For extruder makers, plunging resin prices that squeeze compounders should bring good news and bad news in 1999.
First, the bad news: Some compounders that see profits fall will delay spending on new machines. On the good-news side, a slowdown will heighten already intense competition, prodding compounders to buy more modern equipment, such as the new high-output machines.
Business has cooled for the largest twin-screw compounding machine supplier, Werner & Pfleiderer Corp., said Asmut Kahns, vice president of sales and marketing.
``We did see a slowdown, as predicted, in the second half of 1998 for new orders. Backlog is still high, but new orders are slower,'' Kahns said.
What does Kahns think about this year?
``It will be on a lower level, altogether, for order income. But there will be no dramatic downturn. Order income just will not be sustained at the relatively high levels of '97 and early '98.''
But Kahns said sales of W&P's high-torque ZSK Mega machines have held up.
``Most of the machines we sell into the plastic compounding operations for engineering resins have been the high-torque, high-speed machines,'' he said.
Screws on high-output machines can turn faster than 1,200 revolutions per minute, thanks to improved gearboxes and screw designs.
At Berstorff Corp., Nelson Hopcus also said high-output compounders have become widely accepted. ``That's mainly what we're selling,'' he said.
Hopcus acknowledged that the resin pricing woes hit compounders when their customers, in turn, demand price cuts to match.
``They've got to ride it through,'' he said. ``They don't have much choice.'' But Hopcus is more concerned about the presidential election next year. ``We typically see a little stagnation coming to that election year. That's a typical bump we go through coming into an election year.''
Hopcus said Berstorff, of Florence, Ky., has seen some large customers hold off buying machines because of concerns about the economy or the Asian downturn. However, he has been surprised by the number of small companies expanding production.
``We're seeing new start-ups. Other industries also are investing money in diversification and getting involved in compounding,'' he said.
Strategically, Berstorff wants to broaden its reach into powder coatings and masterbatch compounding.
This year, one venerable name, Welding Engineers, has a new owner — National Feedscrew & Machinery Inc. in Massillon, Ohio. Phil Roberson, president and chief executive officer of the renamed NFM Welding Engineers, said recent advances such as high-torque machines will drive sales.
``A lot of new technology has come to the market in the last four or five years. There are still a lot of machines out there that are 15 and 20 years old,'' Roberson said.
Like W&P, Farrel Corp. saw a second-half slowdown last year.
``We're expecting it to pick up [in 1999] but it's probably not going to be a banner year,'' said Mike Hotchkiss, director of sales for plastics machinery at Farrel in Ansonia, Conn.
Hotchkiss said a manufacturing slowdown that hits compounders could hurt.
``When projected profitability is down, probably the first thing they take a look at is capital expenditures,'' he said. ``However there's also opportunities to look at doing things a different way'' by upgrading equipment.
Hotchkiss said high-torque machines account for three out of every four compounding extruders Farrel sells.
Italian extruder supplier Pomini has closed its U.S. headquarters and demonstration laboratory in Brecksville, Ohio, and is moving in with its parent, Techint Technologies Inc. in Coraopolis, Pa.
Douglas Sublett, general sales manager, said, ``Business has been slower than usual. Inquiries are not flowing in like we'd like to see them, but we're optimistic. We've got several projects right now.''
Sublett said compounders are looking for answers. ``If the resin prices are dropping, then somehow they've got to be more profitable. Hopefully machinery is an area where they can get more bang for the buck,'' he said.
American Leistritz Extruder Corp. enjoyed a record year in 1998, thanks to a 15 percent increase in North American sales, according to Charlie Martin, national sales manager.
Compounding machinery sales are down. But Leistritz has been touting direct extrusion equipment—which eliminates the need for a separate step to compound into pellets. Martin said direct extrusion generates about 40 percent of sales at the company in Somerville, N.J.
Leistritz has installed a 42-inch-wide direct extrusion line to make sheet at its laboratory.
Martin goes against the grain on high-torque machines, and urges customers to use caution before buying one. Some resins do not run well at those fast rates, he noted.
``From what I see, a lot of people want one, but they don't even understand it,'' Martin said.