Sales and Profits Slide in Early 2002

April 26, 2002
Over the past two weeks, many publicly held electrical manufacturers and distributors released their sales and earnings reports for the first three months

Over the past two weeks, many publicly held electrical manufacturers and distributors released their sales and earnings reports for the first three months of 2002. The double-digit declines that many electrical companies are now reporting are a stark reminder that despite the positive swing in some economic indicators that measure the health of North America's industrial manufacturers, the electrical industry isn't out of the woods yet.

If there is any good news in the most recent batch of financial reports, it's that most electrical companies are seeing signs that the economy has stabilized, and believe their sales and profits will begin picking up by year-end. Here's a summary of financial reports from publicly held distributors and manufacturers in the electrical industry:

Fastenal opens 24 new locations in first three months of 2002

Fastenal Co., Winona, Minn., spent much of early 2002 adding to its distribution network by opening 24 new locations and increasing its number of employees by 3.5 percent to 4,411. The company now has 1,049 locations. The company also reported mixed news on the financial front. Bucking a widespread distribution industry trend of slower sales, Fastenal reported a net sales increase of 5.5 percent for the three-month period ended March 31, 2002. Its 2002 first-quarter sales were $214.5 million, compared to the $203.3 million in sales in the first quarter of 2001. However, its net earnings for this period decreased $20.7 million in the first quarter of 2001 to $17.7 million in the first quarter of 2002, a decrease of 14.6 percent.

Anixter 2002 first-quarter profits drop 61% over 2001 first-quarter

Reflecting the weakness of its core telecommunications customer segment, Anixter International Inc., Skokie, Ill., reported a 30 percent sales decrease in 2002's first quarter over the same period last year and a 61 percent profit decline during that same period. Sales for first-quarter 2002 were $614.7 million and profits declined to $20.5 million. Robert Grubbs, president and CEO, said, “In normal times, we would expect to see sales growth of 3 to 8 percent from the first to second quarter. While there are indications that the economy, in general, is beginning to improve, we think it is prudent to continue to take a conservative view of the timing of a recovery for our business. At the same time, we have not seen any signs that would suggest that the second quarter would be worse than the recently completed quarter. Our market leadership position and the diversity of our client base continue to give us a true advantage over our competitors. So, for the second quarter we are projecting a modest increase in sales to a range of $625 to $650 million in sales.”

Rockwell Automation reports 2% sales increase in fiscal 2002 second quarter

While it experienced a small sales increase over its first quarter, Rockwell Automation, Milwaukee, reported a decline of 22 percent in its fiscal 2002 second-quarter earnings from continuing operations, compared to the same period in 2001. Its 2002 second-quarter earnings were $58 million, down from 2001 fiscal quarter of $71 million. Sales in the second quarter were $958 million, compared to $1.2 billion in the second quarter of 2001, a 22 percent decline.

Don H. Davis, chairman and chief executive officer, said, “Sales growth of about 2 percent versus our fiscal first quarter exceeded our expectations. In addition, we achieved strong sequential earnings growth as segment operating earnings were 18 percent higher than the first quarter. These results are clear evidence of the earnings power of our businesses as well as the operating leverage produced by our cost reduction actions.”

Davis added, “Although sequential sales growth was higher than expected for the quarter, we have yet to see evidence of a sustainable recovery in the industrial economy. While we are seeing some indications that business conditions are starting to improve, we continue to operate in an uncertain economic environment.”

Thomas Industries announces record first-quarter earnings

Thomas Industries Inc., Louisville, Ky., reported that first-quarter 2002 earnings were a record for any first quarter in the company's history, although sales declined 7 percent. Net income for the quarter ending March 31, 2002, was $7.4 million versus $7.2 million in the comparable 2001 period. Net sales for the quarter were $46 million, compared to first quarter 2001 sales of $49.6 million a 7.9 percent decrease. Timothy C. Brown, chairman, president and CEO said, “Sales were down from last year's levels in North America and Europe, primarily due to the stagnant economy and the strength of the U.S. dollar. The year got off to a slow start, as our January results were down considerably. However, we are encouraged by an improved February and March performance. We are also pleased by the overall performance of the Genlyte Thomas Group (GTG), considering the continued difficult market conditions that they are operating in. The commercial and industrial sectors, which are the heart of GTG's business, continue to be particularly slow, and we look for continued weakness in the second quarter. We are still operating in a difficult environment, although we expect to see some improvement in our earnings year over year in the second half pending the results of GTG, and the weakness in commercial construction.”

Woodhead Industries second-quarter net down 95%

Woodhead Industries Inc., Deerfield, Ill., announced that its second-quarter profit sank 95 percent from a year ago, hurt by a restructuring charge taken for severance and other costs and a steep drop in sales due to weak manufacturing. Woodhead posted quarterly net income of $164,000, compared with $3.4 million, in the year-earlier quarter. Net sales for the quarter fell 18 percent, to $42.6 million from $52 million last year. Looking ahead, Woodhead projected revenue to increase between 7 percent to 10 percent over the second quarter. The company also said it anticipates that the job cuts it announced in the previous quarter, which affected about 10 percent of its global work force, will produce about $3 million in annual cost savings.

Rexel's 2002 first-quarter sales down 5.8% compared to 2001

Rexel, Paris, announced that its consolidated sales for the first quarter of 2002 slid 5.8 percent to $1.64 billion, compared to $1.74 billion for the first quarter of 2001. Sales were down 10.6 percent in North America and 4.7 percent in Europe, while sales in the company's Latin America and Oceania regions were flat. According to a company press release, the company is seeing improvement in some of its regions and in the United States in particular, and is forecasting more favorable growth for the second half of the year. In this context, Rexel said it's actively pursuing its cost-cutting measures, and upgrading the tools it will need to develop its business when the economy improves.

Schneider Electric consolidated sales down 7.1 percent

For the first quarter ending March 31, 2002, consolidated sales of Schneider Electric, Paris, were $2.0 billion. According to a company press release, the year 2001 was marked by a continuous decline of activity, accentuated in the fourth quarter. First quarter 2002 sales were down compared to the same period last year. North American sales were down 11.7 percent, and sales in Europe, the company's largest market, were down 6.1 percent. Schneider said its markets were slow in 2002 because of low industrial investments and a sluggish non-residential market. The trend in sales is more favorable in electrical distribution than in industrial automation. In North America, first-quarter sales are down 11.7 percent compared to the same period last year. However, since the beginning of the year, there are signs of a gradual upturn in orders due to the halt in inventory drawdown by distributors and a more buoyant end-user market. Although it is too early to speak of a real recovery, it is likely that orders have bottomed out in North America.

General Cable sees slower sales from telecom market

Suffering from depressed demand in its key telecommunications customer segment, General Cable Corp., Highland Heights, Ky., said net income in the first quarter 2002 fell to $4.9 million, from $11.5 million, in the year-ago quarter. It earned $3.4 million, in the fourth quarter. Although net sales fell 20 percent, to $361.4 million from $451.7 million last year, they rose slightly from the fourth quarter's $360.3 million. “With the exception of our communications activities in North America, the business conditions for our end markets in the first quarter were substantially similar to the conditions in the fourth quarter,” said Gregory Kenny, General Cable president and CEO. He said the company's efforts to control costs, combined with seasonal demand increases and improving bookings in industrial, specialty and local area networking cables, should produce earnings improvement in the second quarter from the first quarter.

Thomas and Betts restructuring program paying off

Thomas and Betts Corp., Memphis, Tenn., saw sales in the first quarter 2002 drop 13.8 percent to $342.1 million, from the $396.9 million reported in the first quarter 2001. The decline in sales was expected and is due mainly to continued weakness in the company's core electrical markets and the divestiture or discontinuation of certain non-strategic, under-performing product lines in 2001. Excluding revenues from product lines divested or discontinued, sales were down 8.7 percent compared to the year-ago period.

Earnings from operations were $9.9 million for the first quarter 2002. Excluding $12.3 million in charges associated with the company's previously announced manufacturing consolidation and efficiency program, operating earnings would have been $22.2 million versus a loss from operations of $1.1 million in the first quarter last year. The company also reported a net loss of $11.6 million in the first quarter, versus a loss of $5.0 million in the year-ago period. “For the first time since initiating the turnaround program in August 2000, our quarterly operating results clearly show the positive impact of the many actions we have taken to return Thomas and Betts to a position of strong and sustainable profitability,” said Kevin Dunnigan, the company's chairman and CEO. He said the manufacturing consolidation and efficiency program initiated in December 2001 is progressing as planned. The program affects approximately two-thirds of the company's total manufacturing operations, including all electrical products manufacturing plants in the United States, Europe and Mexico, and has three primary components: consolidating manufacturing capacity, improving productivity, and investing in tooling and equipment.

As of the end of the first quarter, the company had closed, or was in the final stages of closing, five facilities and was in the process of transitioning production from these plants to other locations. An additional six plants will be closed over the course of the program. Efficiency improvements are underway at all facilities included in the program, and investments in equipment and tooling have begun. Management expects to substantially complete the program by the end of the third quarter 2002, although some activities may extend slightly beyond this date.

Juno Lighting reports flat sales

Juno Lighting, Des Plaines, Ill., reported that its first quarter net sales were $41.4 million, roughly the same as its sales for the same period in 2001. The company said its inability to make revenue progress in this quarter was impacted by continuing weakness in the commercial segment.