Milacron Holdings Corp. (Cincinnati, OH) ended 2018 with sales of $1,258.2 million, an increase of 1.9% from sales of $1,234.2 million in the prior year, the company reported during its Feb. 21 earnings conference call. Excluding the favorable effects of currency movements, sales for the year ended Dec. 31, 2018, increased 1.2% compared to the prior year. Orders decreased 6.8% on an as-reported basis to $1,211.2 million, and operating earnings increased 19.6% to $106.6 million. Cash flow from operations of $124.3 million increased $13.9 million, driving free cash flow of $102.1 million, an $18.9 million increase versus $83.2 million in the prior year.
Sales in the fourth quarter of 2018 were down 4.2% to $311.4 million; orders also decreased 13.3% to $274.2 million. Operating earnings increased 45.2% to $15.1 million, and cash flow from operations of $68.8 million decreased $34.2 million, driving free cash flow of $63.2 million, a $32.3 million decrease versus $95.5 million in the prior year period.
“Milacron delivered another solid year of results, meeting our sales and adjusted EBITDA targets and exceeding our target for free cash flow,” said Milacron President and CEO, Tom Goeke. “We also capped off our multi-year restructuring initiative. Looking ahead to 2019, Milacron’s strategy remains unchanged and all of our platforms are well-positioned for growth and margin expansion. We are well-prepared for the challenges and opportunities in 2019.”
Milacron CFO, Bruce Chalmers, added, “We delivered on our commitment for 2018 by voluntarily paying down a total of $100 million on our term loan and our net-to-debt ratio ended at 2.9. In addition, we made significant improvements in working capital as we continue to strengthen our balance sheet. Our guidance for 2019 reflects our expectation of the impact of policy-induced trade headwinds in the first half of the year with a recovery in the second half as the headwinds recede.”
As a result of the Tax Cuts and Jobs Act (Tax Act), the company began to recognize indefinite-lived deferred tax assets associated with U.S. net operating loss carry forwards and deferred interest deductions generated during the year ended Dec. 31, 2018. In the fourth quarter of 2018, the company made a tax accounting policy election to utilize existing indefinite-lived deferred tax liabilities as a source of income to support recognition of the aforementioned indefinite-lived deferred tax assets. In conjunction with this election, the company recorded an income tax benefit of $6.4 million, or $0.09 diluted adjusted earnings per share, related to the reversal of valuation allowances previously recorded against the deferred tax assets.
In the fourth quarter of 2017, Milacron recorded a net income tax benefit of $8.9 million, or $0.12 diluted adjusted earnings per share, relating to the enactment of the Tax Act. This benefit was primarily driven by the release of valuation allowances on AMT credits and the revaluation of net deferred tax liabilities, partially offset by the recognition of withholding tax liabilities on planned cash repatriation from non-U.S. subsidiaries.
Milacron’s various business segments reflected the relatively flat results the company reported. Sales for Q4 2018 for the Melt Delivery & Control Systems were $102.3 million compared to $103.6 million in the same period a year ago. For the year ended Dec. 31, 2018, sales saw an increase to $451.7 million compared to $423.9 million in the same period a year ago.
Fluid Technologies saw sales increase slightly to $31.1 million compared to $31.0 million in the same period a year ago. Sales were up for the year ended Dec. 31, 2018, to $129.3 million compared to $121.2 million in the same period a year ago.
Sales decreased in the fourth quarter for the Advanced Plastic Processing Technologies (APPT): $178.0 million compared to $190.3 million in the same period a year ago. Sales in the APPT segment were $677.2 million for the year ended Dec. 31, 2018, compared to $689.1 million in the same period a year ago.
For 2019, Milacron forecasts negative sales growth in the -3% to -4% range, which is inclusive of an anticipated 1% foreign currency headwind. On a pro forma basis, Milacron forecasts 0% to 1% sales growth in 2019, inclusive of the aforementioned foreign currency headwind. Adjusted EBITDA margin is forecast to be between 17.5% and 18.0%. Free cash flow is forecast to be between $100 million and $110 million.