In the minds of some plastics processors, medical molding remains something akin to a holy land of high profit margins and constant growth because of an aging population.
That's partially true.
There is strong growth. Many medical molders are projecting healthy sales increases for 1999, mirroring what they saw in 1998.
But some of those same molders are expecting tighter profit margins from increasing consolidation and expansion among both the medical device manufacturers and molders.
The growth and consolidation among molders remains at a much slower pace than among the medical device manufacturers for which many of them work.
Medical plastics processor Ballard Medical Products was bought by consumer and health-care product giant Kimberly-Clark Corp. in late December, acknowledging that it needed either to expand or partner with a larger firm. Some of the larger medical custom molders, such as Nypro Inc. and Tech Group Inc., bought smaller molders or launched joint ventures in new markets.
Molders contacted said they were looking for sales growth of 10-30 percent, with markets like alternative site care, safety syringes, diagnostic devices, drug-delivery and intravenous sets considered strong.
A Merrill Lynch analysis of the medical device market said, for example, that most of the industry's major players would see double-digit earnings growth in 1999, which it termed ``increasingly impressive in light of the disappointments reported across the board in other sectors.''
Health-care spending worldwide rose about 8 percent last year, despite the turmoil in Asia, and is expected to continue at about that pace in 1999, said Doug Small, market manager of medical business for Eastman Chemical Co. in Kingsport, Tenn.
But changes in the medical device marketplace are acting as a reality check.
``The margins are compressing,'' said Tim Reis, health-care business unit manager for GW Plastics Inc. in Bethel, Vt., which does about one-third of its $51 million business in medical molding. ``Consolidation in the marketplace by the big boys is driving competition at a very steep rate, and the way to win competition is to decrease prices.
``It happened in auto and now it's happening in medical,'' he said.
Still, GW plans to add 14 new injection molding machines for medical work, ranging from 35-200 tons, Reis said.
Medical margins are in the 5-10 percent range, down from 10-15 percent two or three years ago, said Paul Nickerson, vice president of sales and marketing at Cycles Inc. in Sterling, Mass.
Unimark Plastics Co. expects 10-12 percent growth in its medical business, in spite of closing its Puerto Rican plant because medical device manufacturing slowed there, said Dan Hanlon, vice president of sales and marketing for the Greenville, S.C., firm. Unimark is part of Alltrista Corp.
The margin pressure comes from medical device makers reducing the number of suppliers they deal with, plus competition from larger molders, Hanlon said.
``We see 1999 as a good year, but not everybody shares that,'' said Gerald Sommers, president of custom injection molder Courtesy Corp. in Buffalo Grove, Ill. Courtesy does about half of its $152 million in annual molding sales in the medical market, he said. ``A lot of shops are slow.''
Other molders disputed that. Nypro, for example, saw slowdowns in some plants during the summer from weakness in the electronics and telecommunications markets. But medical remained strong and the telecom business picked up later in the year, said Jim Dolan, business manager of Nypro's health-care group.
Clinton, Mass.-based Nypro, which does about a third of its $373 million in molding business in medical, still sees tremendous opportunities in China and Mexico, and is ready to open a medical molding plant in the Dominican Republic in March, Dolan said.