Molins plc

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Molins plc

11 Tanners Drive
Blakelands
Milton Keynes, Buckinghamshire MK14 5LU
United Kingdom
Telephone: (+44) 1908-219-000
Fax: (+44) 1908-216-499
Web site: http://www.molins.com

Public Company
Incorporated: 1912 as The Molins Machine Company
Employees: 1,202
Sales: £111.3 million ($161.5 million) (2001)
Stock Exchanges: London
Ticker Symbol: MLIN
NAIC: 333298 All Other Industrial Machinery Manufacturing; 541330 Engineering Services

The United Kingdom’s Molins plc has been adjusting to the post-tobacco world. One of the leading producers of packaging machinery for the tobacco industry, including cigarette-making machinery, Molins has reoriented itself as a specialist engineering company, including a growing niche packaging component that makes the machinery for such products as pyramid-shaped teabags and toothpaste tubes. Molins also has reacted to the worldwide collapse in sales of tobacco machinery—the company’s sales have been slashed by more than half since 1997—by repositioning itself as an aftermarket service provider, particularly for its large installed customer base. The company also has added a new component of scientific measurement devices for the tobacco industry, such as smoke analysis equipment and analytical smoke constituent services. Molins operates through two primary divisions, Tobacco Machinery, which includes subsidiaries Arista, acquired in 2002, and Cerulean; and Food Packaging, which includes subsidiary companies Langen in Canada, Langenpac in The Netherlands, and Rose Forgrove and Sandiacre Packaging Machinery Ltd. in the United Kingdom. Molins, which posted sales of £111 million ($160 million) in 2001, is quoted on the London Stock Exchange and is led by Chairman Peter Byrom.

Cuban Origins in the 19th Century

Molins involvement with the tobacco industry began in the late 19th century. In 1874, Jose Molins set up shop producing hand-rolled cigars and cigarettes in Havana, Cuba. Molins moved to the United States, then to the London. By the turn of the 20th century, cigarette-making machinery had begun to change smoking habits, popularizing that tobacco product. Molins’s sons, Harold and Walter, picked up on the packaging potential presented by the machine-rolled cigarette. In 1911 the Molins brothers patented their own packaging machine, capable of producing packaging for a wide variety of items, including tea and cigarettes.

The brothers set up their own company in 1912, The Molins Machine Company, and began production of their packaging machines. By the end of that decade, the company purchased new facilities in Deptford, which became the company’s main production and warehouse facility for the next 50 years.

In 1924, the Molins brothers patented a new machine, the Mark 1, the company’s first cigarette-rolling machine. Continued improvements on the Mark 1’s design enabled the machine to reach production levels of more than 1,000 cigarettes per minute by the end of the 1920s. By the mid-1930s, the company had unveiled its Mark 6 model.

By then, Molins had been expanding, acquiring the Thrissell Engineering Company in 1928, which was later expanded as the Masson Scott Thrissell Company. At the beginning of the 1930s, Molins crossed the Atlantic to set up shop closer to the U.S. tobacco industry. In 1931, the company established its U.S. subsidiary, the Molins Machine Company Inc., in Richmond, Virginia.

The death of Walter Molins left his son Desmond Molins in charge of the company. The younger Desmond quickly followed in his father’s inventive footsteps, registering five patents in just one year. One of Desmond Molins’s most important patents was filed in 1937, for a hinge-type cigarette box that was to have a major impact on the worldwide cigarette industry. Molins also showed himself to be a shrewd marketer—in 1936, Molins negotiated a supply agreement with U.S. tobacco giant Reynolds. The deal, which called for Reynolds to buy 278 Mark 6 machines from Molins, was the largest-ever single order for cigarette-rolling machinery. It proved to be the company’s breakthrough, establishing Molins as one of the world’s major cigarette machinery manufacturers.

Molins converted its production to support the Allied war effort during World War II (which earned Desmond Molins the U.S. Medal of Freedom). Returning to tobacco and packaging machinery production after the war, the company found itself in the midst of a worldwide boom in cigarette consumption, especially as more and more women began to smoke. In 1950, Molins opened a larger facility in Saunderton.

In 1954, Molins achieved a new breakthrough. In that year, Phillip Morris sought to re-introduce one of its discontinued brands. Originally introduced in 1902, the Marlboro had not been a success; re-launched in the 1920s as a “women’s” cigarette, the brand had faded out again. The re-launch of Marlboro in the 1950s, and its repositioning as a “men’s” cigarette was accompanied by a new package—Desmond Molins’s hinged-top lid. The new package helped the brand develop into the world’s leading cigarette brand. The Molins Hinge Lid Packer, first sold to Philip Morris in 1954, soon became a standard across the industry, as the hinged-pack became the preferred packaging type throughout the world.

Molins’s main product, however, remained its cigarette-making machinery, and in 1959 the company released its newest generation, the Mark 8. The spread of cigarette consumption in other parts of the world led the company to extend its own international presence, and by the beginning of the 1960s the company had opened production facilities in Brazil and India, and a sales office in Hong Kong. In 1964, the company formalized its presence in South America with the creation of its Brazilian subsidiary in 1964. At the same time, the company saw its first sales of machinery to China, which was later to become, if only briefly, one of the company’s major markets.

Molins introduced its Mark 9 cigarette-making machine in 1972. By then, however, the company had begun to seek to diversify beyond its core tobacco machinery. Already present in the broader packaging industry, through its Masson Scott Thris-sell subsidiary, the company boosted that operation in 1974 with the purchase of the Langston Corporation, based in New Jersey in the United States, for $8.5 million. Founded by Charles Langston in 1880, that company had begun producing corrugated cardboard boxes in 1885, and later grew into an important manufacturer of corrugating and paper converting machinery.

Desmond Molins, who remained at the head of the company, had not lost his inventive spirit, and in the early 1970s the company introduced what it called “System 24,” an automated machine tool system. The company succeeded in adapting the system to the production of certain parts for the new Concorde airplane, but was soon forced to abandon the project due to a lack of industry interest.

Reorienting for a New Century

More successful was the company’s public offering, made in 1976, which brought Molins to the London Stock Exchange. Yet the decision to go public was to come to haunt the company over the next decade. Nonetheless, the company entered the 1980s riding high as one of the top cigarette machine makers in the world; it was also poised to reap the rewards of patience: by the early 1980s, the technology behind the company’s System 24 had led to the creation of what became known as Flexible Manufacturing Systems, or FMS. As the holder of the patents underlying the FMS technology, Molins set out to collect royalties and sell licenses to the technology. It also prepared to extend its expertise by moving into production of FMS systems itself. As part of that effort, the company established a research subsidiary, Molins ITCM, in Coventry in 1985, in order to assist Molins’s other businesses in developing new products and technologies.

Yet by the mid-1980s, Molins had become caught up in the hostile takeover craze that marked the decade. By the beginning of the 1990s, the company had been the target of five hostile takeover attempts, including an attack in 1987 by a subsidiary of New Zealand Brierley Group. After the death of Desmond Molins in 1988, Brierley struck again, this time through another holding, Industrial Equity (Pacific), based in Hong Kong, in 1989. Part of the company appeal, in addition to its FMS patents, was its strong position in China, where cigarette consumption was rising rapidly and where Molins had established itself as market leader. By 1990, the company was forced to fight off two new attempts, this time from Leucadia Corporation.

Shaken by these events, Molins had lost a lot of ground and was forced to abandon its plans to enter the factory automation arena. Instead, Molins turned to building up its corrugated paper machinery division, acquiring the Wm. C. Staley Machinery Corporation, in 1990, which was then merged into the company’s Langston business as Langston Hunt Valley. Molins also was riding high on the booming Chinese and Asian markets, where demand for the company’s cigarette-making machinery rose strongly in the early 1990s. Aiding the company’s growth was the launch of a new cigarette machine in 1991.

Company Perspectives:

Molins is an international business, combining service and support with the design, engineering and manufacturing of specialist machinery for the fast moving consumer goods market, including tobacco, food and other high volume products. We meet the technically complex expectations of customers by delivering innovative solutions on a global basis.

Molins began new diversification toward the mid-1990s, now targeting the specialty packaging sector. In 1994, the company acquired Sandiacre Packaging Machinery Ltd., which specialized in manufacturing equipment for vertical form fill packaging. In 1996, the company acquired the Langen Group, of Canada, including its subsidiary Langenvac, based in The Netherlands, which extended Molins’s packaging arm with carton and related packaging machinery. By then, the Molins ITCM research group had developed its own machinery, for producing pyramid-shaped teabags, which was then purchased by Unilever. That success led the company to establish a new subsidiary, Molins Food Machinery, in 1997, with the aim of developing further innovative packaging products.

Still, Molins once again faced difficulties in the late 1990s. A new wave of anti-tobacco legislation in the United States and Europe, coupled with the collapse of much of the Asian market economies, severely crippled the company’s cigarette-making machines. At the same time, the Chinese tobacco monopoly, China Tobacco, had begun a vast restructuring effort, shutting down more than one-third of its factories—putting an end to new orders for cigarette-making machinery, at least temporarily. The company’s revenues, which had topped £250 million ($400 million) in 1997, suddenly dropped back to just £170 million in 1998, then to £110 million.

By then, the company had decided to abandon its Langston corrugated cardboard operation, which had been struggling in the face of a depressed market. That business was sold off in 1998 to BancBoston for $40 million. Molins also was forced to cut a large number of its workforce as its tobacco machinery operations continued to dwindle.

Molins’s restructuring was to last for nearly three years, enabling the company to raise its profitability by the end of the decade. Molins also had identified a new area for expansion—that of providing services to the tobacco industry, including aftermarket support for the large installed base of Molins machines. In 2000, the company made a new acquisition, of Filtrona Instruments and Automation (FIA), a maker of analysis and quality control instruments for the tobacco industry, as well as a producer of packaging for niche markets. FIA, purchased from Bunzl, was then renamed Cerulean.

After adding a new factory and subsidiary in the Czech Republic, Molins hit the acquisition trail again, bringing back Rose Forgrove, a manufacturer of horizontal flow wrapping machinery, in 2001. Then, at the beginning of 2002, Molins enhanced its tobacco industry service offerings with the purchase of Arista Laboratories, based in Richmond, Virginia, which had established itself as a provider of smoke constituents analysis services. By then, Molins appeared to have accepted as permanent the change in the worldwide tobacco industry, as anti-smoking efforts were expected to continue to reduce the number of smokers—and the number of cigarette-making machines. At the beginning of 2002, Molins set up its own real estate development company, with the intention of converting the now-unused areas of its Saunderton facility to apartment buildings. While remaining committed to heritage at the center of the tobacco industry, Molins nevertheless showed that it had not lost its spirit of invention.

Principal Subsidiaries

Arista Laboratories Inc. (U.S.); Cerulean; Cerulean Inc. (U.S.); Kunming Molins Tobacco Machinery Company Ltd. (China; 48%); Langen Packaging Inc. (Canada); Langenpac NV (The Netherlands); Molins del Paraguay SA; Molins do Brasil Maquinas Automaticas Ltda; Molmac Engineering Ltd.; Molins Far East Private Ltd. (Singapore); Molins ITCM; Molins Richmond Inc. (U.S.); Molins sro (Czech Republic); Molins Tobacco CIS (Russia; 69%); Molins Tobacco Machinery Ltd.; Rose Forgrove Ltd.; Sandiacre Packaging Machinery Ltd.; Sandiacre Packaging NA (U.S.).

Principal Competitors

Sasib Tobacco Group (Compagnia Finanzaria de Benedetti); Gibraltar Packaging Group, Inc.; Metso Corporation; Robert Bosch Corporation; Shorewood Packaging Corporation.

Key Dates:

1874:: Jose Molins sets up a cigar and cigarette making business in Havana, Cuba.
1912:: Molins’s sons invent a packaging machine and establish the Molins Machine Company.
1919:: The company acquires larger production and warehouse facilities in Deptford.
1924:: The company launches the Mark 1 cigarette-making machine.
1931:: The company establishes a U.S. subsidiary in Richmond, Virginia.
1936:: Reynolds buys 278 Mark 6 cigarette-making machines.
1950:: The company opens a new production facility in Saunderton
1959:: The company opens a production facility in Calcutta, India, and a sales office in Hong Kong.
1960:: A plant in Sao Paulo, Brazil, is established.
1964:: The company begins sales to China.
1976:: Molins goes public on the London stock exchange.
1985:: The company establishes Molins ITCM as a research and development subsidiary in Coventry.
1994:: Molins acquires Sandiacre to extend the company into the specialty packaging market.
1996:: The company acquires Langen (Canada) and Langenvac (Netherlands), extending into carton packaging.
1997:: The company creates Molins Food Machinery to capitalize on successful development of pyramid teabag machinery.
2000:: The company moves into providing services to the tobacco industry.
2002:: The company acquires Arista Laboratories, a provider of analytical services to the tobacco industry.