., said the company in Hamden, Conn., sold more than 150 machines in 1997. Like many smaller single-screw extruder makers, Merritt has tried to pick its spots against the giant Davis-Standard.
``We're still finding extremely high demand for specialty applications from people who are trying to create a niche outside of a me-too environment,'' Guthrie said.
Jerry Berlyn, founder of Berlyn, an extruder maker in Worcester, Mass., that is part of Clay Group Inc., said the company shipped 70 percent more machines in 1997 than it did in 1996. ``And our backlog is such that I know we will ship 50 percent more than that next year,'' he said.
Fiber manufacturing, profiles and color compounding are among the best markets.
``What we've done is develop a small group of dedicated people who know how to build special equipment,'' Berlyn said.