Die Cast Machinery
Date December 2015
By the numbers
- After soft market conditions in 2008, 2009 and part of 2010, used equipment market participants have reported increasing buyer inquiries about the availability of production machinery of all types
- Industry revenues: $15.5 billion (non-ferrous foundry products)
- Major product categories: Gas and water meters, tools, gear housing covers, drive axles, transmission and engine components
- Major machine manufacturers: BuhlerPrince, HPM, Idra
- Recent sales trends: Falling nonferrous metals prices have increased competitiveness of die cast products and improved margins. Overall, revenue for nonferrous foundry products is forecast to increase at an annualized rate of 4.3 percent over the five years to 2015, including growth of 2.4 percent in 2015
Current market for die casting equipment is good: Industry participants report there is currently a healthy balance of supply and demand of die casting equipment in the secondary marketplace. Late model machines are selling well, particularly those with shot end and control advancements. Certain manufacturers, such as BuhlerPrince, are particularly desirable because used machines are not readily available and new machines are subject to long lead times. Older machines and machines in poorer condition are not as marketable. The most popular size machines are between 400- and 800-ton capacity. Machines with larger than 1,200-ton capacity require a longer market period due to a more limited user base. Lenders should discuss appropriate liquidation timeframes with appraisers for these sizes of machines.
Rebuilds can add value: Because of their significant investment, die casting machines are often rebuilt to prolong life and improve performance. Machines that have undergone significant rebuilds will garner higher values of significance as long as those rebuilds are complete and enhance production levels. Who conducted the rebuild also makes a difference. If the work was completed by the original equipment manufacturer or other reputable firm, such as DCP, the value added will be much greater. In comparison, in-house rebuilds are less valuable due to the inability of a buyer to know the “quality” of the rebuild. Control upgrades (such as shot monitoring or machine controls) add value to machines but only a small portion in relation to their costs. While the controls do increase the operability of the older die cast machines, they are still older machines as a core and therefore need to have upgraded controls to continue operation at a competitive level. Appraisers should inquire about these types of improvements to ensure valuations reflect these investments.
Metals pricing a key external driver: Nonferrous materials such as aluminum, copper, magnesium, titanium and zinc are the primary materials used in die casting. Of these, aluminum castings make up the majority of sales and have been heavily relied upon for their ability to reduce weight, while maintaining rigidity. This characteristic has closely linked aluminum die castings to the transportation industry, more specifically the automotive industry, which makes up more than 50 percent of the customer base. Lenders should be aware that fluctuations in raw material pricing can impact margins of portfolio companies. Prices for nonferrous metals declined notably in 2015, creating favorable conditions for die casters.
Melt furnaces can prove challenging to sell: In die casting, molten metal is forced into cavities under high pressure. To liquefy the metal, melt furnaces adjoin die cast machines. While melt furnaces can signify a significant installed cost, getting that investment back out in liquidation can be challenging when sold for removal. These furnaces must be dismantled to transport and need refractory brick upon re-installation. This cost to reline a furnace can be equal to almost half the original cost of the furnace, negatively affecting its salability in a duress sale scenario. Smaller holding and melt furnaces (typically less than 50,000-pound capacities) that can be shipped in one piece may be more salable, while larger capacity furnaces are usually going unsold or selling for scrap.