Milacron reports fourth quarter growth, but no uptick from tax reform

Milacron Holdings Corp. is ending the fourth quarter with $325 million in sales — a 9 percent increase over last year in the same period — citing double-digit growth in machinery and market demand from China and India.

“The fourth quarter capped off a great year for Milacron,” CEO Tom Goeke told financial analysts during a Feb. 20 conference call.

Net profit was $3.3 million in the company's fourth quarter, which ended Dec. 31. New orders for the fourth quarter were up 5 percent over last year, totaling $316 million.

The Blue Ash, Ohio-based equipment manufacturer also reported growth for 2017. Full-year sales of $1.2 billion represent a 5 percent increase vs. the prior year for the company.

“We had growth in all major regions — both for the fourth quarter and for the full year — with particular strength in China and India,” said Bruce Chalmers, Milacron's chief financial officer. “From an end market perspective, the consumer goods, electronics and construction segments grew positively in the fourth quarter and the full year.”

2017 also marked a shakeup in stock ownership for the company. Private equity firm CCMP Capital Advisors LLC, which in December 2016 owned 60.6 percent of Milacron's shares, sold the rest of its stock to Credit Suisse Securities (USA) LLC in November in a secondary stock offering. The sale marks the firm's official exit from Milacron stock ownership.

Back in 2012, CCMP had purchased Milacron for an undisclosed amount from private equity firm Avenue Capital Group, which along with three other investment firms bought Milacron out of Chapter 11 bankruptcy in 2009 for $175 million.

Milacron's melt delivery and control systems (MDCS) unit, which includes hot runners, process control systems and mold bases and components, generated fourth-quarter sales of $103.6 million compared with $101 million in same period of 2016.

For the full year, the MDCS segment had sales totaling nearly $424 million, up from nearly $390 million in 2016.

“MDCS's fourth quarter sales were down 1 percent, primarily driven by the timing of major projects during the year,” Chalmers added. “This resulted in 9 percent full-year growth driven by significant shipments in Q2 and Q3.”

Chalmers said the strong full-year growth was primarily driven by hot runners in China. Sales were also boosted by strength in end markets, such as automotive and electronics.

In machinery, sales for the fourth quarter increased 16 percent to $190.3 million compared with $160.1 in the same period a year ago. For the full year, sales totaled $689.1 million, an increase of nearly 3 percent over last year.

Packaging, consumer goods, electronics and construction all grew in the fourth quarter and for the full year, he added, “partially offset by a decline in automotive for both periods.”

“Growth in the fourth quarter was driven by all major regions, with particular strength in North America and India,” Chalmers said. “For the full year, sales were primarily driven by double-digit growth in India.”

In February, Milacron said at the Plastindia trade show that it was investing $8 million in its Ferromatik Milacron India Pvt. Ltd. subsidiary to increase the production of injection molding machines. The investment in the Ahmedabad, India, facility is partly a strategic response to the shifting of production from Milacron's plant in Malterdingen, Germany.

Spokesman Mike Ellis confirmed in January that machine production at the German plant will end in 2018, a year earlier than previously planned. Production from Malterdingen may move to existing plants in the United States and India.

“We have a great schedule, good agreement with the works council, and we're just winding orders [down] now,” Goeke said of the transition at the Malterdingen facility. “I think as we go through 2018, we're just bleeding the business out of the German site, and it's going very smoothly at this point.”

Goeke said the company has taken no further orders at the Malterdingen facility.

Milacron is starting 2018 with an order backlog of $287 million, but company executives said they are still examining the full impact of the new tax law known as the Tax Cuts and Jobs Act.

In the fourth quarter, Milacron recorded a nearly $9 million provisional tax benefit driven by the repeal of the 20 percent corporate alternative minimum tax, the revaluation of net deferred tax liabilities and withholding tax liabilities on planned cash repatriation from non-U.S. subsidiaries, the company said.

But beyond the immediate provision impact, “tax reform is not a benefit to Milacron,” Chalmers said.

“Based on our current structure, future impact of our tax provision will shorten the life of our [net operating losses] to approximately five years,” he added, citing limitations of interest deductibility and an increase in taxable foreign earnings.

Chalmers said Milacron is continuing to analyze the details of the tax law to minimize these impacts while maximizing the benefits of a lower U.S. corporate tax rate, which was cut to 21 percent from 35 percent as of Jan. 1, 2018.

Additionally, Chalmers said Milacron is “attentive” to how the tax law will influence its customers to invest in machinery.

NPE2018, where Milacron will have a display at Booth W2703 in Hall D, may boost machinery sales, but “to date, we have not seen an uptick in orders related to the tax reform,” he said.