Hillenbrand Inc. executives said its Milacron business is facing continued pressure from the global economic slowdown, including a weak worldwide automotive market and weakness in China.
Hillenbrand reported first-quarter sales of $567 million, a total that included 41 days of business from Milacron Holdings Corp., which Hillenbrand bought Nov. 2.
Hillenbrand announced the financial numbers Feb. 6. The Batesville, Ind.-based company is traded on the New York Stock Exchange.
Hillenbrand, which already owned Coperion compounding extruders and other types of industrial equipment, as well as Batesville-brand burial caskets, made the largest acquisition in company history when it bought Milacron for $1.9 billion. Milacron's annual sales are about $1 billion. Hillenbrand generated $1.81 billion in sales for fiscal 2019, which ended Sept. 3.
President and CEO Joe Raver said Hillenbrand is focused on integrating Milacron, which makes injection molding machines, extruders, structural foam machines, hot runners and mold bases and components.
"We're excited to have closed the Milacron acquisition, which represents a major step in our transformation journey to become a world-class global diversified industrial company, and further establish Hillenbrand as a leading equipment provider across the plastics value chain," Raver said.
In the first quarter of fiscal 2020, which ended Dec. 31, Hillenbrand sales increased 38 percent over the first quarter the year before. Milacron accounted some of that gain. But costs associated with the acquisition resulted in a net loss of $3 million. Chief Financial Officer Kristina Cerniglia said Hillenbrand incurred one-time costs of about $54 million in connection with the purchase.
In a conference call with financial analysts, Raver said Hillenbrand leaders think Milacron results could improve in the second half of the calendar year, "but it's difficult to predict the timing."
Cernigila said Milacron's financial results were below the previous year, "reflecting the slowdown in the global economy. In particular, weakness in China and the global automotive end market were especially challenging for Milacron." Orders fell around 8 percent from the year-earlier period but increased 7 percent sequentially over the prior quarter, driving by North American injection molding equipment, she said.
As broader question marks remain about capital spending, Hillenbrand also faces debt from buying Milacron, and net debt at the end of first quarter was $1.7 billion. Cerniglia said the company is curtailing additional merger and acquisition activity and suspend buying back shares to pay down debt over the next several quarters.
Hillenbrand's current net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) leverage is 3.8 times. The goal is to get it down to below 2.7 times net debt to adjusted EBITDA over the next 12 months, Raver said.
Hillenbrand has retained Houlihan Lokey for advice on a sale of Milacron's Cimcool metal-cutting fluid business, with the proceeds going to pay debt.