OREANDA-NEWS. Hillenbrand, Inc. (NYSE: HI) reported results today for the second quarter of fiscal 2016 that ended March 31, 2016.

Revenue of $387 million was 4% lower than the prior year, including 1% attributable to FX pressure.  Organic revenue of $374 million was 8% lower than the prior year. Compared to the prior year, net income decreased 15% to $26 million, or $0.41 per share, while adjusted net income was down 1% to $31 million, or $0.49 per share. Adjusted EBITDA increased 4% to $68 million, and adjusted EBITDA margin improved 130 basis points to 17.5%.  Operating cash flow of $87 million year-to-date was $77 million higher than the prior year, driven by improved working capital performance in the Process Equipment Group and the non-recurring payment of a litigation settlement in the prior year.

Process Equipment Group

Process Equipment Group revenue of $236 million was down 2%, but in line with prior year on a constant currency basis.  The business continued to experience weak end markets and lower demand for equipment. In addition, several projects in the pipeline have been pushed out, and parts and service sales, although higher than the prior year, have also been affected by lower demand. Despite the challenging market environment, overall order volume was in line with the first quarter and increased 16% organically over the prior year. Backlog grew 4% sequentially and finished the quarter at $525 million, an increase of 1% over the second quarter of the prior year, or 2% lower excluding the impact of currency.

As a result of continued utilization of the Hillenbrand Operating Model in pursuit of profitable growth, adjusted EBITDA margin of 14.8% in the quarter was 40 basis points higher than the prior year, driven by the addition of Abel and Red Valve, improvements to the mix of parts and equipment sales, as well as ongoing process improvements.

Batesville

Batesville revenue was $151 million, a decrease of 8% compared to prior year.  Volume in the North American burial market decreased, partly as a result of a lower mortality rate associated with a subdued flu season.  Additionally, Batesville continues to face the pressure of a secular decline in the burial market based on the increasing rate at which families opt for cremation.

Despite lower volume, the Hillenbrand Operating Model continues to enhance profitability. Batesville improved adjusted EBITDA margin 150 basis points to 28.4% on the strength of supply chain productivity improvements, lower commodities prices, and ongoing efforts to aggressively manage costs.

"End markets for the Process Equipment Group and Batesville continue to be challenged," said Joe Raver, President and CEO of Hillenbrand. "While we do not anticipate meaningful improvement in market conditions this fiscal year, we continue to take proactive measures to protect our profitability and prepare the business to respond to our customers' needs as demand returns. Our results continue to demonstrate our focus on what we can control, evidenced by the margin improvement in both segments in the face of continued market headwinds."

Other Noteworthy Developments

Last quarter, Hillenbrand announced expanded restructuring actions to reduce costs and better position the business to compete effectively and respond to shifting demand. Those actions continue to progress, and the business is on track to achieve the targeted savings of approximately $10 million on an annualized basis, including an estimated benefit of $4 million expected in fiscal 2016.

During the quarter, Hillenbrand closed its acquisition of Red Valve within the Process Equipment Group segment.  In combination with ABEL, Hillenbrand's flow control business contributed $13 million of revenue in the second quarter, which is in line with our expectations.  Integration activities are also progressing well as we apply the Hillenbrand Operating Model to improve profitability and drive synergies.  These results help advance Hillenbrand's platform strategy to become a leader in highly engineered and differentiated products that safely move, measure, and manage high-value fluids.