Pricing pressures are growing in the sale of plastics processing equipment, officials of Milacron said in a recent conference call. Weak pricing had a negative impact of 1.4 percent in the April-through-June (second) quarter and the effect is expected to grow to 2 percent in the third quarter.
Chief Financial Officer Bruce Chalmers told stock analysts that conversion of bids on large projects to hard orders is “lumpy” and one of the areas of weakening pricing. Another area of weak pricing is hot runner sales in China.
Milacron reported organic growth of 6.6 percent in the second quarter, driven in part by strong sales of co-injection systems. Milacron sells a patented, proprietary co-injection nozzle that allows two different resins to be combined in a single 3-layer melt stream.
One big hit is Kortec co-injection equipment used to produce recyclable coffee pods. One early adopter is Keurig Green Mountain, which last year sold more than 9 billion single-serve plastic coffee pods. Keurig’s new pod uses polypropylene to replace a plastic blend, and injection molding in place of thermoforming. Keurig says the new cups will make up half of its supply by 2018 and all by 2020.
Milacron also sold its first Klear Can production system. Customers were not disclosed.
Overall, Milacron presented a positive picture of its performance in 2016 given “a soft macro environment” particularly in Europe.
Milacron Chief Executive Officer, Tom Goeke said: “The second quarter developed in line with our expectations, as continued end market and geographic stabilization led to organic sales growth within our APPT and MDCS segments. Orders were robust at 8.5 percent constant currency growth, driven by our APPT and MDCS segments…We remain on track to deliver our full year commitment.”
Milacron Chief Financial Officer, Bruce Chalmers added, “Our adjusted EBITDA for the quarter was slightly ahead of our expectations with a 20 basis point improvement, driven by favorable mix within our MDCS segment and the benefits of our general fixed cost optimization actions from the prior year in our Fluids segment. We are also pleased that our free cash flow generation in the second quarter maintained its early 2016 momentum, as our financial flexibility continues to increase.”