Batesville-based manufacturer Hillenbrand Inc. is planning to launch a program designed to reduce costs and improve operational efficiency after what is being described as a weaker-than-expected performance from one of its primary business segments.
In its quarterly earnings report this week, the company said low customer demand caused by “the uncertain global macroeconomic environment,” led to a 16% decrease in year-over-year revenue in its Molding Technology Solutions, or MTS, unit.
As a result, Hillenbrand is implementing its Cost Savings & Restructuring Program, which will include a 5% workforce reduction within the MTS segment.
“We’re launching a restructuring program in our MTS segment in order to improve operational efficiency and optimize our cost structure for the current environment, while also ensuring we remain poised for growth once market conditions improve,” Chief Financial Officer Bob VanHimbergen said Tuesday during Hillenbrand’s fiscal first quarter earnings call.
The MTS segment focuses on highly-engineered processing equipment, systems, and aftermarket parts and service for the plastic technology processing industry, according to Hillenbrand’s website.
The segment is comprised of three primary brands: Madison Heights, Michigan-based DME; Ontario-based Mold Masters; and Cincinnati, Ohio-based Milacron, which Hillenbrand acquired in 2019 for nearly $2 billion.
Hillenbrand said revenue for the MTS segment in the fiscal first quarter totaled $205 million, down from $243 million during the same period the previous year. The company said the decrease was primarily due to lower volume for injection molding and hot runner equipment.
The Cost Savings & Restructuring Program, according to CEO Kim Ryan, will include structural changes that are expected to generate about $15 million in annual run-rate cost savings, with about 50% expected to be realized in the current fiscal year.
“We’re not satisfied with the current performance, and we’re confident these actions will help optimize our cost structure as we manage through the current demand environment, while also ensuring we’re well positioned to return to higher levels of growth and profitability once the market recovers,” Ryan said in a news release.
A spokesperson for Hillenbrand did not respond to an inquiry from Inside INdiana Business asking how many employees are part of the MTS segment, so it is unclear how many will be affected by the 5% reduction or if any are located in Indiana.
In a recent filing with the U.S. Securities and Exchange Commission, Hillenbrand said it had approximately 10,400 employees around the world as of Sept. 30, 2023, with about 3,200 of those located in the United States.
“We are making decisions that are appropriately sized for the demand trends that we’ve seen, and that are also taking into consideration where we expect the demand to return, so that we can be prepared for that,” Ryan said in the earnings call. “This allows us to look at everything from creating flexibility in the way we manufacture our goods, leveraging partners, leveraging some of our suppliers to help with volume as we would want that to return.”
Hillenbrand said it expects to incur a one-time charge of $20 million related to the Cost Savings & Restructuring Program, but did not provide specifics.
“We’ve got a lot of work that has been done over the last four months in collaboration with the leaders in [the MTS] business, and all are agreed that these are appropriate actions to take that create an appropriate return, even though we’ve got some one time charges associated with that,” Ryan said.
The company did not specify when the workforce reductions would begin.
As of Tuesday afternoon, no WARN notices have been filed with the Indiana Department of Workforce Development. Such notices are required to be made to state officials 60 days ahead of a mass layoff under the Worker Adjustment and Retraining Notification Act.
Hillenbrand is the 18th largest public company in Indiana with $2.9 billion in total revenue, according to IBJ research. The company’s stock was down 4.8% at the end of trading on Tuesday, to $44.37 per share.