AKRON, OHIO (Nov. 24, 10 a.m. EST) — From “slow and spotty” to “lively,” the state of extruder machinery is as diverse as the sector's end markets — but most executives expect their companies to ride an improved U.S. market into 2004.
Packaging, a mainstay during the difficult manufacturing recession, held up all year and got stronger late in the year, officials said.
Other markets were weaker, but business seemed to pick up in the second half, officials said.
In construction — a key market for extruders to make siding, windows and pipe — the bad news is the red-hot market for new-home construction should finally slow down. The good news? Economists think the $234 billion remodeling market will enjoy solid growth in 2004.
Plastics News reported on several expansions this year, including a project to double capacity at Westech Fence and a new plant for Dayton Technologies LLC to make wood-plastic composite decking and railing sold by Alcoa Home Exteriors.
The Federal Reserve Board delivered the best news of all for construction, when it pledged to keep interest rates low even as the economy recovers. Low rates also should help machine sales.
Vinyl siding, windows, decking and fencing are still solid.
“Siding has had some of the best months for a long time,” said Josef Marek, president of American Maplan in McPherson, Kan. Maplan is running the highest level of quotations in several years. “So if the hit rate is normal, it should be a good year,” he said.
Marek said some extrusion companies that serve hot construction markets are busy. “What I'm seeing now is the utilization of the plants is pretty high: They are about 80 percent, and some are even at 100 percent. So I'm optimistic for 2004,” he said.
At Krauss-Maffei Corp., Hans-Jurgen Matthesius, vice president for the extrusion division, said vinyl windows continue to grow, taking market share from wood and aluminum.
“Expansion is still going on, which is good for us,” he said. “Siding was surprisingly strong for us this year. I didn't expect that. I thought siding would be a commodity market, but it became pretty strong.”
But the U.S. pipe market is not ordering machines. Matthesius said that tight budgets at state and local governments don't allow for spending on needed infrastructure like water and sewer pipes, which would give the industry a boost.
Overall, he said: “I have seen better years, but in general, the activities are increasing. We have done pretty well considering the economic conditions,” he said from the company in Florence, Ky.
The strong remodeling business has helped Milacron Inc. in extrusion, according to Glenn Anderson, director of sales for the Cincinnati machinery maker. Milacron sees interest from processors making window profiles, siding and pipe.
“There are more projects looming. Certainly the activity is there, and our customers are healthier than they have been,” Anderson said. “The wood composite business continues to do well for us.”
Jerry Berlyn, owner of Berlyn Extruders Inc. said his “gut feeling” is 2003 marked the bottom of the U.S. machinery business. Last year, customers were waiting for the other shoe to drop — another act of terrorism on U.S. soil. “This year they have confidence that the world is not going to come to an end, and they're getting on with their lives. They're beginning to put some projects in the pipe,” he said.
“Our year 2003 has been very soft. But I see the sleeping giant is wiggling its big toe,” Berlyn said from the company in Worcester, Mass.
Sales rose by 20 percent at Merritt Davis Corp., according to Sandy Guthrie, president and chief executive officer of the Hamden, Conn., extruder maker. A year ago, the market did not have a lot of direction. “Demand is coming back at a reasonable level. We'll be able to plan again,” he said with a chuckle.
Late in the year, Guthrie said his business is approaching a level not seen in four years, part of it from year-end spending.
“Though margins were a little bit slimmer, there was growth nonetheless,” he said. “We are seeing the market right now very lively, with people buying machines and wanting short delivery.”
Processing Technologies Inc. got a big order for an undisclosed number of six-layer sheet lines for Visteon Corp.'s thermoformed gas tanks, a groundbreaking automotive achievement. President Dana Hanson said PTI also is selling sheet lines for PET and polypropylene packaging. In wood flour, PTI has developed equipment to make sheet, a new market for that material.
PTI of Aurora, Ill., does not release sales, but Hanson said sales increased this year by 15 percent over 2002, which was a record year. The company currently employs 60 people, and Hanson said he plans to hire 10-20 employees next year.
“We've been fortunate, because of our diversity and our markets have been solid,” he said. “Our backlog is solid going forward. Our pipeline for quotations is bigger than it's ever been. From our perspective, the market conditions look like they're stable and good.”
An agreement announced at NPE 2003 between PTI and Bruckner Formtec GmbH, a German company that makes machinery for thin-gauge packaging film, has opened new global markets for PTI, Hanson said. Through Bruckner, PTI got an order from Russia for a PET packaging sheet line, and an order from China for lenticular sheet used in billboards.
American Kuhne Inc. also has boosted employment. A year ago, the company in Norwich, Conn., was predicting a modest sales gain in 2003. Instead, said David Citron: “We had an explosion of orders starting on Jan. 2 of this year.”
The hot markets were extruders for medical products and multilayer tubing for automotive and industrial applications. “All the projects we had been working on for two years, really came through in the first half of this year,” said Citron, director of sales and marketing.
American Kuhne also sees strong demand for complete systems.
Davis-Standard Corp., part of publicly traded Crompton Corp., has reported an operating loss in 2001 and 2002. Through the first nine months of 2003, sales of $120 million are down 8 percent from the same period in 2002 — but Davis-Standard is in the black, turning a profit of $1.7 million. Last year through the first nine months, the company had lost $9 million.
Interviewed Nov. 7, Davis-Standard President Robert Ackley attributed the black ink to cost cuts and a move toward higher-growth areas such as packaging. “The economy still hasn't done much for us,” he said from Davis-Standard headquarters in Pawcatuck Conn.
“Packaging is still in high demand, food packaging and every other kind,” he said. “But at the same time, some of the other markets are softer.” Davis-Standard also rolled out its Super Blue line of lower-cost single-screw extruders, using a standardized, modular design.
Overall, Ackley is optimistic that the nasty machinery downturn should be over in 2004. “We may have another slump here and there, but I do think by the middle of next year, we should be on more solid footing,” he said.
China is a hot market for Welex Inc., which makes sheet extrusion lines in Blue Bell, Pa. “We're selling like crazy in China,” President Frank Nissel said. “And I'm seriously, quite honestly, looking at putting a plant into China.”
Nissel called the U.S. market “very spotty,” adding: “Here and there we sell something. We're keeping alive. Food packaging is doing well. That's where it's all going.”
Nissel said Welex has received requests for loads of quotes in the last three months. “This is a good sign … People are talking about plans, but orders are still slow coming.” Big U.S. packaging companies seem to be fine-tuning their machines to get maximum production before ordering new sheet lines, he said.
At HPM in Mount Gilead, Ohio, “packaging has been a solid market over the last two or three years,” said Gerry Sposato, director of sales and marketing. Other growing areas include wood-flour profiles for construction and automotive products.
HPM is a division of Taylor's Industrial Services LLC.
Executives at two smaller extruder makers also are polishing their crystal balls. They like what they see. Harrel Inc.'s president, Holton Harris, said business is down. “But there's light at the end of the tunnel” at the maker of specialty extruders for medical tubing and other markets. The company in East Norwalk, Conn., keeps pushing new technologies, such as a fully automatic “lights out” system that extrudes tubing and handles product takeoff—and can shut itself down if something goes wrong.
“This has been done in injection, but nobody's been doing it in extrusion,” Harris said.
Thomas Allen, president of Diamond America Corp., in Tallmadge, Ohio, said signs look good for the new year. “All indications I have is, the projects we are quoting seem to be real and have time frames on them. And they're good-sized projects,” he said.
Food packaging indeed may be recession-resistant, but that does not mean every packaging company is ready to shell out the hundreds of thousands of dollars for a new blown film or cast film line — at least not in the United States.
Business is “unbelievable” in China for Battenfeld Gloucester Engineering Co. Inc., according to Brian Marvelley, president and chief executive officer.
What about North America? Marvelley echoed several other film equipment executives who said business started to grow only in recent months. “North America was, for the first eight months, pretty flat relative to last year,” he said. “And then towards the end of the summer months, there was a visible pickup. It's certainly not what you would call a rebound in the sense that we've reached astronomical levels, but it's certainly improving. It's taken the gradual improvement that everybody is expecting for the rest of the economy.”
Most blown film equipment for food packaging now centers on five- or seven-layer lines, he said, although Battenfeld Gloucester goes up to nine layers. Machines to the Far East typically have three layers.
For 2004, Marvelley is cautiously optimistic that will continue. “We are not looking for the thing to take off like a racehorse,” he said.
The old “cautious optimism” also applies to David Nunes, president of Hosokawa Alpine American in Natick, Mass. “It's been really slow for the last two years, and I would say the outlook from NPE to now has been improving in a number of different markets. We're seeing much more quotation activity and certainly more prospects for an improving market,” he said.
But then Nunes says how he hates that phrase, “cautious optimism.” What he'd really like to see is a break in the relentless pricing squeeze, which goes by another buzz-phrase: “Taking cost out of the supply chain.”
Allow Nunes to sound off: “There's nothing left to squeeze. We're at the bottom and now we have to get back to partnering with suppliers and not just getting every last penny that's left. Because there isn't anything that's left.”
Nunes agrees it has been a buyer's market, but warns: “You can only sustain falling prices for machinery for so long.”
Nunes and other machinery executives who sell to U.S. customers is closely following the anti-dumping complaint filed against the flood of cheap imported bags from China, Malaysia and Thailand, by the Polyethylene Retail Carrier Bag Committee. “This could have a significant impact on the machinery industry and the overall film market,” he said.
Meanwhile, at Brampton Engineering Inc. sales increased by double-digits this year, said Bud Smith, president and chief executive officer. Customers are seeking quotes and should continue to place orders in 2004, he said.
“Factory utilization is getting higher and they've deferred capital expenditures. Now they're facing a shortfall to meet their customers' needs,” Smith said.
The company in Brampton, Ontario, displayed a nine-layer film die during NPE. Smith said the food market continues to be strong as flexible containers, like pouches, win market share from rigid ones.
Paul Conley said Macchi North America also likes the zipper pouch. “It's steady and it's consistent. There's always something that can be put into a plastic pouch or bag,” he said.
Based in Burlington, Ontario, the North American operations of Italy-based Macchi srl opened in late 2000. This year at NPE 2003, the company ran a three-layer blown film line at NPE.
“Things seem-ed to have bottomed out. I'm seeing a lot more interest,” Conley said, attributing some of that to Macchi's NPE exposure.
In Italy, Macchi is building five seven-layer lines, all for European customers.
Reifenhauser Inc. of Ipswich, Mass., said business this year “has been surprisingly strong,” according to John Wise, general sales manager. The company's blown film business has been “just so-so,” but sheet extrusion lines for food have sold well.
On the food film side, Wise said Reifenhauser is waiting to see if long-delayed projects come through next year. “At this point, we're encouraged,” he said.
Black Clawson Converting Machinery LLC changed ownership earlier this year, as Carl Landegger sold the maker of cast film and extrusion coating machinery to a management team led by Mark Panozzo. He business has picked up in the last three months, after a “somewhat disappointing” beginning of the year.
The company in Fulton, N.Y., has sold extrusion coating machines to make window coating and film for graphic arts.