Electrical distributor respondents in the latest industry survey by Vertical Research Partners (VRP), Stamford, CT, logged a solid quarter of growth, but price increases hit home during 1Q 2021 in the electrical industry, according to VRP’s findings.
As part of its research for this quarterly survey, VRP surveys readers of EM and Electrical Wholesaling, in addition to additional contacts in the electrical market. Below is an excerpt of the survey and some of its findings. Click on the green box below to get VRP’s 1Q 2021 report.
Recovery stepping up. Q1 distributor revenue grew +5% year-over-year, including volume growth of +3.3% and pricing gains of +1.7%. Results likely embed some level of conservatism as several respondents indicated sales up “more than +10%” which we included as +12.5% in our calculations in the absence of further detail. Power transmission & distribution led the way again with +5.6% growth as utility spending continues. Automation equipment showed a solid return to growth, up +4%.
After six quarters of reported declines. electrical equipment grew +4.5% including the most robust pricing result among categories — a +1.8% increase.
Supplying the demand is the biggest challenge. Underlying activity remains solid and the main impediment to achieving budgets is clearly the supply chain issues the entire industry is working through. Employee availability and remote work are also having an effect. Several distributors said backlogs remain at record levels, but that supply chain and other availability issues (labor, etc.) are limiting the ability to complete projects. A few distributors reported being in decent shape as a result of having made large prebuys anywhere from twice to five times normal purchasing levels.
ABB indicated that its stronger than expected Q1 may have reflected some restocking strength. In aggregate, we think things are too tight for distributors to be able to overstock, with full replenishment of inventories possibly taking most of this year. Some distributors indicated good visibility for continued activity through this year as projects that were already underway move to completion but see a cloudier outlook after that. Stimulus optimism seemed concentrated in denser urban settings where infrastructure spend on roads, airports, etc., is likely to accrue. We heard continued rumblings of extended terms and late payments from customers though bankruptcies have been rare to date.
Passing along price. Reported pricing results were among the highest seen since the 2015-2016 period. Some distributors said it has become more difficult to pass along price but the inflationary environment is generally supportive of price increases. There could also be some conservatism in the reported results with many distributors indicating pricing up “more than +2%”. We picked up on some increased aggressiveness from suppliers, with former OEM price increases of +3% to +7% now consistently in the +7% or higher range.
If you are interested in participating in this survey, contact VRP’s Nick Lipinski at [email protected] / 203-276-5661. All respondents receive a detailed copy of survey results.
