Milacron Inc., the largest U.S. plastics machinery maker, expects to record modest losses in the first half of this year, before returning to profitability in the second half - breaking even for 2003 - Ronald Brown, Milacron's chairman and chief executive officer, said Feb. 11.
Brown answered questions from analysts who were digesting Milacron's fourth-quarter and full-year 2002 financial results. Investors are getting more-detailed information about Milacron's plastics machinery operations, as the company broke out North America and Europe and gave separate financial information for D-M-E mold technologies.
But more information does not mean Brown's crystal ball is in sharp focus. ``We have still not seen any strong signs of a recovery, at this time,'' he said. Milacron officials are not counting on a strong pickup in business this year, he said.
Milacron continues to ``focus on areas we can control, namely cost reductions, efficiency improvements and better working-capital management,'' Brown said. Negative factors outside of the company's control include the economy, higher insurance costs and a decline in pension income.
Milacron announced some good news: After losing money in 2001, its key North American business turned an operating profit in 2002. The company credits its restructuring, cost-cutting moves and an improved fourth quarter.
After selling off all of its metalworking-products business except for industrial fluids, the Cincinnati company now is dedicated almost entirely to plastics machinery and mold components. More than 85 percent of its total sales now come from plastics.
Industrial fluids is the only segment that saw sales increase in 2002. The plastics-related segments - machinery in North America, machinery in Europe and D-M-E - all saw sales decline for the year.
Capacity utilization remains below 80 percent for plastics processors, Brown said. Machine sales typically pick up when utilization hits 85 percent, he said.
Brown said medical, packaging and automotive customers are buying machines. Automotive model changeovers are generating orders and medical molders are expanding globally, he said.
Analysts pressed Brown for leading indicators - any signs that could point to a future recovery.
``No, there is nothing that would indicate that there are a lot of orders hanging out there,'' Brown said.
Brown did say Milacron is giving more quotes. But he added: ``I wouldn't say that we're seeing any positive signs until we see the actual purchase order.''
In 2002, Milacron generated total sales from continuing operations of $693.2 million, down 8.2 percent from $755.2 million in 2001. The company reported a net loss of $222.9 million, but nearly all of that came from a big $187.7 million write-down of impaired goodwill after taxes, $16.8 million in losses from discontinued operations on the metalworking side and $8.8 million worth of restructuring charges.
Looking only at continuing operations, Milacron did eke out a tiny operating profit of $600,000 for 2002, after posting an $11 million operating loss in 2001.
Total plastics technologies sales declined 10 percent, to $597.2 million, from $662.4 million in 2001. But moves to increase efficiency and cut costs helped the plastics-related businesses turn an operating profit of $5.2 million for 2002; it lost $10.5 million in 2001.
For the full year, North American machinery operations and D-M-E made a profit, while machinery in Europe lost money.
Here is a breakdown by segment:
Machinery technologies North America reported 2002 sales of $313.6 million, a 13.3 percent drop from 2001 sales of $361.7 million. Milacron's most important region reported a profit of $8 million, after losing $13.5 in 2001.
Machinery technologies Europe generated 2002 sales of $117.4 million, down 4.24 percent from the year before. Europe lost $8.1 million in 2002 and lost $9.1 million in 2001.
Mold technologies, which includes D-M-E and maintenance, repair and operating suppliers, was reported in worldwide figures. Milacron said that segment generated $174.7 million in 2002 sales, down 5.4 percent from 2001 sales. Mold technologies generated profit of $5.3 million, down significantly $12.1 million in 2001.
For the total plastics technologies operations, new orders were $607 million in 2002, down from $629.2 million in 2001.
Brown said Milacron strengthened its balance sheet in 2002 by reducing debt by more than $300 million from selling its metal-cutting products operations and generating cash from operations. The banks have amended Milacron's revolving loan package, giving the machinery maker ``relaxed'' covenants through 2003. Milacron said it faces no significant debt repayment obligations until March 2004.
The company also holds $122 million in cash. Responding to an analyst's question, Brown defended holding that much cash as a way to provide liquidity to get Milacron through the difficult economy.