Plastics processing machinery market trending flat in a toughening global environment: Page 2 of 3

Milacron’s MDCS business generates close to 60% of overall EBITDA, Simpson noted, with much higher margins than the capital equipment–focused APPT segment (though APPT has a notable aftermarket parts and services component). “As part of the company’s overall strategy to prioritize higher-margin consumables, Milacron has seen the mix of consumables increase from less than 45% over five years ago to around two-thirds today, with a significant improvement in EBITDA margin along the way. With management targeting a 75% to 80% mix of consumables in the future, an EBITDA margin target of 20% or more doesn’t seem unreasonable,” said Simpson in his analysis.

While Simpson points out that the current operating environment is a tough one for Milacron, “good things are going on under the surface,” such as the company’s conclusion of a “multi-year restructuring process and a recently introduced injection molding equipment line (the Cincinnati) with some truly heavy-duty capabilities—the company is building a 6,600-ton machine for a customer—that can be used to manufacture things like an entire dashboard in a single go,” he said.

“I like a lot of what’s going on with Milacron, and I really like the potential of the company’s efforts to grab more aftermarket business, increase its consumables mix and drive notably higher margins.”

Global plastics industry report

According to the Machinery Shipments Report from PLASTICS, injection molding machinery generally saw shipments increase 2.1% on a quarterly basis. Single-screw and twin-screw extruder shipments continued double-digit growth of 23.8% and 14.2%, respectively. Compared to the third quarter of 2017, shipments of injection molding machines were up 4.6%. Shipments of single-screw extruders rose 7.7% and twin-screw extruders 17.2% over the same period.

“Except for soft auto and home sales numbers in the third quarter, the U.S. economy is still in expansionary mode—and that’s good news for plastics machinery manufacturing,” said Pineda. "While there are projections of moderate growth next year, it is expected that the U.S. economy will remain healthy.”

On Oct. 31, PLASTICS released its annual Global Trends report at the 2018 Global Plastics Summit (GPS), which analyzes trade date from 2017. It paints a complex and ultimately positive portrait of the U.S. plastics industry.

“The 2018 Global Trends report again shows that the U.S. plastics industry continues to innovate its way into new applications and new markets where even more consumers can benefit from these versatile, lightweight materials and products,” said then President and CEO of PLASTICS, William Carteaux. “This year we are releasing the Global Plastics Ranking, which will help U.S. plastics companies—and particularly PLASTICS members—find new opportunities to export their goods and build new trade relationships abroad.”

Although the report found that the U.S. plastics industry trade surplus decreased nearly 40% in 2017—from $4.8 billion in 2016 to $2.9 billion in 2017—demand was up across the board. Apparent consumption of plastics industry goods increased in 2017 by 6.0%, a large increase that outpaced growth in U.S. plastics industry shipments overall. The decline in the plastics industry’s trade surplus was driven by a 9.3% increase in imports, another sign of strong demand in the United States.

“A shrinking trade surplus in this instance shows how in-demand plastic products and services are in the United States,” said PLASTICS’ Pineda. “Our estimates show that in 2017 the plastics industry global trade volume increased 9.5% from 2016. Free and fair trade is enormously beneficial to the U.S. plastics industry, and thus enormously beneficial to the nearly one million workers it employs.”

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