Barnes Group Inc.'s bottom line took a $96.7 million tax reform hit in the fourth quarter of 2017, but companywide sales were strong, and the company's hot runner sales reached record levels, President and CEO Patrick Dempsey said.
“Molding Solutions sales increased 25 percent over last year's fourth quarter, while organic sales grew in the mid-teens. Another solid quarter to cap off an exceptional year. Many of the brands in this portfolio — Synventive, Thermoplay and Priamus — all had record sales. While Manner was very close to a record,” Dempsey said.
Barnes, based in Bristol, Conn., and traded on the New York Exchange, announced its fourth quarter and full year 2017 results on Feb. 16. Since buying Synventive in 2012, the company has been building a group of plastics-related companies in the Molding Solutions unit.
Hot runners are a key area. “As we exit 2017, we anticipate program launches continuing to support for hot runner growth in Europe and Asia. Though after a strong 2017, we'll be watching the U.S. market for signs of leveling demand,” Dempsey said in a conference call with financial analysts.
He said the backlog for Molding Solutions is stronger than it was going into 2017. Barnes is forecasting growth of mid-single digits for the plastics group in 2018.
Barnes bought Foboha, the rotating cube mold maker, in 2016. Dempsey said Foboha had low margins in 2017, which officials expected. Margins have recently been strengthening. “Detailed plans are being worked on a number of fronts to improve its profitability, including the recently completed restructuring of our Swiss operations, he said.
In its second-quarter 2017 filing, Barnes announced it was closing the Foboha mold plant in Muri, Switzerland, and moving the work into other facilities, including an Otto Manner factory in Au, Switzerland.
“We are predicting Foboha to contribute nicely to Molding Solutions in 2018.” Dempsey said.
Molding Solutions is accounts for about a third of sales at in the Industrial business segment. The Industrial group generated $973.9 million sales in 2017, an 18.2 percent increase from 2016 sales of $824.2 million.
In response to an analyst's questions about mergers and acquisition activity, Dempsey revealed that Barnes walked away from a deal in Industrial segment in the fourth quarter. He gave no details.
Barnes also is a global aerospace manufacturer.
Companywide, Barnes generated sales of $1.43 billion in 2017, up 16.7 million from $1.23 billion sales in 2016. But net income for the year fell 56.2 percent, to $59.4 million, or $1.09 per diluted share. In 2016, the company generated net income of $135.6 million.
The U.S. tax reform package negatively impacted the fourth quarter, when Barnes lost $59.2 million. Barnes reported a one-time charge of $96.7 million because of the tax cuts, including a mandatory deemed repatriation on non-U.S. earnings, and a preliminary charge of future repatriation. Barnes also had a reduction on its deferred tax asset position, based on the 21 percent U.S. corporate tax rate under the tax reform.
But the results were much better when reported on an adjusted basis, excluding the effect of tax reform, said Christopher Stephens, senior vice president and chief financial officer. For the full year, adjusted earnings per share was $2.88, up 14 percent from 2016, he said.
Operating profit was $210.3 million, an increase of 9.4 percent from the 2016 total of $192.2 million.
Dempsey was optimistic. “Looking ahead, our businesses are further positioned to benefit from a strong economy,” he said. He added that officials “feel very positive about the upcoming year.”