Pointing to full order books, injection press makers seem confident that their strong-and-steady sales will hold up — at least through the first half of 1999.
After that, things get a bit hazy. Regional question marks like Asia and Latin America add to the uncertainty. Machinery price hikes should be virtually nonexistent this year, according to equipment executives.
U.S. manufacturing is slowing down. Stock market watchers are bracing for some disappointing year-end 1998 manufacturing results, due out in the next few weeks.
Reports issued in December reflect a mixed bag:
The National Association of Purchasing Managers predict capital expenditures by factories will increase just 3.5 percent in 1999. That's substantially smaller than the 5.7 percent gain last year. On the plus side, purchasing managers at plastics plants expect to spend more. Unfortunately, two-thirds of NAPM's total members say they plan to spend the same or less.
The National Association of Manufacturers says companies are upgrading equipment to combat slower growth in 1999. Even as output remained flat, manufacturers' productivity increased 5.2 percent in the third quarter of 1998, the Labor Department reported.
Michael Santa, executive vice president of Krauss-Maffei Corp., said the drive to improve productivity translates into machine orders, regardless of the economy.
``Ironically, on some of the higher-end companies, push for cost reduction actually stimulates sales of higher-performance equipment,'' he said. ``We're seeing an ongoing emphasis on cost reduction. What that requires is to have a greater output with less people and less machines.''
Michael Paslawskyj, vice president of CIT Group in Livingston, N.J., said it will be harder to pitch standard injection presses, because U.S. factories are now operating at just 80 percent of capacity — a rate he called ``incredibly low for this late in the business cycle.'' Paslawskyj thinks that higher-tech and specialty machines will sell.
That sounds good to Jeanine Hettinga, president of Hettinga Technologies Inc. in Des Moines, Iowa, which is focusing on low-pressure machines to mold thin-wall parts.
``When times are very good, Hettinga technology and equipment usually doesn't do as well because molders can sell all they want, using their shoot-and-ship machines. When times begin to tighten up, that's when we begin to do very well. They look for something that will give them the edge,'' she said.
According to Paslawskyj, after five good years, the press market is experiencing ``a bit of a glut.'' He thinks sales will grow less than 3 percent. ``You're not going to be buying a machine that's just going to sit there,'' he said.
Walter Liptak, who follows the machine tool industry for McDonald & Co. in Cleveland, predicts flat injection press sales this year. But that's not necessarily a bad outlook, he said, given the market's strength in recent years.
``I expect that [machinery] companies will work off their backlog in the first half of '99. They will be forced to look for new orders in the second half,'' Liptak said.
Hardly anyone expects a U.S. recession. ``I don't think there'll be a recession, but I don't see any big growth spurts, either. I think we're in for a flat year in the capital equipment market,'' said Jerry Boggs, vice president of SHI Plastics Machinery Inc., a unit of Japan's Sumitomo Heavy Industries Ltd.
Many machinery executives say sales declined in 1998, largely because of a summer sales drought. Business was strong at the beginning and end of the year, they said.
William G. Pryor, president at Van Dorn Demag Corp., said the U.S. market for injection presses declined from 7,000 machines in 1997 to 6,500 units in 1998. He thinks 1999 will match the 6,500 number.
``The market started off very strong for the first four months of 1998, especially in small machines,'' Pryor said. ``Then it definitely leveled off in the middle three or four months.'' Van Dorn Demag is based in Strongsville, Ohio.
Big news for 1998 came from Canada's Husky Injection Molding Systems Ltd. and Milacron Inc.
Milacron, the largest U.S. plastics machinery maker, bought the Uniloy blow molding business from Johnson Controls Inc., then a few weeks later sold its 114-year-old machine tool business. Husky went public in Canada on Nov. 9.
On Dec. 17, Husky, of Bolton, Ontario, issued its first-ever quarterly report as a public company. Sales for the first quarter of fiscal 1999, which ended Oct. 31, increased 11 percent, to $140.5 million, from $126.8 million in the year-ago period. Husky credited continuing strong U.S. demand for PET packaging, which translates to more sales of Husky PET preform molding presses.
Husky introduced a smaller model of its Index revolving-mold PET press at K'98 in Dusseldorf, Germany. ``There's still a steady business in soft drinks,'' said Michael Urquhart, vice president of sales and marketing. ``We're seeing a lot of different applications in PET, in things like milk and more wide-mouth jar business.''
Husky generated $762 million in sales for fiscal 1998, ended last July 31. That represents a 20 percent gain from 1997.
Milacron's Plastics Technologies Group in Batavia, Ohio, reported sales of $548 million through the first nine months of 1998, a 2 percent increase from $537 million in the same period of 1997. Final-year sales figures were not available for this story.
One year ago, Wolfgang Meyer, president of Battenfeld of America Inc., was very bullish. He even predicted that spot shortages might happen in 1998. What does he say today?
``The second half of 1997 was very strong, so we went into this forecast probably a little bit too optimistic. We can now say that 1998 was probably a little bit behind '97. But there are pockets where there was more growth. In 1998, small machines suffered considerably, while the larger machine business was quite strong,'' he said.
Meyer said some niche areas are hot, such as multimaterial molding.
Santa agreed that the action was in big presses last year.
``We sold a lot more higher-tonnage machines in '98 vs. '97,'' he said. ``It appears that the small tonnage range equipment, the 30-to 110-ton range, has slowed somewhat in '98.''
Krauss-Maffei, of Florence, Ky., sold more than 200 C-range presses in 1998, marking its fifth consecutive year of increases in units and sales volume, Santa said. ``We're looking for a continued steady growth in 1999,'' he said, thanks to traditionally strong K-M markets, such as medical, packaging and electronics.
Kurt Fenske, vice president of Engel North America, said plastics machinery has outpaced the overall industrial equipment sector.
``Plastics still has a solid growth, driven to a large degree by people in the automotive industry,'' he said. ``You just can't do it fast enough, and most of that requires new technology and new equipment.''
Engel North America builds machines in Guelph, Ontario, and York, Pa. Fenske said the company has a ``healthy backlog'' for the new year.
The automotive industry used to be marked by a boom-and-bust cycle. But since 1994, U.S. sales of cars and light trucks have remained at a high level, about 15 million. Analysts predict that will continue in 1999.
Ube Machinery Inc. has sold an all-electric injection molding machine to Stanley Electric Inc. an automotive molder in London, Ohio, according to Toshiaki Kaku, president of the company in Ann Arbor, Mich. He said Stanley has ordered a 950-ton electric machine made by the partnership between Ube and Niigata Engineering Co. Ltd. Stanley officials did not return telephone calls.
Kaku said Ube hopes to sell an all-electric press to Ford Motor Co.
Meanwhile, last year, Ube doubled the sales from its Ann Arbor assembly plant, which opened in 1996.
Robert Columbus, general manager of Niigata's U.S. operation in Itasca, Ill., also has high hopes for electrics, which should account for more than 30 percent of sales this year.
``The medical market continues to be hot. We see lots of interest in the medical and connector industry. We're getting exposed to a lot of new customers in those areas because of the electric machine,'' he said.
Columbus said Niigata's U.S. sales were flat in 1998. Another Japanese press maker, JSW Plastics Machinery Inc., saw a small gain, according to Bill Roebuck, JSW's vice president of marketing and sales.
Roebuck is hopeful going into 1999. ``I'm king of hearing it both ways,'' he said. ``I would hope we'd have as equally good year as 1998. But I don't know where the growth is going to be.''
Several other Japanese companies reported a sales decline last year, despite a price advantage over U.S.-made machines thanks to the weak yen.
Nissei Plastic Industrial Co. Ltd. should see sales decline 20 percent for the fiscal year which ends March 1999, Nissei President Tsukasa Yoda said during K'98.
Sumitomo Heavy Industries began U.S. assembly in October at a $10 million plant in Jefferson, Ga. The plant is making five to 10 machines a month, with a goal of turning out 20 a month in three years, according to Boggs, vice president of the U.S. operation, SHI Plastics Machinery Inc.
Boggs said SHI sales were down about 15 percent in 1998, after a strong first quarter. Japan's weak economy and the strong dollar restricted business at Japanese transplants in the United Sates, he said.
Methods Plastics Machinery in Sudbury, Mass., bought a lot of its Japanese-made Shinwa Seiki presses early last year, when the yen was trading at an eight-year low, at more than 140 yen to $1. That allowed Methods to offer discounts, including a year-end promotion. Even so, Hunter R. Kissam Jr., director of sales and marketing, said 1998 sales were off 15-20 percent from 1997.
This year could be flat, he said.
``There's a lot of concern about what's going on with the economy and whether the president's being impeached. The stock market has been going down again. I don't expect it to change too much, but I'm hoping for at least a moderate increase,'' Kissam said. On a positive note, Methods has picked up new customers for Shinwa Seiki machines.
Expect to hear more from Fortune International Inc., which sells Taiwanese presses made by Victor Taichung Machinery Works Co. Ltd. Dan Preston, senior vice president, said Fortune has concentrated on selling machine tools more than injection presses. Victor Taichung presses used to top out at 275 tons, but now the company makes machines up to 600 tons in clamping force.
``Now I've got dealers coming to me, where before I had to go out and chase them,,'' Preston said.
Tony Firth, vice president and general manager at Italian supplier Sandretto USA Inc., thinks overall injection press sales this year should equal 1998. But Sandretto, as a relatively small player, is hoping to do better and pick up market share in packaging, medical and other segments, he said.
Sandretto USA is moving its headquarters this year from Middleburg Heights, Ohio, to Freedom, Pa.