Milacron: North American processors stringing out investment plans

Photo by Caroline Seidel Milacron Holdings Corp.'s production of Klear Cans at its K 2016 booth.

Milacron Holdings reported solid growth in orders for the third quarter, sales gains in hot runners and growing machinery business in Europe, India and China. But equipment customers in the company’s biggest market, North America, are stringing out investment decisions, CEO Tom Goeke said in a 1 November conference call.

Overall, Milacron said “the sluggish macroeconomic conditions that have limited growth during the first nine months of 2016 will continue to impact the fourth quarter.”

Goeke also said Milacron spent $2.5m (€2.5m) to $3m (€2.7m) for its exhibit at K 2016.

Companywide, Milacron reported third quarter sales of $292.2m (€263.5m), down 0.2%, and when measured on a constant currency basis, up 0.8%, over the year-ago third quarter.

New orders in the third quarter increased to $284.3m (€256.6m), up 3.3% (4.3% in constant currency) — about the same rate of growth for the first nine months.

Goeke said that solid order environment is giving officials “better visibility” for the first half of 2017. Also, the company has 25% more backlog in orders scheduled to ship in 2017 than at this point a year ago.

“It’s a great backlog to have,” he said.

But it’s taking more time to convert orders into sales, Goeke told financial analysts. Those longer-term projects, and resulting variability in delivery dates, has caused some “lumpiness” when comparing results from quarter to quarter, he told analysts.

“Our customers are generally cautious. I don’t see them laying out a lot of capital or cash without a certain level of certainty. I think we see it stable, which is in my view very positive,” Goeke said.

“It’s really the short-cycle business that’s made an impact,” he said.

Goeke said Milacron did see a bump in business at K 2016, the eight-day technology extravaganza that concluded in Düsseldorf, Germany, on 26 October. But he said that was mainly from orders made from before the show.

“On the other hand, at the K show, I was really surprised at the attendance,” he said. “The attendance from India was incredible; Asia, China, very high. … There was an awful lot of activity and a lot of decision-maker discussion. So it isn’t that people aren’t active in the projects that they had. It’s really just pulling the trigger.”

Chief Financial Officer Bruce Chalmers said Milacron continues to make investments in its aftermarket and systems operations, as well as investing to ramp up production at its facilities in the Czech Republic.

Milacron is moving assembly of its Ferromatik Milacron injection molding machines from Malterdingen, Germany, to the Czech Republic, and the cost savings from that action will help the company’s financial performance in 2017, Chalmers said.

He said Milacron finalized an agreement with the works council, representing unionized workers at Malterdingen, on 30 September.

Sales declined by 1.2% in the third quarter for the Advanced Plastic Processing Technologies group, which covers machinery. North America was down vs. the year-ago period. But the company reported solid growth in Europe, India and China — as those regions saw strong end-market performance in consumer goods, construction, electronics and custom molders. North America had lower sales volume in packaging and automotive.

Applications are gaining momentum for coinjection moulded single-serve coffee pods, the company reported.

In the Melt Delivery and Control Systems business, hot runner and related component sales grew 3.7% in the third quarter, but that was partially offset by declines in mould bases. Robust hot runner growth in packaging, consumer goods and medical are partially offset by declines in automotive and electronics.