Rexnord acquires metal conveyor manufacturer

Earnings fall on increased restructuring costs

Rexnord Corp.
Rexnord Corp.

Milwaukee-based Rexnord Corp. announced today it has acquired Cambridge International Holdings Corp. for about $210 million.

Rexnord Corp. headquarters

Cambridge, Maryland-based Cambridge International designs, manufactures and installs metal conveyor belts, architectural mesh and environmental filters. Its products are used mostly in food processing end markets, and also have architectural, packaging and filtration uses. Most of its manufacturing is completed in Mexico, and Cambridge has a leading market share in North America. The company has about 400 employees.

Rexnord is divided into two divisions: Process & Motion Control, which manufactures and services mechanical components used in complex systems; and Water Management, which manufactures products used to improve water quality, safety, flow control and conservation. The company has about 7,700 employees globally.

The companies expect the cash transaction to close in the next 30 days. Rexnord will complete the acquisition with its available liquidity.

The acquisition of Cambridge will expand Rexnord’s consumer exposure and strengthen its position in the food and beverage sector, the company said. It will also add about $80 million in annual EBITDA.

Acquiring Cambridge fits in with Rexnord’s ongoing strategic growth strategy, through which it has been acquiring leading industrial manufacturing companies in new markets that it expects will improve revenue growth, operating margins and customer satisfaction. The company has completed seven other acquisitions in the past three years, while divesting non-core businesses.

“Cambridge aligns well with our strategy to expand our presence in consumer-driven end markets,” said Todd Adams, president and chief executive officer of Rexnord. “The acquisition, when completed, will bring our total sales to water, aerospace, and food and beverage end markets to more than 70 percent of total revenues that should, over time, generate a better balanced, overall growth profile.”

“The combination of Cambridge’s leadership in food applications and Rexnord’s strength across the global beverage industry yields an unequaled portfolio of food and beverage conveying solutions that we are confident will create additional value for customers, associates and shareholders,” said Kevin Zaba, president of Rexnord Process & Motion Control.

Fourth quarter earnings down

Rexnord’s earnings and net income fell sharply in the fourth quarter of fiscal 2016 with the company reporting a net loss of $600,000, down from net income of $32.5 million in 2015. The company reported no earnings per share for the quarter, after reporting 32 cents per share in 2015.

The company’s adjusted earnings were down 44 percent to $37.8 million. The adjustment included $10.7 million for the company’s exit of the Rodney Hunt Fontaine business, $24.2 million in restructuring charges and $1 million in supply chain optimization initiatives.

Rexnord’s revenue was off almost 5 percent to $492.6 million. Adams said the company had a solid quarter in its water-focused end markets, offset by ongoing challenges in its process industry end markets.

“Despite the slightly weaker than expected top line, we reduced our financial leverage, made important progress against our strategic growth initiatives, and we delivered $171 million of free cash flow for the year,” Adams said, adding that the supply chain initiative is on track to deliver $30 million in annual cost savings by the end of the upcoming year.

Core net sales for the water management segment were up 8 percent, excluding the impact of foreign currency. The company said there were higher shipments for water infrastructure projects and steady growth in nonresidential construction markets. The segment had a loss of $5 million, primarily from restructuring expenses from exiting product lines.

Core net sales in the process and motion control segment were down 9 percent with stable aerospace and industrial distribution demand offset by weaker demand from OEMs and end users in process industry markets.

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Molly Dill, former BizTimes Milwaukee managing editor.

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