Acuity and ABB (Thomas and Betts) Deliver Q2 results

As promised with Friday’s post regarding the challenging first half for Rexel and WESCO, as depicted in their Q2 reports, now we’ll touch on some recent manufacturer filings.  Again, we’re being factual based upon their analyst call and their presentations:

Acuity (source)

Acuity’s report (their Q3) was earlier in the month. As many know, they are in the “red hot” LED category that also has a significant amount of competition.

• Up 13% YoY
• Sales of LEDs increased 55% YoY and accounts for 46% of its quarterly sales
• The LED market is to be worth $42 billion in 2019, up from $4.8 billion in 2012 according to MarketWatch.
• Company is focused on new product launches
• Net sales are $2.4 billion with 98% of sales coming from North American market
• According to a 2015 Acuity company profile, Acuity’s addressable market (and hence the opportunity for distributors) is:
• 
• Quarter growth driven by projects from new construction and renovation in non-resi and resi makets as well as emphasis on selling higher value added lighting solutions.
• Acuity “thinks” that the lighting market was up mid-high single digits in Q2 (their Q3) and hence they think they are taking some market share.
• GP is a record 43.2% – driven by productivity improvement, higher net sales (hence higher commission costs), lower material costs (and offset by currency issues re Canada)
• Key focus is product development – lighting solutions and controls
• Consensus for lighting for rest of year is mid to upper single digit growth and looks to continue into 2016 due to architectural building index (ABI), vacancy rates, office absorption rates, etc
• Expect continued decline in price of some LED components.
• Acuity’s tiered initiative based upon solution need (simple fixtures to integrated holistic solutions) is driving growth and expanding market potential.
• Some key market segments – healthcare, education, infrastructure (roadway and street)
• Part of lighting future is “using lighting as the backbone to collect information to help provide capability back so that they (building owner) can optimize the management of the building” – could generate new / different competitors
• Acuity estimates the installed indoor lighting base at over $300 billion!

ABB / T&B

Let’s now touch base on T&B through the ABB Q2 report and maybe a little re ABB U.S. as their overall report covers many areas that electrical distributors do not focus on given that ABB had $9.165 billion in sales worldwide!

• Overall sales were down 10% in US dollars by up 3% “like for like” (which essentially means, excluding currency issues)
• Reduced discretionary spending by oil & gas customers
• Of interest, for longer-term, is ABB’s Low Voltage Products divisions expansion into the home automation segment in Asia with its free@home smart home offering that can automate 60 household functions.

According to the analyst call and online slides:

• Low voltage grew in the US in the second quarter. Seeing success in combining, to distribution, Low voltage, Thomas & Betts and Baldor and hence capturing a higher share of wallet of the distributors.
• Soft demand in oil / gas in US
• Has a focus, through multiple divisions, on the food & beverage market
• Expect continued growth in US markets (as an overall ABB comment, ABB doing well in automotive market)
• US share of ABB Low Voltage business is 29% of orders and 29% of revenues (which includes T&B)
• Low Voltage, worldwide, was up @% in orders received, 4% in revenues.  T&B revenues outside North America contributed to worldwide low voltage revenue growth.

So, some thoughts …

• Regarding Acuity, while they are doing well, and may be outpacing the market, the key for distributors is, if you’re not over-resourcing to grow your lighting business you are, most probably, missing an opportunity to grow at a faster rate. While it takes effort to capture the renovation business (which can be higher margin), there is business available, especially if you are willing to do the missionary work to go beyond, in Acuity’s terms, Tier 1 sales to Tier 3 or 4 sales.
• Given that 46% of Acuity sales are LED, the question to a distributor becomes, what percent of your sales are LED? If not in the 40’s, then you are missing a market.
• Regarding ABB / T&B, there is business there, the industrial has slowed (led by oil / gas), currency issues for global companies is having a major effect (once again), but there are pockets of opportunities.

What is your experience with LEDs? With Acuity and T&B? Your perception of the LED market?