Expansion In Emerging Markets To Aid Milacron Amid Inflation
Zacks Investment Research | May 28, 2018 09:34PM ET
On May 28, we issued an updated research report on Milacron Holdings Corp. (NYSE:MCRN) . The company is poised to gain from new order books, expansion in emerging markets, as well as cost-reduction initiatives. However, input cost inflation is expected to affect results.
Let’s illustrate these growth factors in detail.
Milacron to Gain From Expansion in Emerging Markets
Demand for a diverse range of finished plastic products has been on the rise in many markets, including automotive, construction and consumer products. This is being escalated by global population growth, along with sustained urbanization, increased purchasing power and improved lifestyle in emerging markets. Given its strong global presence, Milacron is well positioned to capture a portion of this growth.
The company has made significant investments in China and India, considering the projected growth rates of plastic business in these markets. Milacron plans to continue to expand its manufacturing capabilities, while also improving the company’s technical, marketing and sales efforts. The company also continues to strategically reorganize its manufacturing base in order to shift resources to high-growth geographic markets.
New Order Books to Boost Top Line
Milacron will display its latest product offerings in the NPE trade show this year. The company will display new Mold-Masters sequential electric valve gates, the Fusion G2 hot runner system for large parts, as well as Milacron's M Powered IoT and aftermarket solutions. The company will also exhibit its new Cincinnati large tonnage machine. There will be many other product displays in the equipment and consumables segments of business. This level of product launch will support Milacron’s vitality index goal of 20% and also add to new order books.
Cost-Reduction Initiatives to Stoke Growth
Milacron expects that its profitability will be supported by revenue growth and margin expansion in the near term. Over the past three years, the company has undertaken a number of organizational redesign and cost-reduction initiatives. The key actions include realigning the overall cost structure, consolidating sales offices and call centers, along with optimizing the manufacturing footprint. Milacron’s organizational redesign and cost-reduction efforts are in the process of being implemented and are expected to yield approximately $35 million of annual run-rate cost savings by the end of 2018.
Input Cost inflation to Impede Profit
Imposition of tariffs on steel prices will pull down Milacron’s margin with a $3-million headwind, principally in the Advanced Plastic Processing Technologies segment. Thus, input cost inflation, particularly steel, will continue to be a headwind and dampen margins in 2018.
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