2Q Financial Reports Batter Industry Firms

July 30, 2009
The most recent round of financial reports for publicly held companies in the electrical industry makes for pretty grim reading

The most recent round of financial reports for publicly held companies in the electrical industry makes for pretty grim reading, as double-digit declines in sales and net income were the rule rather than the exception. Following is a sampling of these financial results.

WESCO endures job cuts and decreases in sales and operating income. Along with having to eliminate more than 900 positions from 2008 staffing levels, like many other companies in the electrical market WESCO International Inc., Pittsburgh, has had to take major cost reduction measures to cope with decreases in sales and operating profits. Its consolidated net sales for the second quarter of 2009 dropped 27 percent to $1,159 million compared with $1,588 million for the second quarter of 2008. Operating income for the quarter was $47.6 million versus $96.8 million in last year’s comparable quarter,

Stephen Van Oss, senior vice president and chief administrative officer, said, “Our cost reduction efforts will continue throughout the remainder of the year. Actions are focused on branch optimization, staffing adjustments, and further elimination of discretionary expenses. Through the second quarter, we have made staffing adjustments of over 900 positions from last year’s employment levels. We are on target to reduce overall 2009 SG&A expenses by over $140 million compared to 2008.”

Eaton 2Q sales slide 32 percent. Eaton Corp., Cleveland, announced that its sales in the second quarter were $2.9 billion, 32 percent below the second quarter of 2008. Net income was $29 million compared to $333 million in 2008. The company’s second-quarter sales for its Electrical Americas segment were $881 million, down 14 percent compared to 2008.

“Our sales in the second quarter were only slightly higher than in the first quarter of 2009, reflecting little improvement in the challenging global economic conditions,” said Alexander (Sandy) Cutler, Eaton chairman and CEO. “End markets for our Electrical Americas segment declined approximately 22 percent during the second quarter. Both non-residential electrical and power quality markets declined in the high teens, while residential electrical and industrial controls markets declined about 30 percent. We now anticipate markets in our Electrical Americas segment will decline by 20 percent for the full year. The European electrical markets declined steeply in the quarter, down 24 percent. Asian markets fared a bit better, declining by 15 percent. We now anticipate markets in our Electrical Rest of the World segment will decline by 17 percent for the full year.”

Cutler added that significant destocking and inventory liquidation continued in virtually all of Eaton’s segments during the quarter. “As we survey our end markets, the year is shaping up to be considerably weaker than we had forecast in April. We now anticipate our overall end markets will decline by between 21 and 22 percent versus our earlier forecast of a decline between 15 and 16 percent.”

Thomas & Betts electrical segment 2Q sales decline 30 percent. Thomas & Betts Corp. (T&B), Memphis, Tenn., reported net sales of $461 million for the second quarter 2009, down 28.1 percent year over year. In the company’s Electrical segment, second quarter sales were $383.4 million, down 30.4 percent year over year. Foreign currency contributed approximately $36 million, or seven percent, to the sales decline. Volumes were lower across all market segments and geographies.

“2009 has proven to be considerably more challenging than anticipated, with continued pressure in our key markets,” said Dominic Pileggi, chairman and CEO. “The lack of any meaningful improvement in credit availability has crippled capital investment in the global industrial base and severely curtailed spending on construction projects. In addition, we have not yet seen any notable impact from government-initiated stimulus spending.

“The result is an unprecedented decrease in demand. While we have responded aggressively by reducing headcount, freezing wages and cutting discretionary spending, it has not been possible to fully offset the earnings impact of such a significant drop in sales volume.”

Drop in copper prices contribute to decline in 2Q sales for Encore Wire. Encore Wire Corp., McKinney, Texas, said its 2009 second-quarter net sales were $159.4 million compared to $322.8 million during the second quarter of 2008. A company release said lower prices for building wire sold in the quarter accounted for most of the decrease in net sales dollars, which declined 38.1 percent per copper pound sold versus the same period in 2008. Unit sales in the second quarter of 2009 decreased 20.2 percent versus the second quarter of 2008. Sales prices fell primarily due to lower copper prices and building wire industry competition.

Said Daniel Jones, the company’s president and CEO, “The current financial crisis has raised uncertainty amongst builders and buyers of buildings across America. This uncertainty has also affected our competitors and created a volatile pricing environment in our industry that compressed the spread between what we paid for a pound of copper versus what we were able to charge for wire that contained a pound of copper. In the second quarter of 2009, this spread fell by 9.4 percent versus the second quarter of 2008 and it fell by 5.1 percent versus the first quarter of 2009. We attempted to lead the industry with several price increases during the quarter, but met limited success, as the average price of wire sold increased only 21 percent, while copper costs increased 34 percent on a sequential quarter basis.”

Cooper Industries 2Q revenues decline 26 percent to $1.3 billion. Cooper Industries, Houston, said its second-quarter 2009 revenues decreased 26 percent to $1.27 billion, compared with $1.72 billion for the same period last year. Revenues for its Electrical Products group for the second quarter decreased 25 percent to $1.13 billion, compared with $1.51 billion in the second quarter 2008.

“In the second quarter, while our book-to-bill ratio stabilized, we did not experience the normal seasonal increase in revenues,” said Kirk Hachigian, Cooper Industries’ chairman and CEO. “As a result, our revenue for the quarter was at the low end of our forecast. However, our intense cost management across the company allowed us to deliver earnings per share at the top end of the forecast.”

Rockwell Automation reports 31-percent sales decline in its fiscal 3Q. Rockwell Automation Inc., Milwaukee, reported fiscal 2009 third quarter revenue of $1,010.8 million, down 31 percent compared to $1,475 million in the third quarter of fiscal 2008. Sales for the company’s Control Products & Solutions business unit for fiscal 2009 third quarter sales were $611.3 million, a decrease of 28 percent from its 2008 fiscal third quarter.

“Based on mixed results in macroeconomic indicators and stabilization in our own demand trends, it appears that we may be approaching the bottom of the cycle,” said chairman and chief executive officer Keith Nosbusch. “However, the outlook for the global economy is still uncertain, and we have yet to see evidence of an upturn.”

Anixter reports 2Q sales decline of 25 percent. Anixter International Inc., Glenview, Ill., reported a 25 percent decline in its second-quarter sales to $1.22 billion, compared to sales of $1.62 billion in the year ago quarter. The company said unfavorable foreign exchange rates and $50.7 million in estimated unfavorable effects from lower copper prices were two of the reasons for the decline, but said that the rate of recession may be slowing.

“Our North American enterprise cabling and security sales were down 13 percent year-on-year. However, one sign that conditions in the North American enterprise cabling and security market may be nearing bottom was that sales within this market were up 2 percent on a sequential basis from the first to the second quarter of this year,” said Robert Eck, president and CEO.