Milacron keeps mum on Hillenbrand deal in second quarter results

Executives at Milacron Holdings Corp. remained tight-lipped on any new details regarding the July 12 announcement that Hillenbrand Inc. is buying the company.

Milacron President and CEO Tom Goeke told analysts July 30 in a second quarter earnings call that the company would not be taking any questions related to the transaction.

The blockbuster cash and stock deal is valued at about $2 billion, including net debt of approximately $686 million, and is expected to close in the first quarter of 2020 if approved by Milacron shareholders.

"Our board carefully and thoroughly reviewed the strategic and financial merits of this combination and unanimously concluded that this transaction represents a unique opportunity for Milacron," Goeke said during the conference call.

As part of the merger, Milacron shareholders will receive $11.80 in cash and a fixed exchange ratio of 0.1612 shares of Hillenbrand stock for each share of Milacron stock they own. Under terms of the agreement, Hillenbrand shareholders will own approximately 84 percent of the combined company and Milacron shareholders will own about 16 percent.

Both companies are traded on the New York Stock Exchange.

Shares of Milacron opened at $16.83 and were trading down 0.36 percent to $16.73 during morning trading hours. Hillenbrand shares opened at $34 and were trading down 1.2 percent at $33.70. Overall trading on the stock exchange was slightly down for the morning hours on July 30.

"In Hillenbrand, I believe we have found a tremendous partner," Goeke said. "Our goal at Milacron has always been to provide our customers with innovative products across our critical plastics and fluid technologies. Together with Hillenbrand, we will be able to continue delivering breakthrough products and customized systems to existing and new customers, and strengthen our service platforms and distribution capabilities."

Hillenbrand, based in Batesville, Ind., is the parent company of compounding extruder maker Coperion and auxiliary equipment firms K-Tron and Rotex. It is also the manufacturer of burial caskets under the 100-year-old Batesville Casket brand. Hillenbrand went public in 2008 and has been diversifying into industrial machinery.

In other news, Milacron reported second quarter sales of $271.4 million, a decrease of 10.6 percent from sales of $303.6 million in the same period a year ago. Compared with the first quarter of 2019, sales were up about 9 percent.

Net profit, including the loss from discontinued operations, was $4.1 million. Operating profit slumped by 33.3 percent to $23.8 million compared with the same period last year.

Goeke said the second quarter of 2018 was a record quarter for the company, creating a tough year-over-year comparison.

"As previously discussed, 2018 was best characterized as 'a tale of two halves,' with very solid growth in the global economy during the first half of the year and the introduction of policy-generated headwinds in the second half that have carried into 2019," Goeke said.

Those headwinds include tariffs and global trade tensions that have clawed at China's economy and clipped into Milacron's results. But despite the uncertainty, Goeke said the second quarter results are "in line with our expectations," and he is optimistic the second half of the year will show improvement, as it did in 2018.

"It's definitely tough," he said of the current environment. "We're slugging it out. And part of it is winning new customers, part of it is new product development launch, and then the balance is recurring business."

New orders of $235.7 million declined 26.4 percent in the second quarter of 2019 compared with $320.1 million in the prior-year period.

Goeke, answering a question from an analyst, attributed the slip to a delayed payment schedule from machinery customers in North America and India that should flow into the third quarter. It is "no loss of orders," he said.

The Melt Delivery and Control Systems Unit, which includes hot runners, mold bases, components, parts service, retrofit and remote monitoring, fell about 16 percent to $103.9 million of sales in the second quarter compared with the prior-year period.

Within the unit, its Mold-Masters brand of hot runners and process control systems posted increases in orders from the first quarter of 2019 in nearly all end markets, but primarily driven by electronics, medical and packaging, the company said.

The machinery segment, called Advanced Plastic Processing Technologies, reported second quarter sales declined nearly 5.5 percent to $137.9 million from 2018's second quarter sales of $145.9 million.

Earlier this year, on July 1, Milacron completed the nearly $52 million sale of its Uniloy blow molding machinery business to two private equity firms, Osgood Capital LLC and Cyprium Investment Partners LLC. The business, formerly a part of the APPT unit, is now considered a discontinued operation. The $52 million was applied toward a debt repayment totaling $57 million.

Geographically, in net sales, the company reported "strong sequential improvement" in both North America and China in the second quarter, according to Bruce Chalmers, Milacron's chief financial officer.

"From an end-market perspective, packaging, construction and medical all did well in the quarter both vs. prior year and sequentially," he said.

Second quarter orders in China, specifically, increased in all business segments, including Fluid Technologies, which has the Cimcool product line of fluids for metalworking. Sales in the unit were $29.6 million compared with $33.6 million in the same period a year ago — a decrease of nearly 12 percent.

"As a reminder, we based our 2019 annual guidance on the assumption that the policy-induced trade headwinds subside midyear and create a dynamic that is the opposite of [fiscal year 2018], with some sequential weakness in the first half and a stronger second half," Chalmers said. "Thus far, we are tracking with these expectations and remain attentive to the inflection points underpinning our forecast for the remainder of the year."