Batesville, Ind.-based Hillenbrand Inc. reported strong results for the third quarter with a 14 percent increase in sales to $695 million driven by growth in its two plastics-related segments.
The publicly traded company's other business unit — burial casket sales and death care services — saw an expected decline for the quarter ending June 30.
Hillenbrand's Advanced Process Solutions (APS) segment posted an 11 percent gain on year-over-year sales to $313 million. The APS increase was driven by an uptick in large plastics projects and higher prices set for compounding, extrusion, material handling and flow control products.
"We continue to see solid demand for both polyolefin and engineered plastic projects with record order volume in the quarter. The pipeline for new large plastic projects remains solid, particularly in Asia," Hillenbrand Chief Financial Officer Kristina Cerniglia said in an Aug. 5 quarterly earnings call.
APS equipment, which makes up 47 percent of Hillenbrand sales, is sold mostly to plastics companies in the automotive, consumer goods, chemicals, packaging and construction markets.
"Although not a significant portion of our revenue today, we continue to see strong opportunities for future growth in recycling and processed foods," Cerniglia said.
In the Molding Technology Solutions (MTS) segment, which was Milacron Holdings Corp. before it was acquired in 2019, sales were up 31 percent to $244 million with demand spread across all product lines and aftermarket parts and service.
"Sales remain strong for hot runner systems across nearly all end markets and regions with solid order volume in automotive, consumer goods and electronics," Cerniglia said.
However, the MTS segment, which makes up 31 percent of overall sales, is facing a new challenge.
"Supplier disruptions due to the ongoing chip shortage have begun to impact our ability to ship machines in both North America and India," Cerniglia said. "We anticipate this to have an impact on our fourth fiscal quarter."
Company officials say they are working with suppliers on mitigation efforts but didn't elaborate.
"We remain focused on leveraging the Hillenbrand operating model to drive sustainable operational improvements in this segment. We see significant opportunity to expand margins and improve working capital over the long term, particularly within the injection molding product line," Cerniglia said.
In the death care unit, which is reported as the Batesville segment and is managed for cash to support APS and MTS, sales dropped 1 percent to $138 million due to a decline in deaths associated with the COVID-19 pandemic. Still, Batesville sales came in higher than projected.
"Deaths were down a little bit less than we expected. Our revenues were a little higher in the burial market and there was not a huge increase in the cremation rate," Hillenbrand President and CEO Joe Raver said.
Company officials are closely monitoring the effect of COVID-19, including the rise of new variants, Cerniglia added.
"We do anticipate deaths due to COVID-19 to continue to decrease during our fiscal fourth quarter when compared to the prior year," she said.
Overall, Hillenbrand made a profit of $40 million, largely due to MTS volume growth, productivity improvements, favorable pricing, and inventory step-up charges in the prior year that did not repeat.
Hillenbrand experienced record order volume of $787 million in the third quarter, which drove the backlog to a record $1.77 billion. The order intake was led by large plastics projects in the APS unit and demand for injection molding, extrusion and hot runner equipment in the MTS unit.
Sequentially, the backlog increased 19 percent compared to the previous quarter.
Hillenbrand's sales outlook for the fourth quarter looks good with a year-over-year increase of 6-9 percent expected driven by the two industrial segments. Total quarterly revenue is projected to range from $713 million to $738 million.
The overall 2021 fiscal year outlook calls for a sales increase of 11-12 percent to $2.8 billion to 2.825 billion. APS sales are expected to go up 5-6 percent and MTS sales by 22-23 percent — with the latter led by growth in the injection molding product line and the continued strength of hot runner systems.
For Batesville, fourth quarter sales are expected to decrease 6-8 percent year over year with a drop in burials and cremations from fewer COVID-19-related deaths.
"If you look at mortalities and death in North America, really the U.S. and Canada, the rates are pretty low right now. They have been low for a while but we've seen just recently the uptick in the Delta variant," Raver said. "It's not clear how that will play out."