US machine shipments continue recovery in third quarter

Machine builders have been busy meeting increased demand amid a pandemic that poses unprecedented challenges but has brought many new opportunities.

Shipments of primary plastics machinery from reporting companies to U.S. injection molders and extruders reached a value of $306.7 million in the third quarter, which is 4.6 percent higher than the same period in 2019, according to Plastics Industry Association's committee on equipment statistics.

Compared with the second quarter of 2020, when the spread of COVID-19 brought much of the world to a halt, the shipments value of primary machinery jumped 15.8 percent.

For single- and twin-screw extruders, the value of shipments grew 27.4 percent and 17.5 percent, respectively, in the third quarter vs. the second quarter. Shipments of injection molding equipment were up 15 percent sequentially and 7.9 percent above the third quarter last year.

Perc Pineda, chief economist for the Washington-based trade association, said the quarterly 2020 numbers reflect more than the machine builders' rapid response to soaring demand from consumer products that protect health.

"The double-digit increases in the third quarter are in sync with the quicker-than-expected turnaround in other plastics end markets in addition to health care and consumer essentials," Pineda said in a news release. "Most likely, shipments of machinery will also increase in the final quarter of 2020 as the economy continues to recover."

The committee also surveys plastics machinery suppliers every quarter about present market conditions and expectations. In the coming quarter, 76 percent of respondents expect conditions to either improve or hold steady compared with a year ago. That's a sharp rise from the second quarter, when only 36 percent of respondents felt similarly.

As for the next 12 months, 89.8 percent expect market conditions to be steady-to-better, which is significantly above the 48 percent in the previous quarter's survey.

"It appears that the second quarter was the trough of the business cycle, as the economy slowed due to the pandemic," Pineda said. "Recent data point to an industry that's moving towards the pre-COVID-19 level of activity. The industrial production index on plastics products manufacturing rose for five consecutive months through September."

The plastics industry is essential and businesses stayed open to ensure uninterrupted supply for products in the health care sector, Pineda added.

"The pace of economic recovery, however, is not without risks, and its path will depend to a great extent on the containment of the coronavirus," he said. "Nevertheless, the overall outlook for plastics machinery and the industry has turned more favorable in recent months."

Joe Raver, president and CEO of Hillenbrand Inc., talked about machinery demand for the Batesville, Ind.-based company during a fourth-quarter conference call on Nov. 12. Hillenbrand posted sales of $694 million — an increase of 43 percent compared with the prior year — primarily driven by the November 2019 acquisition of Milacron for $1.9 billion.

"In the Molding Technology Solutions segment, hot runner systems orders continue to improve as demand for medical products and electronics remained strong. And in injection molding, we saw strengthened orders, both in India and North America, as order activity picked up in consumer goods, packaging, automotive and construction," Raver said.

The publicly traded company has a portfolio of industrial businesses, including compounding extruder maker Coperion and auxiliary equipment firms K-Tron and Rotex, which are in the parent company's Process Equipment Group.

Hillenbrand finished the fourth quarter with the best order rates and backlog for injection molding in more than two years, according to Raver.

"As we alluded to on our last call, we booked more than $100 million in new, large-scale plastics projects in the fourth quarter. These orders contributed to record backlog in the segment," Raver said.

The order backlog of $988 million increased 5 percent sequentially and finished 14 percent higher than the prior year, according to Kristina Cerniglia, Hillenbrand senior vice president and chief financial officer. Large plastics projects comprise more than half of the current backlog, she added.

"These projects are expected to contribute to revenue over the next several quarters, including about 28 percent of the backlog expected to convert to revenue beyond the next 12 months," Cerniglia said. "The strong backlog and the growing installed base it signifies is a positive indicator for opportunities in both feature capital projects and higher margin aftermarket parts and service."

Still, amid all the uncertainty, Hillenbrand only gave guidance for the first quarter of fiscal 2021 and it assumes stability in the global economy without any broad-based COVID-related disruptions. Overall, Hillenbrand expects total first-quarter sales to decrease year over year in a range of 1 percent to 4 percent while at the same time it forecasts strong margin performance across its three segments.

As for overall industry machine sales outside the U.S., plastics machinery exports in the third quarter totaled $298.8 million, which is a 3.4 percent increase from the previous quarter, according to the Plastics Industry Association.

Imports rose by 16.2 percent to $754.6 million, resulting in a $455.8 million trade deficit, which is 26.4 percent larger than the previous quarter.

Canada and Mexico remained the top export markets for U.S. equipment suppliers in the third quarter. The combined exports to the United States, Mexico and Canada trade partners totaled $124.5 million, representing 41.7 percent of total U.S. plastics machinery exports in the third quarter.