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October 25, 2018 02:00 AM

Milacron reports higher profit, rebounding orders

Bill Bregar
Senior Staff Reporter
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    Milacron's Tom Goeke addresses the media at the company exhibit at NPE2018.

    Milacron Holdings Corp. CEO Tom Goeke said U.S. machinery customers delayed orders earlier this year, “waiting to see where the dust settles on tariffs.” But in a third-quarter conference call, he said orders are back to normal now.

    “Coming out of the second quarter and into the third quarter, buying in America was disrupted,” Goeke said. He told financial analysts that plastics machinery typically sees a delay in orders after an NPE trade show — which was held in May this year — and then it ramps up again. But this year, customers held back even after the big U.S. show, he said.

    Goeke said U.S. orders returned to normal levels in September and that has continued in October.

    Goeke also disclosed that Milacron has exited the market for PET preform injection presses.

    Milacron reported its third-quarter results Oct. 25. The company's sales were $308.3 million in the third quarter, a 2 percent decline from $314.7 million in the year-earlier period. Sales for the first nine months grew by 4.1 percent, to $946.8 million, from $909.3 million in the first nine months of 2017.

    The new-order picture was not as good. New orders declined by 16.4 percent in the third quarter, to $269.6 million, and by 4.7 percent in the first nine months, to $937 million, from the prior-year periods.

    Even as orders weakened, Milacron improved its bottom line. The machinery maker generated net profit of $14.9 million in the third quarter of 2018, up 2.6 percent from $12.3 million in the first quarter of 2017. And through the first nine months, the company reported $35.7 million in net profit, vs. a loss of $2.2 million in the same period a year ago.

    “Milacron continued to execute on its long-term growth initiatives and delivered another solid quarter including solid sales, continued margin expansion and free cash-flow generation,” Goeke said. “These results are in spite of the continued geopolitical uncertainty the U.S. tariff initiatives have introduced to our global end markets.”

    Milacron is making voluntary debt payments, restructured some of its operations, and continued its move to focus on consumable industrial items — such as hot runners, DME mold components and aftermarket parts and service. In the third quarter, consumables accounted for 65 percent of total sales, Goeke said. He added that Milacron now generates about 75 percent of its profit from consumables.

    Those moves give Milacron financial and operational flexibility “and the company is in a much better position today to better manage changing market conditions,” he said.

    Milacron executives also told financial analysts the company is considering buying back shares on the New York Stock Exchange.

    Analysts asked about how Milacron is impacted by U.S. tariffs in Chinese goods, and the slowing growth in the overall Chinese economy — a big market for plastics machinery.

    Goeke said tariffs could slow the internal Chinese economy, hitting sales of plastics machinery and other industrial products for “China for China.” But he said past experience has shown that China can rebound very quickly.

    And Goeke said North American orders should remain strong, as work returns from offshore.

    “Because of the tariffs, there are mold makers who build products for other regions, in particular where U.S. customers are making decision whether they're reshoring or they will continue to leave molds in China. There are a number of customers that have decided to relocate [to North America],” he said.

    Looking at business by segment, Melt Delivery and Control Systems experienced flat sales in the third quarter, but a 23 percent gain in the first nine months of 2018, compared to the first months of 2017.

    Plastics processing machinery — formally named Advanced Plastic Processing Technologies — grew by 5 percent in the third quarter and was flat for the first nine months, compared to the same periods a year ago.

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