Milacron Reports Increase in Second Quarter Earnings
CINCINNATI, July 24 - Milacron Inc. (NYSE:MZ) today reported that second quarter earnings of $.47 per share were up 15% over the second quarter last year, while sales and new orders from ongoing businesses were up 5% and 6% respectively. The company foresees continued growth in the second half of the year despite an anticipated slowing of the U.S. economy.
Second Quarter Consolidated Results
Sales in the second quarter were $405 million, compared to $401 million in the second quarter of 1999. The year-ago quarter, however, included $15 million in sales from the company's European extrusion systems business, which was sold in December, 1999. Excluding that unit's results, sales rose 5% over last year.
Net earnings increased 9% in the quarter, to $16.7 million from $15.3 million in 1999. With fewer common shares outstanding, the company earned $.47 per share in the quarter, up 15% from $.41 per share a year ago. Second quarter net earnings included net costs of about $.01 per share associated with implementation of the company's ongoing efficiency initiatives.
New orders in the quarter were $404 million, compared to $397 million a year ago. Adjusted for the year-end divestiture, however, new orders were up 6%.
Operating cash flow or EBITDA (earnings before interest, taxes, depreciation, and amortization) was $50 million, up over 8% from the year-ago quarter.
"Second quarter operating results showed solid improvement in terms of sales, earnings and cash flow, and we are well positioned for future growth," said Ronald D. Brown, president and chief operating officer. "We continue to steadily improve our competitiveness through accelerated new product introductions and the execution of the previously announced efficiency measures in both our operating groups," he said.
First Half Consolidated Results
For the first six months of the year, Milacron's sales and new orders totaled $801 million each, up 5% and 6% respectively from 1999 when adjusted for the divestiture. Adverse currency translation reduced reported orders and sales by 3% to 4% compared to the first half of 1999. Net earnings for the first six months of 2000 were $31.8 million, up 5% from $30.4 million, while earnings per share rose 9% to $.88 from $.81. Operating cash flow was $96 million, over 5% ahead of 1999.
Segment Results
Plastics Technologies - The group's sales in the quarter were $221 million and new orders were $223 million, both even with the year-ago quarter. Excluding results of the divested European extrusion systems business, however, the group's sales increased 7% and orders were up 8% in the quarter. Currency translation reduced sales and orders by about 2% to 3% compared to the second quarter of 1999.Helped by the introduction of a record number of new products, many of which debuted at the National Plastics Exposition in June, the group's injection molding machine businesses in North America and Europe showed double-digit increases in orders, sales and earnings. Sales of extrusion equipment to process wood-flour composites (plastic lumber) and other infrastructure materials were up well over 20%, and the extrusion parts replacement business was very strong. Sales of mold bases, moldmaking components and MRO supplies held steady in the quarter; but ongoing consolidation in the U.S. dairy industry and continued weakness in European and Asian orders resulted in lower-than-expected performance by the group's blow molding systems business.
Excluding restructuring costs, the group's operating earnings climbed 26% to $25.9 million from $20.5 million in the second quarter of 1999. As a percent of sales, operating earnings rose more than two full points to 11.7% from 9.3%, reflecting successful implementation of efficiency measures, excellent performance in the extrusion systems business and a favorable mix of large injection molding machine shipments.
Year to date, the plastics group's sales and new orders were $439 million and $433 million, each up 8% when adjusted for the divestiture. Operating earnings before one-time items were $48.0 million, up 18% from $40.6 million in the first half of 1999.
Metalworking Technologies - Spurred by a growing contribution from newly introduced cutting tools, sales in the quarter were $183 million, up slightly from $180 million a year earlier. Unfavorable currency translation reduced reported sales by over 5% in the quarter.
Sales of carbide insert cutting tools and steel tool holders were steady in North America and in Europe in local currencies. Sales of round tools - high-speed steel drills and solid carbide mills and drills - were even with the year-ago period. Demand improved slightly in energy, construction, aerospace and general machining industries, but remained soft in many other markets such as agricultural equipment and heavy trucks. Sales of metalworking fluids continued strong in both North America and Europe, as the group benefited from its expanded product offering.
The group's operating earnings, before restructuring costs, were $15.8 million, or 8.6% of sales, compared to $16.3 million, or 9.1% of sales, in the year-ago quarter. The decline was caused by lower sales volume and a $2.5-million (pre-tax) inventory adjustment in the grinding wheel business, as each of the group's other business lines showed improved profitability over the year-ago quarter. In addition, higher oil prices had a negative impact on metalworking fluid margins in Europe.
For the first half of 2000, the metalworking group's sales increased 2% to $362 million, while operating earnings were flat at $32.4 million. Currency translation reduced the group's sales and operating profit 5% and 3% respectively.
Share Repurchase and Debt Reduction
Following the board of directors' authorization in February to buy back up to four million shares, or about 11%, of the company's outstanding common stock, Milacron repurchased over 900,000 shares in the second quarter, bringing the total for the year to 1.8 million shares. Even with this action, cash generated from operations allowed the company to make a modest reduction in debt in the quarter.
Outlook
"Conditions continue to improve in Europe and Asia, but many industrial sectors of the North American economy, such as agricultural equipment and heavy truck production, remain soft," said Daniel J. Meyer, chairman and chief executive officer. "Looking ahead, we believe that growth in the U.S. may slow somewhat due to the negative impact of higher interest rates on consumer spending, including auto sales and new housing starts, as well as the strong dollar, which hurts our U.S. customers' export sales. In this context, while we expect third quarter results to hold up as planned, the fourth quarter may be less robust than originally anticipated."Nevertheless, for 2000 as a whole, Milacron will continue to focus on growth opportunities and, assuming markets don't weaken significantly, we are targeting a 10% increase in earnings per share, as well as a comparable rise in operating cash flow," Meyer concluded.
The above forward-looking statements by their nature involve risks and uncertainties that could significantly impact operations, markets, products and expected results. For example, some of the above forward-looking statements are made based on certain projections relating to the introduction of new products, which may be impacted by changes in the level of customer demand and other factors. For further information please refer to the Cautionary Statement included in Item 2 the company's most recent Form 10-Q, on file with the Securities and Exchange Commission.
Milacron Inc. (NYSE:MZ) is a world leader in plastics processing and metalworking technologies with major manufacturing facilities in North America, Europe and India and 11,000 employees worldwide. Plastics technologies include injection molding machines, blow molding equipment, extrusion systems and wear items, mold bases, mold-making equipment and mold components, as well as aftermarket and MRO (maintenance, repair and operating) parts and services. Metalworking technologies include carbide metalcutting inserts, insert holders, carbide and high-speed steel round tools, metalworking fluids, chemical and tool management services, precision grinding wheels and carbide wear parts.
For further information, visit the company's web site, http://www.milacron.com, or call its toll-free investor hot line: 800-909-MILA (800-909-6452).