A powerhouse is quietly emerging in the metal injection molding (MIM) business. A company based in Florida called the ARC Group Worldwide has formed a Precision Components Group, consisting of new MIM acquisitions FloMet, AFT-US, and AFT-Hungary.
Significant investment is flowing into its Advancing Forming Technology (AFT) unit in Firestone, Colo., which is reporting 50 per cent year-on-year gains in sales and will open a major expansion late this year.
MIM is increasingly used to manufacture high-volume small metal components requiring specialized properties or complex design. Replacement of machined parts with metal molded parts results in savings that escalate as volume grows. The cost of the mold, which can be significant, first needs to be amortized, however.
Firearms parts are a big play. Use of MIM for surgical jaws is growing. ARC received significant new tooling orders from a medical device company that makes robotic surgical devices. The MIM Group also received a record 51 tooling orders in its 2013 fiscal year for a projected $17.6 million in new business.
AFT was purchased in 2012 for $41 million. Flo-Met was acquired through a reverse acquisition of Quadrant Technologies in 2011 for $10.2 million. Revenues for the Precision Components Group for the fiscal year ending last June 30 were $59.9 million. Net income was $7.8 million.
The company’s stock price has had a wild 52-week swing from $4.65 to 43.73 per share possibly due to a lack of understanding of the company’s business, all the recent changes, or lack of analyst coverage. Its stock price-to-earnings (P/E) ratio this morning was 31. Lack of stock market understanding of the company is not unusual for the manufacturing industry, nor is it particularly important right now because it appears ARC is in the business for the long haul.
According to ARC, the global MIM market exceeds $1.2 billion annually with recent annual growth rates above 20%. The domestic MIM industry is about $350 million. The field of suppliers, however, remains relatively small because the technology is more complicated and expensive to implement than thermoplastic injection molding. Ovens are required, for example, to bake the parts after molding.
Again according to ARC, there are about 40 identified MIM manufacturers involved in contract manufacturing in North America and a dozen or so captive operations. The European market is projected to be approximately $350 million in size and the Asian market is approximately $550 million, primarily in China.
AFT is considered one of the three largest MIM suppliers in North America. Global competitors include Indo-MIM, Parmatech, Kinetics, GKN, Schunk and Parmaco.
ARC’s investment in these businesses is another sign of slowly growing confidence in U.S. manufacturing. Although Asian competition has grown, MIM is more protected than standard plastic molding because of its complex nature. The 70,000 s.f. plant in Hungary provides some low-cost country protection.
It’s also interesting that ARC is investing in additive manufacturing capabilities for its Colorado plant. 3D printing allows the company to make small-volume parts and prototypes. Showing its serious intent, ARC named industry maven Todd Grimm to its board of directors.
The fact that ARC is a publicly owned company (Nasdaq ARCW) provides interesting transparency into the rapidly growing MIM business that previously was not available.