Continuing a difficult year, Milacron Inc. will eliminate about 300 nonmanufacturing jobs in the second half of 2003 and attempt to get its financial house in better order.
The Cincinnati company announced the layoffs during a July 29 conference call with analysts. The downsizing will affect all areas of the company, reducing employee count by about 9 percent, said Chairman and Chief Executive Officer Ronald Brown at the briefing.
The company confirmed figures it hinted at two weeks ago: It recorded a loss of $9.8 million for the second quarter. For the first six months of the year, Milacron recorded sales of $372 million but posted $99.6 million in losses.
Beyond the immediate restructuring, Milacron faces another impending challenge: A major portion of its bank debt, $115 million in notes, comes due in March. The company either must refinance the debt, possibly at a higher interest rate, or sell off some assets before March, said Chicago-based analyst Walter Liptak of McDonald Investments Inc.
The company did not provide details of how it would proceed, but it clearly is a high priority for the machinery maker. The company only has about $67 million in cash on hand and needs the bank support, Liptak said.
``Between now and the end of the year, we intend to execute on alternatives,'' Brown said. ``That's nothing more than we've said in the past. We're exploring those [to find] which ones would have the better likelihood of success.''
The company owns a spectrum of companies that could be evaluated, Liptak said. Known largely for its injection molding machinery, Milacron also makes blow molding and extrusion equipment and owns leading mold components supplier D-M-E Co. of Madison Heights, Mich.
It is not out of the realm of possibilities that Milacron could be shopped as a whole company, Liptak said. But whether a buyer would exist is another matter.
``They have to renegotiate with existing lenders and put together a deal that people want to buy,'' Liptak said. ``In a market like plastics machinery that has been down for a couple of years now, the forecasts are not strong for the second half. There's not a whole lot of visibility.''
The eliminated positions will be spread across Milacron's operating segments in North America and Europe, Brown said. The cost reductions, subject to bank approval, will generate cost and cash savings of about $20 million annually, Brown said.
However, the layoffs also will lead to charges to earnings of about $10 million in the second half of this year. Another $8 million in costs will be spread over the next four quarters.
Milacron's board of directors also decided not to pay dividends for the second quarter.
In response to an analyst's question, Brown said the firm is not concerned that the moves will cut muscle from the company. The layoffs will reduce nonproduction staff by about 15 percent, he said. No plant closings were announced.
``At this point, we feel that we have to do what it takes to become profitable,'' Brown said. ``We are not doing this to risk the future of the company. We're doing what's right in this environment.''
In the face of tough times, the company is starting to see some encouraging signs in its machinery businesses, including an increase in replacement-parts business and quoting activity, Brown added. It would take a sustained recovery in plastic part production over several quarters before the market significantly improves for equipment, he said.
The company is encouraged by new orders for machinery, totaling $84 million in the quarter, Brown said. But Milacron's North American machinery segment also lost $1.6 million in the quarter, compared with $700,000 a year ago.
Its D-M-E operations, symptomatic of a slow mold-making industry, were down by $2 million in sales for the quarter, to $43 million.