Milacron IPO timed to benefit from improving machinery sales

UPDATED — Fresh off an NPE show where the company made a big splash, Milacron LLC — the largest U.S. plastics machinery company — has announced plans for an initial public offering.

The Cincinnati-based company on April 3 filed a Form S-1 with the U.S. Securities and Exchange Commission disclosing plans for an IPO on either the New York Stock Exchange or NASDAQ Global Market.

The company plans to raise an as-yet undisclosed amount of money for general corporate purposes, including repayment of outstanding debt. Milacron's private equity owner, CCMP Capital Advisors LLC, will continue to own more than 50 percent of the voting shares in the company, according to the S-1 filing.

For Milacron, an IPO would mark a return to the stock market. Milacron had been traded on the NYSE for years, until the stock exchange delisted the company in 2008, and the machinery maker moved to over-the-counter trading as the Great Recession slammed sales. Avenue Capital Group and other private equity firms took the company private after Milacron filed for Chapter 11 reorganization in 2009.

The economy — and plastics machinery sector — has rebounded strongly since the recession.

CCMP Capital Advisors bought the company in 2012. CCMP, which owned 78.8 percent of outstanding common stock at the end of 2014, will occupy three seats on the board of directors of the publicly traded Milacron, according to the S-1.

Milacron describes itself as a global leader in the $27 billion plastic technology and processing industry.

“We are the only global company with a full-line product portfolio that includes hot runner systems, injection molding, blow molding and extrusion equipment,” the company said in the S-1. Milacron has “strong market positions across these products,” as well as leading positions in process control systems, mold bases and components, maintenance, repair and operating supplies for plastics equipment.

Milacron claims leading market shares in several key products:

• No. 1 in plastics processing equipment in North America.

• No. 1 in injection presses in India.

• No. 2 in hot runners globally. That includes No. 1 positions in North America and Europe, and No. 2 in Asia.

Milacron generated 2014 sales of $1.211 billion, according to the S-1. The company posted adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $198.5 million, and adjusted net income of $74.5 million, but a net loss of $14.9 million.

That compares to 2013 sales of $1.028 billion. Adjusted EBITDA for 2013 was $161.6 million, adjusted net income was $57 million and Milacron posted a net loss of $24.7 million in 2013.

 The company employs more than 5,000.

Sales breakdown

The majority of the company's sales are from plastics machinery — what the company calls its Advanced Plastics Processing Technologies unit. That business generated 2014 sales of $675.8 million, compared to $406.7 million for Melt Delivery and Control Systems, which includes hot runners.

Milacron leaders estimate the company has more than 40,000 machines and over 140,000 hot runner systems installed around the world.

Milacron said it has 27,000 customers, and said it has achieved significant growth since 2012 through acquisitions and capacity investments in China and India.

Although Milacron lost money in the three years covered by the S-1, the company said it has been making significant investments in low-cost manufacturing overseas, which will help drive improvement in its profit margin over the next three years. The expanded overseas manufacturing will serve both local sales and export business, the company said.

And Milacron has broadened its portfolio in the past few years — boosting its “consumables” business by acquiring hot runner major Mold-Masters, Kortec, a specialist in coinjection systems for barrier layers, and Tirad European mold bases, since 2012. Milacron already owned DME, a maker of mold bases and mold components. In the S-1, Milacron said products like hot runner systems and mold bases need to be replaced every one to five years. Injection molding machines have a replacement cycle of 15 to 25 years, the company said.

The company also cited its "One Milacron" initiative, which it highlighted at NPE 2015 in Orlando, Fla., as a way of leveraging its diverse global capabilities.

Opportunities for growth

While the company has benefited from a rebound in machinery sales since the Great Recession, according to the S-1 Milacron expects to see additional growth thanks to pent-up demand.

“We believe that many processors deferred investment in new equipment in the United States in the decade from 2000 to 2010 as they invested in emerging markets and delayed replacement during the 2008-2010 recession,” the company said in the S-1.

“Since 2010, many customers have reinvested in their North American plants due to rising demand and the improved competitiveness of North American manufacturing. We believe much of the equipment purchased in the 1980s and 1990s is now nearing the end of its useful life, and the plastic processing industry will experience sustained growth as customers begin to make significant investments in machinery and equipment due to strong plastic demand, lower resin costs and a more robust manufacturing environment.”

Citing the U.S. Federal Reserve Board, Milacron said the average age of plastics processing equipment was 12 years as of 2013.

Milacron cited several markets as being particularly promising, including automotive and construction.

“In 2014, we experienced a 14.1 percent increase in sales of extrusion equipment and tooling compared to the prior year, which reflects the continued recovery in the residential and non-residential construction markets.”

Return to Wall Street

For Milacron an IPO actually will mark a return to the stock market.

The company's history dates back to 1860, when it was founded as Cincinnati Screw and Tap Co. — it was officially incorporated in 1884. The metal milling company entered the injection molding machinery market in 1968, and was renamed Cincinnati Milacron in 1970.

The company filed for Chapter 11 reorganization during the depths of the Great Recession in 2009. It was purchased by a private equity firm Avenue Capital Group, then sold to CCMP Capital Advisors, its current owner, in 2012.