Industry Roundup On Recent Happenings

Some interesting information has been shared by public companies over the past couple of days as well as some construction forecast information.

1. Hubbell purchased Burndy this week, netting itself a $225M company for $360M. On the surface this appears to be a nice fit for Hubbell, and presumably Burndy will eventually (no sense of when) fit into the HEP family given its product profile (and parts could go into Hubbell Power as 37% of Burndy’s sales were to the utility market). This makes Hubbell an even stronger competitor to T&B and Cooper.
2. Hubbell’s electrical business was down 22% in the 2nd quarter according to its quarterly report. Could they be taking some share? And if so, in what product categories?
3. Cooper reported their Q2 results. Sales were down 25% and gross margins declined by 3 points. The sales decline is consistent with what we have heard from some other manufacturers across many product categories. The margin erosion could be due to reduced pricing to maintain, or capture, market share (which is something we are also seeing in many markets).
4. T&B’s quarterly report showed a 28% sales decrease across the business.
5. Encore’s quarterly report showed a 20% year over year unit decrease and mentioned about price competitiveness (hence some margin erosion). They also mentioned that Q2 over Q1 had unit declines, reflecting challenges in the marketplace and a common refrain from manufacturers of “the market moving forward is uncertain.”
6. WESCO reported their quarterly results, sales were down 25.6% (sound familiar as an industry) and interestingly margins were down only 20 basis points (.2), which infers very good inventory management and cost-savings controls. The company has quiety reduced its workforce by over 900 people (and remember, WESCO is in more segments than just electrical). Given that WESCO’s customer base is more industrial and larger companies (and hence employers) it stands to reason that as the industrial market (and some large contractors) go, so will WESCO go

It’s important to note that all of these companies are comparing themselves vs. last year (which they need to) but that the first half of last year was still pretty good for many companies. The wheels fell off the bus late in the third quarter and we’ve broken all of the axles since then.

1. To learn of a new competitor, go to www.gogreensavegreen.com. An online lighting project service (which is probably backed by a full-service or lighting distributor.) Good lead generation tool, but now you may have someone else’s pricing driving project pricing in your market. Wonder which rep will get the credit?
2. Sat in on a Reed Construction Forecast webinar this afternoon. Presenters included an economist from AGC, one from AIA and another from Reed. Feel free to download the slide presentation. Couple of interesting points that were made (aside from the information in the slides which we’ll leave to you):
• AGC has identified about 130+ stimulus programs, some which don’t apply to the electrical industry. They can be found at www.agc.org/stimulus.
• All three economists see some demand for “green” construction, especially in the retrofit markets (commercial and residential), however, due to the economy and everyone being cost-conscious, the market isn’t growing as dramatically as it could, even with government and utility stimulus. Once the economy begins to recover, “green” demand is expected to grow “dramatically” (in the words of the presenters).
• Remodeling is growing with 50% of residential construction being remodeling. When the economy improves, this is expected to grow to 60%. The remodeling / renovation market is larger than the new residential market. Commercial remodeling/renovation is also growing. From an electrical industry perspective, much of this renovation could be energy efficiency initiatives as well as datacom (especially in the educational, healthcare and institutional / government markets

What is your forecast for the 3rd quarter? Your crystal ball for 2010? Thoughts re: Hubbell and Burndy? Are you seeing share changing for the above manufacturers?