Molding machinery demand helps drive growth at Hillenbrand

Batesville, Ind.-based Hillenbrand Inc. reported strong results for its second quarter with an 11 percent increase in sales to $722 million driven by growth in two of its three operating segments.

Higher sales for the Molding Technology Solutions (MTS) unit, which was Milacron Holdings Corp. before it was acquired in 2019, and the burial casket business offset a drop for the Advanced Process Solutions (APS) unit, which manufactures industrial equipment.

In MTS, sales climbed 28 percent, a $56 million increase to $255 million, compared with the prior-year period. The unit sells injection molding, extrusion and hot-runner equipment and aftermarket parts and service.

Burial casket sales increased 20 percent to $166 million due to deaths attributed to the COVID-19 pandemic. The increase was partially offset by more families opting for cremation. The company expects demand to decline in the second half of the fiscal year.

For APS, Hillenbrand saw equipment sales drop 3 percent to $301 million compared with the same period in the prior year. The decline was largely driven by lower large polyolefin systems sales and aftermarket parts and service revenue.

Still, sales exceeded expectations across the company, officials said in a May 5 conference call with investment bankers.

Hillenbrand's product lineup for the recycling market is a growing part of the momentum, according to Hillenbrand President and CEO Joe Raver.

"We now have solutions in chemical and solvent-based recycling in addition to our well-established offerings in mechanical recycling," he said. "This is an exciting market that we expect to grow significantly across the globe in the coming years."

Hillenbrand has a record backlog of $1.52 billion, which is up 34 percent year over year driven by injection molding demand in MTS and large plastics projects in APS.

Overall, the company's 11,000 employees "went above and beyond" during the quarter ending March 31 and the industrial units have significant momentum heading into the second half of the fiscal year, Raver said.

"We significantly strengthened our balance sheet over the past 12 months and we're now focused on investing in growth initiatives," Raver said. "We believe we remain well positioned to overcome any near-term macro challenges and are confident in our strategy to deliver profitable growth for the long term."

Raver also said Hillenbrand hired its first chief sustainability officer and will continue to simplify and focus its portfolio. He pointed to the January sale of pump technology manufacturer Abel for $103.5 million and plans to divest Terra Source Global, which makes equipment for crushing and material handling, mostly for mining and forestry applications.

About 18 months ago, Hillenbrand was doing the buying when it acquired Milacron for $1.9 billion in November 2019.

The Milacron integration, which added injection molding and hot-runner product lines, remains on track despite COVID-19 disruptions, according to company officials. They said restructuring activities reduced fixed costs, achieving synergies of $27 million in 2020 with a three-year target set at $75 million.

"We're pleased by the success of our integration and the continued rebound in demand for MTS products," Raver said, "… and we remain confident in the long-term prospects of this segment."

Increased demand for injection molding equipment, in particular, is contributing to the unit's order backlog of $362 million. That's a 93 percent increase year over year and up 24 percent from the previous quarter.

Sales of injection molding capital equipment more than doubled on strong demand from custom molders and the markets for consumer goods, medical and packaging, added CFO Kristina Cerniglia.

"Importantly, aftermarket parts and service sales improved and were higher on a year-over-year and sequential basis," she said.

APS sales fell $9.8 million, or 3 percent, because of the expected decrease in large polyolefin systems due to customer-driven delays on projects, Cerniglia said.

The business unit provides compounding, extrusion, material handling and flow control products to mostly the plastics industry but also the chemicals, mining and minerals, food and pharmaceuticals and other markets.

APS parts and service sales also dropped, but Cerniglia said the company has recently seen signs of a pickup. She expects sequential revenue growth in the second half of the year.

"Longer term, we continue to see opportunities for growth in this area as the installed base of our large systems continues to grow," Cerniglia said.

The Batesville segment manufactures and distributes funeral service products in North America, such as burial caskets, cremation caskets and urns. Hillenbrand manages it for cash and invests it to grow its industrial platforms.

"Batesville's outstanding cash flow over the last several quarters played a key role in our reducing our debt and underscores the important role it plays in our portfolio," Raver said.

The segment has a 125-year history in the death care business with strong manufacturing capabilities and long-standing relationships with funeral homes.

However, in the next quarter, sales are projected to decrease 7-11 percent year over year to a range between $125 million and $130 million.

Cerniglia said she expects a significant drop in burial demand due to a reduction of COVID-related deaths in North America. The trend should continue through the rest of the year, she added.

Cerniglia also offered near-term outlooks for the industrial segments and the company overall. She expects Hillenbrand total third-quarter sales to increase year over year in a range of 13-17 percent.

For APS, she expects growth of 18-23 percent, primarily due to strong sales from the engineering plastics, food and recycling markets.

Cerniglia also expects MTS will do much better. She projects sales growth of 23-28 percent with demand remaining strong for hot runner and injection molding product lines.

The CFO also offered her projections for fourth-quarter industrial segment sales. She expects APS sales will be up in the high single digits, resulting in single-digit growth for the full year.

"This is an improvement to the outlook we gave last quarter, driven primarily by strength of large plastics projects and growth in the aftermarket business," Cerniglia said.

For the MTS segments, the company expects year-over-year sales growth in the mid-teens and full-year growth in the high teens, which also is better than the previous outlook.

"Our outlook for the year is contingent on no prolonged shutdowns in any of our key markets due to the resurgence of COVID," Cerniglia said. "Our team has demonstrated the ability to execute through challenging circumstances. I'm confident we can continue the momentum in the back half of the year."