Solid First-Quarter Sales Reflect Higher Commodity Prices and Increasing Demand

April 30, 2004
The first-quarter financial statements for publicly held electrical are encouraging, with several firms registering double-digit increases in sales and earnings over first-quarter 2003.

The first-quarter financial statements for publicly held electrical are encouraging, with several firms registering double-digit increases in sales and earnings over first-quarter 2003.

Factors at play for the boosted sales performances include manufacturers and distributors passing the commodity steel and price increases on to their customers and four additional sales days in first-quarter 2004 over first-quarter 2003. A sampling of these forecasts follow.

Grainger sales increase 8 percent in first quarter W. W. Grainger Inc., Lake Forest, Ill., reported first-quarter sales of $1.2 billion, up 8 percent over the prior year’s first quarter. Sales in the branch-based distribution segment increased by seven percent. Sales in the United States were up 6 percent, while a weak U.S. dollar accounted for Canada’s 15 percent increase in sales for the quarter. Sales in Mexico were up 13 percent for the quarter driven by increased Internet sales, telesales and the effect of two branch expansions in 2003. Government sales rose 9 percent; national accounts grew 7 percent; and all other customer accounts were up 5 percent. Sales processed through increased 25 percent to $143 million from $115 million in 2003. Sales for Grainger Integrated Supply were up 3 percent for the quarter due to sales at new customer sites. In other news at Grainger, the company opened its ninth distribution center in New Jersey. CEO Richard Keyser said all of the company’s distribution centers are now up and running. Eaton first-quarter sales surge 16% First-quarter sales at Eaton Corp., Cleveland, were a record $2.24 billion, 16 percent above the same period in 2003. Net income was $134 million, compared to $72 million in 2003, an increase of 86 percent. Sandy Cutler, Eaton chairman and CEO, said, “We are very pleased with our first quarter, which exceeded our previous guidance. Sales growth in the first quarter of 16 percent consisted of 2 percent from acquisitions, 4 percent from higher exchange rates, and 10 percent from organic growth. Our organic growth was made up of 6 percent growth in our end markets and 4 percent growth from outgrowing our end markets.” In the Electrical segment, Eaton’s first-quarter sales were $611 million, up 19 percent over 2003. Excluding the impact of the Delta acquisition and the new joint venture formed with Caterpillar, first quarter sales were up 12 percent compared to 2003. Operating profits in the first quarter were $45 million. Operating profits before restructuring charges were $50 million, up 52 percent from results in 2003. “End markets for our electrical business grew about 2 percent during the first quarter,” said Cutler. “Growth appears to be accelerating modestly, but significant pockets of weakness still exist, particularly for larger industrial and commercial projects. We announced in early March the acquisition of the Electrum Group. This acquisition, while small in size, significantly expands our capabilities to serve the telecommunications, data center and government power markets.”

Genlyte announces 16.6 percent increase in first-quarter sales

Genlyte Group Inc., Louisville, Ky., said its first-quarter sales of $277.4 million were 16.6 percent higher than the $237.9 million reported during the same period last year. Larry Powers, the company’s chairman, president and CEO said, “We are pleased to report first-quarter sales and earnings increases despite relatively soft commercial and industrial construction market conditions. “We are experiencing extreme cost increases from steel, ballasts, medical insurance, pension expense, freight, energy, and packaging materials. The market price of cold rolled steel has surged by 68 percent from December of last year. Insurance costs are up over 24 percent and energy costs are also up significantly. The impact of these cost increases outweighs the benefit of 1.8 percent increase of the comparable sales. We have announced a price increase ranging by product from 5 percent to 8 percent to offset some of these cost increases. We are optimistic that these price increases will hold in the marketplace.” Powers added that the commercial construction markets have been forecasted to improve later this year and continue in 2005. “For the present time, however, we are doing our best to control expenses and take opportunistic product and marketing initiatives until the overall market conditions improve,” he said. “These actions include continuous product development and focusing our sales force toward the more active markets such as retail, schools and health care.” Encore Wire sets new sales and earnings recordsEncore Wire Corp., McKiney, Texas, said its net sales for the first quarter of 2004 increased 137 percent to $158.9 million compared to $67.2 million during the first quarter of 2003. The $158.9 million in net sales represents a new quarterly record for Encore, eclipsing the previous high of $123.1 million set in the fourth quarter of 2003. Shipment volume, measured in copper pounds sold, increased by 49 percent over the first quarter of 2003. Higher prices for building wire sold in the first quarter of 2004 accounted for the remainder of the increase in net sales dollars versus the first quarter of 2003. Sales prices for wire rose due to increases in the price of raw copper and favorable market conditions that allowed for increased margins on wire sold. Net income for the first quarter increased to $13.3 million, versus a loss of $500,000 in first-quarter 2003. Vincent Rego, the company’s chairman and CEO said, “Margins are returning to levels last seen in the 1996-to-1998 time frame. However, today we are a much larger company in terms of unit volume than we were then. Our industry has historically enjoyed strong margins when raw copper prices increase. Our highest gross margins in 1998 occurred when copper averaged $0.85 for the quarter, illustrating that the most important factor driving margins is pricing discipline in the wire market. Over the last few quarters we have seen increased pricing discipline in the marketplace from our competitors.” Cooper Industries raises earnings outlook for the year Cooper Industries Ltd., Houston, reported an 11 percent increase in revenues in the 2004 first quarter to $1.06 billion, compared with $957.8 million for the same period last year. Operating earnings for first-quarter 2004 were $114.2 million, a 26 percent increase over first-quarter 2003. Net income for first-quarter 2004 was $77.7 million, compared with $56.6 million in the 2003 first quarter. “We are off to a very good start for 2004, and we are progressing nicely with the execution of our key initiatives to improve productivity, reduce costs, generate excess cash and grow our businesses globally,” said John Riley Jr., chairman, president and CEO. “As we enter the second quarter, we are encouraged by what we see as signs of an improving economy both here in North America and on a global basis. It remains to be seen, however, if this momentum does indeed foretell a broad-based recovery that will continue throughout the balance of the year. We are mindful of the increasing pressure of rising commodity prices as well as the threat of possible increases in interest rates, and the potential impact these measures may have on our performance going forward. Despite this, we are seeing positive commercial dynamics both inside and outside our businesses.” Hughes Supply feeling bullish on sales and earnings for 2004 At Hughes Supply Inc. Orlando, Fla., revenues for the first quarter of fiscal year 2005 are now expected to be in the range of $965 million to $975 million, an increase of 23 percent to 25 percent, with estimated same store sales growth of 11 to 13 percent. Hughes is experiencing stronger sales in most of its businesses due to increased commercial and public sector construction activity and continued strength in the residential construction market. In addition, the recent price increases in commodities such as steel, PVC, copper, nickel and lumber, have contributed to higher sales and improved margins over last year’s first quarter. The price increases are estimated to account for approximately one-third of Hughes estimated same store sales growth rate in the quarter. Tom Morgan, president and CEO said, “As we indicated early last month, strength in the commercial construction sector and higher commodity prices were expected to favorably impact sales and margins in the first quarter, but we clearly underestimated the magnitude of the impact. Stronger than expected demand, driven in part by our sales and marketing programs, coinciding with a higher pricing environment has resulted in an abnormal quarter that has not been experienced at Hughes in recent years. While this clearly translates into higher margins and earnings, and demonstrates the leverage that can be achieved in a distribution business, we remain cautious regarding the outlook for the remainder of the year.” Hughes currently expects its organic sales growth rate to be approximately 5 percent during the remainder of fiscal year 2005 with revenues ranging from $3.75 billion $3.8 billion, an increase of 15 to 17 percent over the prior year; and net income of $95.6 million to $100.1 million, an increase of 66 to 74 percent over the prior year. Hubbell reports solid first-quarter results Hubbell Inc., Orange, Conn., enjoyed an 11 percent sales increase in first-quarter 2004, to $465.2 million from the $419.4 million reported for the corresponding period of 2003. Net income was $34 million, as compared to $21.7 million in the prior year. “The biggest challenge during the quarter was rising raw material costs,” said Timothy Powers, President and CEO. “Steel, copper, nickel, aluminum and other commodity costs rose significantly over the last six months. As a result, we’ve announced price increases to partially counter the impact. The net impact of the cost and price increases had only a small effect on the first quarter. The greater impact on our costs and pricing will be seen in the second quarter and the remainder of 2004. The first quarter was stronger than we expected. As a result, we are raising our full year projection for sales to increase 4-to-8 percent, year-over-year. As we’ve noted in recent months, about 70 percent of our products are sold to markets that are bottoming or showing a positive trend. That bodes well for renewed growth later in 2004 and in 2005.” Powers said he was cautiously optimistic about the remainder of 2004. , however commodity costs are high and volatile. It’s difficult to forecast whether these costs will continue to increase or begin to decline, and at what rate. The amount of realization of recent price increases across the industry is still uncertain. And the question remains whether the increase in activity in our markets will be sustained for the remainder of the year.”