Publicly-held electrical equipment manufacturers, distributors and contractors that released their latest quarterly and annual reports over the past couple of weeks paint a picture of having survived an absolutely brutal year and overall express cautious optimism about market conditions over the next three to 12 months. Here’s a roundup of their results and comments.
Higher wire prices cover unit sales drop, but not copper spread
Distributors hawkish on inventory and will stay that way, T&B says
WESCO sees some early signs of improvement
Industrial MRO may be turning upward says Hubbell’s Powers
Rockwell seeing signs of recovery
Higher wire prices cover unit sales drop, but not copper spread
Encore Wire, McKinney, Texas, reported a drop of 13.1 percent in unit sales in the fourth quarter versus the fourth quarter of 2008. The declines were offset by higher prices for building wire, which increased 13.2 percent per copper pound sold, but the increase in selling price didn’t make up for an increase of 57.1 percent in the copper that went into the wire. The result was a loss in the quarter of $1.9 million versus net income of $16.7 million in the fourth quarter of 2008. Net sales for the year were $649.6 million compared to $1.081 billion during 2008, while net income for the year was $3.6 million versus $39.8 million in 2008.“Unit volume decreases caused by the slowdown in construction have 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,” said Daniel L. Jones, president and CEO “We attempted to lead the industry with several price increases during the quarter, but met strong competitive price cutting, as the average spread fell 8.8% on a sequential-quarter basis.”
Distributors hawkish on inventory and will stay that way, T&B saysThomas & Betts Corp., Memphis, was pleased with the performance of its electrical business segment despite a 16 percent year-over-year decline in sales. Dominic Pileggi, chairman and CEO, told analysts in the company’s conference call that the electrical segment returned earnings of $76 million or 19.3 percent of sales.
Pileggi doesn’t see distributors continuing to reduce inventory levels beyond what they’ve already done in response to the economic downturn — instead they’re replacing inventory on a one-for-one basis, a strategy he expects to see them continue until the outlook brightens.
“Distributors in general are replacing or replenishing their inventory item for item only as it moves out the door. Our distributors are capitalizing on our fast cycle logistic model that replaces their stock very quickly and helps improve their working capital,” Pileggi said. “For Thomas & Betts products, we don’t expect distributors to change their inventory management strategy until the economic recovery is more clearly evident and increased demand has proven to be sustainable.”
WESCO sees some early signs of improvement
It was a tough year for WESCO Distribution Inc., Pittsburgh, with 2009 sales declining 24.3 percent to $4.6 billion from $6.1 billion, and net profits declining 49 percent. “We successfully closed a very challenging year having taken quick and decisive actions resulting in operating cost reductions of $140 million,” John Engel, WESCO’s CEO, said. “The economy appears to be in the bottoming process as we have experienced two consecutive quarters of stable sequential sales and margins. We are beginning to see signs of positive momentum in certain end markets with continued pressure in non-residential construction and utility.”Industrial MRO may be turning upward says Hubbell’s Powers
Hubbell Inc., Orange, Conn., reported sales of $2.4 billion in 2009, including the Burndy acquisition, a decrease of 13 percent compared to 2008, while net income fell 19 percent to 180.1 million.Timothy Powers, chairman, president and CEO, expects the weak non-residential construction sector to struggle again in 2010. “During the fourth quarter, weak market trends continued as expected, he said. “In our Electrical segment, the U.S. non-residential construction market continues to experience significantly lower construction spending and tighter credit markets for commercial projects. The industrial maintenance and repair markets appear to be turning up from historically low levels as capacity utilization rates have started to increase. The residential market continued to show signs of bottoming, aided by the federal tax credit for first time homeowners, which has increased demand. In our Power segment, demand was lower for our products due to restrained capital spending by utility companies as electricity usage declined.”
Rockwell seeing signs of recovery
Rockwell Automation, Milwaukee, reported a 10 percent decline in revenues in its first quarter of 2010 from the same quarter in 2009 and a 32 percent decline in income, which outperformed expectations and spurred a rally in the company’s shares.
Keith Nosbusch, Rockwell’s chairman and CEO, sees cause for optimism over the coming year. “Our first quarter performance and continued improvement in the global economy seem to indicate that we are at the early stage of a recovery. However, high unemployment, historically low levels of capacity utilization and a very cautious capital spending outlook create uncertainty as to the shape of the recovery in manufacturing.”