Nordson Reports Fiscal Year 3Q18 Results

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Nordson Corporation reported results for the third quarter of fiscal year 2018. For the quarter ended July 31, 2018, sales were $581 million, a 1% decrease compared to the prior year’s third quarter. This change in sales included a decrease of approximately 3% in organic volume, growth related to the first year effect of acquisitions of approximately 1%, and an increase related to the favorable effects of currency translation as compared to the prior year’s third quarter of 1%. The prior year’s third quarter sales benefitted from strong organic sales growth in all segments.

In the third quarter of fiscal year 2018, reported operating profit was $136 million, net income was $95 million, and GAAP diluted earnings were $1.61 per share. Free cash flow before dividends was $118 million in the quarter, reflecting strong cash conversion of 124% of net income. Prior year third quarter sales, operating profit, net income and GAAP diluted earnings per share were $589 million, $153 million, $101 million and $1.74, respectively. A reconciliation of GAAP diluted earnings per share to adjusted diluted earnings per share and calculations for EBITDA, adjusted EBITDA, free cash flow before dividends, and adjusted free cash flow before dividends are included in the attached financial exhibits.

Commenting on the third quarter fiscal year 2018 performance, Michael F. Hilton, Nordson President and Chief Executive Officer, said, “Nordson delivered solid results despite challenging comparisons to our prior year’s third quarter, where total company organic sales growth was 11%. Our commitment to delivering the best technology solutions while employing continuous improvement initiatives drove bottom line performance, generating operating margin of 23% and $118 million of free cash flow before dividends. Our base business is strong, and we remain focused on bringing value to our customers and the diverse end markets we serve.”

The current quarter’s results include a non-recurring restructuring charge of approximately $1 million, or $0.02 per diluted share. Additionally, discrete tax benefits of approximately $2 million, or $0.03 per diluted share, were recognized in the quarter.

Third Quarter Segment Results

Adhesive Dispensing Systems sales increased 5% compared to the prior year’s third quarter, inclusive of 3% organic volume growth and a 2% increase related to the favorable effects of currency translation as compared to the prior year. Reported operating margin in the segment was 28%, or 29% on an adjusted basis to exclude non-recurring restructuring charges of $1 million related to a previously announced U.S. facility consolidation.

Advanced Technology Systems sales decreased 8% compared to the prior year’s third quarter, including an 11% decrease in organic volume, a 2% increase related to the first year effect of acquisitions, and a 1% increase related to the favorable effects of currency translation as compared to the prior year. The third quarter’s acquisitive growth includes the fiscal 2018 acquisition of Sonoscan. The third quarter of fiscal year 2017 benefitted from strong electronics end market demand driving 18% organic sales growth for this segment. Reported operating margin in the segment was 25% in the current quarter.

Industrial Coating Systems sales increased 6% compared to the prior year’s third quarter, including approximately 6% organic growth and a less than 1% increase from the favorable effects of currency translation as compared to the prior year. Compared to the prior year’s third quarter, reported operating margin in the segment improved 160 basis points to 22%. 

Backlog

Backlog for the quarter ended July 31, 2018 was approximately $428 million, an increase of 16% compared to the same period a year ago, inclusive of 15% organic growth and 1% growth due to acquisitions. Backlog amounts are calculated at July 31, 2018 exchange rates and include acquisitions that closed prior to the end of the third quarter of fiscal 2018.

Outlook

For the fourth quarter of fiscal 2018, sales are expected to be in the range of flat to down 4% compared to the fourth quarter a year ago. This outlook includes a range for organic volume to be up 1% to down 3%, 1% growth from the first year effect of acquisitions, and an unfavorable currency translation effect of 2% based on the current exchange rate environment as compared to the prior year. At the midpoint of this outlook, operating margin is expected to be approximately 22%. GAAP diluted earnings per share are expected to be in the range of $1.38 to $1.54, with an estimated effective tax rate of approximately 25%. At the midpoint of the guidance, EBITDA and EBITDA margin are expected to be $149 million and 26%, respectively.

“Looking ahead to the fourth quarter, our guidance reflects our current backlog, where organic volume is driven primarily by strength in adhesive and medical product lines, offset primarily by lower demand for Advanced Technology dispense product lines serving electronics end markets and automotive cold materials product lines,” said Hilton. “At the midpoint of our guidance, we expect to generate total company organic sales growth of 2% on a full year basis for fiscal 2018. On top of 8% organic growth in fiscal 2017 and 7% organic growth in fiscal 2016, delivering organic growth again this year highlights the attractiveness of the end markets we serve and our ability to continue to meet our customers’ expectations. We remain focused on delivering value to our shareholders, driving bottom line results through continuous improvement initiatives utilizing the Nordson Business System, and providing superior customer service.”

About Nordson Corporation

Nordson Corporation engineers, manufactures and markets differentiated products and systems used for the precision dispensing of adhesives, coatings, sealants, biomaterials, polymers, plastics and other materials, fluid management, test and inspection, UV curing and plasma surface treatment, all supported by application expertise and direct global sales and service. Nordson serves a wide variety of consumer non-durable, durable and technology end markets including packaging, nonwovens, electronics, medical, appliances, energy, transportation, construction, and general product assembly and finishing. Founded in 1954 and headquartered in Westlake, Ohio, the company has operations and support offices in more than 35 countries. For more information, click here.