AKRON, OHIO (Nov. 25, 10 a.m. EST) — Extruder makers continued to struggle along in 2002, despite pockets of strength in food packaging, medical, and a home construction market that remains upbeat in an uncertain U.S. economy.
Processors are still postponing decisions to buy, several extruder executives said.
Jerry Berlyn, owner of Berlyn Extruders Inc., said processors trim machinery budgets first in a downturn, before looking at layoffs and other cutbacks.
“Look, if you ran a company and wanted to conserve dollars, what's the first thing that you would do?” Berlyn said in October, at Berlyn's factory in Worcester. Mass. “The first thing that they do is stop spending money. And the easiest way to stop spending money is not to buy capital equipment, or to postpone the purchases of equipment, or to postpone the development of new products, because you haven't got that much cash coming in. The last thing you want to do is cut the muscle out of the company, which is the people.”
Because consumer spending has held up, Berlyn said a typical customer's sales may be off about 20 percent. Not too bad, considering the stagnant U.S. economy. “But if their sales are off 20 percent, then their buying, in terms of capital equipment purchasing, is off 50 percent,” he said.
That's exactly what happened in 2001 — when U.S. shipments of single-screw and twin-screw extruders plunged by 45 percent to 882 machines, from 1,612 in 2000. The Society of the Plastics Industry Inc. of Washington compiles the statistics. Through the first three quarters of this year, extruder shipments appeared to be on track to equal their dismal 2001 performance.
Berlyn, like other executives interviewed for this story, said quoting activity and spare parts sales are picking up to end the year. “I see more activity than we saw three to six months ago,” he said. “Everybody is hopeful. I would say you're probably going to see a gradual improvement in capital equipment business, but nothing dramatic and nothing outstanding.”
Fueled by cheap mortgage rates, home construction remains very strong, which is good news for key extruded plastic products like siding, windows, pipe and insulation. The National Association of Home Builders expects housing starts to hit nearly 1.7 million through all of 2002, then slip 3.4 percent to a still strong 1.63 million. Home sales are at historical highs.
Several vinyl window extruders expanded this year. Veka Inc. is buying 17 lines from Milacron Inc. as it doubles capacity at its plant in Reno, Nev. Davis-Standard Corp. also sold seven twin-screw extruders to Silver Line Vinyl Extrusion, for its new plant in Marion, Ohio.
Despite that window news, the glowing housing numbers did not always translate into sales of extruders. “What has happened is all the capacity that was installed in 1997 and 1998, so there was not the need for additional capacity in the market,” said Josef Marek, president of American Maplan.
American Maplan made news this year when its parent, Meinerzhagen, Germany-based SMS Plastics Technology, ended 25 years of Maplan extruder manufacturing in McPherson, Kan., by moving the assembly to the Massachusetts plant of Battenfeld Gloucester Engineering Co. Inc., a sister company that makes film equipment.
Marek said Maplan managed to rebound from a “terrible” 2001 when the market collapsed. “I think it has hit bottom and there will be better times in late summer or fall in 2003. A real improvement will be in 2004 or 2005, not before,” he said.
At Davis-Standard, the largest U.S. maker of single-screw extruders, sales declined 17 percent through the first nine months of 2002, to $130.7 million, from $157.8 million in the same period of 2001.
The Pawcatuck, Conn.-based company lost $9 million through the first months of this year. In the third quarter, sales of $36.3 million were down 11.5 percent from the third quarter of 2001, as depressed demand for machinery resulted in a 13 percent decline in unit volume.
Sandy Guthrie of Merritt Davis Corp. said suppliers have restructured to build extruders to the lower levels. He sees business improving, as new orders have increased from 2001.
“Orders haven't died — what's happening is they've been postponed, awaiting further corporate direction,” said Guthrie, president and chief executive officer of Merritt Davis.
“My forecast for next year is probably going to be anything between level and a 5-10 percent gain. I do not see a further decline. I think we've all become pretty stable,” Guthrie said. The Hamden, Conn., company is doing well in reclaim and compounding extruders. Profile and tubing are “reasonably strong,” he said.
A few companies report robust sales this year.
Processing Technologies Inc. built a new factory in 2001, in Aurora, Ill., doubling its size. “We're very busy,” said Chris Eaton, sales manager. “We're very diversified. Right now we have an order for 18 extruders in the polyester fiber business, and we have several huge packaging lines on order [for] takeout food containers and food and beverage packaging.” PTI also won a multiple-line order for an unidentified customer in automotive.
PTI is in good shape for the new year. “We've got a very healthy, six-month backlog,” Eaton said.
American Kuhne Inc., which makes extruders in Norwich, Conn., also bounced back from 2001. Sales increased in the low double digits, said David Citron, director of sales and marketing. Kuhne attributes the improvement to gains in market share and growth in some markets such as medical, new automotive projects and blown film.
Citron expects Kuhne to have a similar sales gain in 2003, although he said: “I don't think we're expecting anything close to 2000 levels.”
At another single-screw extruder maker, Diamond America Corp., sales are a little below the forecast. “But that's to be expected considering the economy,” said Thomas Allen, president of the company in Tallmadge, Ohio.
The company also makes screws. Allen is getting some early indications that processors are bringing idle machines back into production. But screw demand still seems uneven. “It's been very, very strange. You'll have one or two weeks that are excellent and then things will drop off. It seems to get a spurt and then plays itself out,” he said.
Harrel Inc. of East Norwalk, Conn., makes specialized extruders for small medical tubing, such as catheters, and sheet and profiles. Medical does help, said President Holton Harris. Even so, Harrel's business is “down like everybody else's is,” he said.
What about 2003? “Who knows? You tell me how soon the economy's going to come around and I'll tell you how we'll be next year,” Harris said.
Makers of extrusion lines for film and sheet report mixed results for 2002. Several companies said business has improved, thanks mainly to packaging, but buyers still are extremely selective.
“They are buying for very specific applications and nobody's got any money to waste,” said Welex Inc. President Frank Nissel. Welex makes sheet extrusion lines in Blue Bell, Pa.
Delayed orders are not limited to U.S. customers, Nissel said in early November. “I got one domestic one postponed again till the spring. I got two European ones, one in France and one in Spain,” he said. “They've been put off until into next year.”
Nissel said Welex will benefit from some new packaging products, including a transparent folding box made from clarified polypropylene sheet. Consumers can see the product inside. Also, more companies are seeking quotes, “which tells you at least there's something happening.”
“Six months ago we were not doing any quoting,” he said.
Another sheet line producer, HPM, is back in business as a division of Taylor's Industrial Services LLC. Gerry Sposato, director of sales and marketing, said HPM has sold machines to medical and packaging customers. “It's been doing well. We have machines on the floor right now, and we're in the process of closing more orders,” he said.
An ample supply of good used machines has helped to depress the injection molding press market. But Sposato said that's not the case for customized sheet equipment.
“You can't find a good used piece of machinery if you're going into the large-sheet extrusion business. There's just none out there.”
On the film machinery side, Battenfeld Gloucester's business is about the same as in 2001.
“There's a lot of capacity out there that's not been absorbed to bring growth to the market,” said Robert Weeks, vice president of sales and marketing.
Film producers also are having trouble raising prices so they can make a profit — and upgrade equip-ment, Weeks said from Gloucester, Mass. “Right now people are selling capacity at cost almost, to keep the plants running.”
Once capital investment does pick up, companies will buy new machines with wider webs that can turn out more film per line, he said.
Steven Engel, president of Kiefel Inc. in Wrentham, Mass., said good global sales by its German parent company have offset the flat market in the United States and Canada. “The general level of business is low,” he said.
Quoting levels have been “sporadic,” bouncing up and down throughout 2002, Engel said. “Right now the quoting level is low,” he said in late October. “On the other hand, we have a handful of projects that are active, and our hit ratio of orders to quotes is much higher.”
Engel and Weeks both agreed that seven-layer blown film lines are becoming the standard for food packaging, instead of five-layer lines. Multilayer coextrusion will continue to drive machinery purchases, but 2003 will be a challenge.
“We still do not hear that many of our customers are going to be doing any serious investing, which means the competition for orders out there is going to be brutal, like it is now,” Engel said.
Business is good at Windmoeller & Hoelscher Corp., said Andrew Wheeler, vice president of sales at the Lincoln, R.I., company. One reason: snack foods.
“Interestingly, what the snack-food people will tell you is where there's a recession, their business skyrockets,” Wheeler said. Instead of an expensive date, the thinking goes, folks rent a movie and munch on chips or popcorn.
Wheeler said new blown film lines feature gauge controls that can boost quality dramatically and control resin usage tightly — a big selling point even if companies are running older machines at less than full capacity, he said.
John Wise, general sales manager of Ipswich, Mass.-based Reifenhauser Inc., said the company “could have a record year, which is an anomaly.”
What's the story? “We've picked up some nice business in thermoforming sheet extrusion systems for food packaging,” he said. “On the blown film side, our three-layer blown film sales have been relatively strong, going into food packaging.”
Reifenhauser also is selling lots of retrofit winders. Wide-diameter winder rolls are popular because they allow processors to make larger rolls of film, reducing the number of roll changes.
“I see new projects for new capacity, which is encouraging,” Wise said.