February 2007 - Modern Distribution Management

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February 2007

Home Depot Outlines Plans to Refocus on Retail (UPDATED)

Free, Management, News, Strategy, Subscriber Only /

Home Depot CEO Frank Blake reinforced his drive to refocus on the business’ retail division at the company’s annual investor and analyst conference. To that end, Blake told participants that acquisitions outside of the retail core won’t be a priority for us.


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HD Supply ended the year at 12% of Home Depot’s overall sales – HD hopes that number will grow to 15% by the end of the year. Still HD Supply, which reached $12 billion in sales in 2006, had a 6.9% decline in organic growth in the fourth quarter. That is consistent with the down housing market.


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Retail also suffered in the fourth quarter 2006 with a profit drop of 28%. Sales were up just 4%. For the year, organic growth was down 2.8%.


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HD does not expect …

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Barnes Group Inc. Acquires Di-Dro Manifold Systems Line

Companies, Finance, Free, Mergers & Acquisitions, News, Subscriber Only, Top Distributor Sectors /

Barnes Group Inc., Bristol, CT, has acquired the assets of the Di-Dro Manifold Systems product line from Di-Dro Systems Inc. The Di-Dro Manifold System product line will be integrated into Barnes Group Inc.’s Associated Spring business segment.


The Di-Dro Manifold System product line is complementary to Associated Spring’s Nitrogen Gas Spring Manifold System product line. The addition of the Di-Dro Manifold System product line expands the company’s reach in high-quality gas springs for use in diverse industrial applications requiring high force and/or compact dimensions. Applications range from tool and die manufacturers, to industrial robots, to dump trucks to waste compressors around the world.


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HD Supply White Cap Agrees to Buy GSI

Companies, Finance, Free, Mergers & Acquisitions, News, Subscriber Only /

HD Supply White Cap Construction Supply, a business of HD Supply, has agreed to acquire GSI General Materials LLC, a distributor of concrete accessories, forming systems and fabricated rebar.


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GSI operates two North Carolina facilities and two South Carolina locations, and employs 72.


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HD Supply White Cap Construction Supply is the construction supply business unit within The Home Depot’s HD Supply Division, a distributor of specialty hardware, tools and materials targeting construction contractors.


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With the addition of GSI General Materials, HD Supply White Cap Construction Supply will operate 160 branches in 27 states.



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SKF to Acquire Asian Manufacturer

Fasteners, Finance, Mergers & Acquisitions, News, Power Transmission/Motion Control/Fluid Power, Subscriber Only, Top Distributor Sectors /

SKF has agreed to acquire ABBA Linear Tech Co., Ltd., an Asian manufacturer of profile rail guides, based in Taiwan.


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The ABBA Group has annual sales of about MSEK 250. It is headquartered in Taipei, Taiwan and has facilities in Taiwan and in China.


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With the addition of ABBA’s product range, SKF is reinforcing its position in linear guides. The acquisition is in line with the SKF Group’s strategy to strengthen its different technology platforms and to grow in Asia.


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ABBA will be part of the SKF Actuation & Motion Control business unit within the Industrial Division.


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More Breaking News
European …

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New Orders for Manufactured Goods Down in January

Economic Trends, News, Research & Analytics, Subscriber Only /

New Orders
New orders for manufactured durable goods in January decreased $17.1 billion or 7.8 percent to $203.9 billion, the U.S. Census Bureau announced in a preliminary release. This followed two consecutive monthly increases including a 2.8 percent December increase. Excluding transportation, new orders decreased 3.1 percent. Excluding defense, new orders decreased 7.8 percent.

Shipments
Shipments of manufactured durable goods in January, up five of the last six months, increased $0.5 billion or 0.2 percent to $211.4 billion. This followed a 0.5 percent December increase.

Unfilled Orders
Unfilled orders for manufactured durable goods in January, up twenty of the last twenty-one months, increased $1.0 …

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Sweden-based AxIndustries Acquires AB Sverull

Finance, Free, Mergers & Acquisitions, News, Power Transmission/Motion Control/Fluid Power, Subscriber Only, Top Distributor Sectors /

Stockholm, Sweden-based AxIndustries has acquired AB Sverull, a distributor of bearings, transmissions and seals, also based in Sweden.


Sverull has annual sales of SEK 125 million with more than 45 employees&nbsp ; at offices in five cities.


After the acquisition, AxIndustries will have annual sales of more than SEK 600 million in bearings, transmissions and seals. It has mroe than SEK 1.1 billion in sales overall. AxIndustries is a part of Axel Johnson International.


Sverull will continue to be run as an independent company in AxIndustries.


More Breaking …

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USG to Buy California Wholesale Material Supply for $280M

Building Materials/Construction, Finance, Free, Mergers & Acquisitions, News, Subscriber Only, Top Distributor Sectors /

USG Corp, Chicago, IL, announced its specialty distribution subsidiary, L & W Supply, will acquire California Wholesale Material Supply Inc. for $280 million.


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California Wholesale Material Supply is a distributor of building materials with annual sales of $600 million. It has 30 locations in seven Western states and Mexico and nearly 900 employees.


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The acquisition is expected to help USG enhance L & W’s reach on the West Coast and in the Southwest.


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L & W Supply contributes about $2.5 billion to USG’s annual sales.


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USG also announced it would build a new plant in northern California to manufacture about 1 billion square feet of SHEETROCK …

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Airgas to Raise Prices

Companies, Free, Gases & Welding Equipment, News, Subscriber Only, Top Distributor Sectors /

Higher electricity and energy prices, as well as metals prices, have led Airgas, Inc., Radnor, PA, to increase prices on packaged and bulk gases, and other products.


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We are facing rising costs, even though the escalation of the past year has moderated, said Airgas Chairman and CEO Peter McCausland.


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Prices will increase, on average:




  • 10%-15% for packaged and bulk industrial gases, including oxygen, nitrogen, and argon; acetylene and other fuel gases; specialty gases; process chemicals and rare gases; medical gases; nitrous oxide, carbon dioxide, hydrogen, and dry ice;


  • 15%-25% for helium

Effective immediately, Airgas also will raise rental rates for cylinders and bulk tanks …

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Industrial Production Falls 0.5% in January

Economic Trends, Free, News, Research & Analytics, Subscriber Only /

Industrial production decreased 0.5 percent in January after an increase of 0.5 percent in December. Output in the manufacturing sector declined 0.7 percent in January; about one-half of the decrease was a result of a drop of 6 percent in motor vehicles and parts.


The output of utilities rebounded 2.3 percent, as temperatures moved back toward seasonal norms, while the output of mines moved down 1.2 percent. At 111.9 percent of its 2002 average, overall industrial output for the month was 2.6 percent above its January 2006 level.


The rate of capacity utilization in January fell 0.6 percentage point, to 81.2 percent. Even so, it was 0.1 percentage point above its year-earlier level and 0.2 percentage point above its 1972-2006 average.


Market …

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MDM News Digest 3704

Free, Subscriber Only /

HD Supply reported sales of $12.07 billion in fiscal 2006, an increase of 161.6 percent over 2005. Most of that growth was driven by the almost $4 billion in acquisitions made in the past year when HD Supply bought diversified distributor Hughes Supply for $3.4 billion. In the fourth quarter 2006, sales for HD Supply grew by 64.4 percent to $2.9 billion. In 2006, the retail division had sales of $79 billion, up 2.6 percent. Overall, sales at The Home Depot were $90.8 billion, 11.4 percent over last year, with profit steady at $5.8 billion. Comparable store sales for the year were down 2.8 percent. Home Depot had a slow fourth quarter, with profit falling 28 percent to $925 million from $1.3 billion last year. Sales in the fourth quarter were $20.3 billion overall, …

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MDM Interview, Part I: Wolseley CEO on Distributor’s Localized Strategy

Companies, Management, Strategy, Subscriber Only, Top Distributor Sectors /

Wolseley CEO Chip Hornsby sat down with MDM recently to talk about the distributor’s market moves, its localized strategy, the current housing market and the importance of leadership training. Hornsby also addressed the $25-billion global distributor’s potential expansion into new but complementary sectors, which should slow while the company digests the acquisitions it has made in the past 18 months.

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Wolseley is the parent company of Stock Building Supply and HVAC/plumbing distributor Ferguson in the U.S. The second part of this interview, focused on Wolseley’s European ambitions, will be in the March 10 issue of MDM.

MDM: What are the key issues for Wolseley in North America to develop markets in terms of services, product mix, …

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Commentary: The Let’s-Make-A-Deal Decade in Distribution

Finance, Mergers & Acquisitions, Perspective, Research & Analytics, Subscriber Only /

Last week saw a feeding frenzy of rumors in distribution, with action on both sides of the Atlantic. The biggest hunters suddenly became the hunted.


The history of independent distribution channels has repeatedly provided pointed lessons that size, more often than not, is the real giant slayer. It is tough to institutionalize flexibility and strong service levels – the hallmark of local distribution – across states, much less international borders. The next few years may tell whether there is an opportunity to create a global platform that doesn’t self destruct on its own growth plans.


Some might say too much money is overheating valuations and expectations. The surprise is that the M & A market in distribution (and overall) remains hot in 2007, with most expecting …

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Monthly Wholesale Trade: Sales and Inventories for December 2006

Economic Trends, Research & Analytics, Subscriber Only /

December 2006 sales of merchant wholesalers, except manufacturers’ sales branches and offices, were $337.1 billion, up 1.8 percent from the revised November level and were up 8.6 percent from the December 2005 level. December sales of durable goods increased 1.1 percent from last month and were up 7.0 percent from a year ago. Compared to last month, sales of hardware and plumbing and heating equipment and supplies were up 4.2 percent and sales of motor vehicle and motor vehicle parts and supplies increased 2.9 percent. December sales of nondurable goods were up 2.5 percent from last month and were up 10.2 percent from last year.


Inventories . Total inventories of merchant wholesalers, except manufacturers’ sales …

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Case Study: Outsourced Billing

Research & Analytics, Subscriber Only, Top Distributor Sectors /

In the mid-1990s, Mayer Electric Supply, Birmingham, AL, prepared and mailed its invoices and statements in-house. The distributor had employees who printed the mailings on high-speed printers at night and used a machine to fold and stuff the mailings. It also maintained a Pitney-Bowes postal machine.


It was quite a cost factor to do all of that, says Mayer Electric CIO Barry Carden.


So Mayer started looking at outsourcing its paper billing. The electrical distributor, which serves mostly the Southeast U.S., found a provider in 2001. Despite a few issues – like some double mailings – the service worked well and saved Mayer time and money. But that company was sold to a larger corporation, which decided to cut smaller customers out of the mix, including …

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Wholesale Revenues Rise 9.8% in 2006

Economic Trends, Research & Analytics, Subscriber Only /

Wholesaler-distributor revenues were $3.903 trillion last year, up 9.8% from 2005, unadjusted for seasonal variations. Wholesale revenues for durable goods were up 8.8%, and nondurable goods sales were up 11%. The increase in sales was slower than in years’ past, partly due to a slowdown in commodity inflation.


The MDM Inflation Index, which measures a cross-section of industrial supplies, rose 3.47 percent from December 2005 to December 2006. In comparison, the index rose 5.58% from December 2004 to December 2005. Here’s the breakdown in sales by sector for 2006.


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MDM February 25, 2007

Subscriber Only /

This is the pdf of this issue of Modern Distribution Management. Apply the full $24.95 pay-per-view cost toward an annual subscription (within 30 days of purchase), which includes two issues a month plus access to more than six years of online archives and market data. Call 1-888-742-5060 or email info@mdm.com to …

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Case Study: Minimizing Surplus Inventory

Strategy, Subscriber Only, Top Distributor Sectors /

Company Snapshot:



  • Number of branches: 45

  • Number of employees: 450

  • Key customer base: Food processing, manufacturing, industrial



Inventory management provides both a challenge and an opportunity for all distributors. Our stock is our lifeline. If we do not maintain adequate supplies of merchandise, we lose sales. On the other hand, inventory costs money. The ongoing struggle is to have just the proper amount on hand, but not too much.


In past years, we’ve fallen into the distributor habit of not thinking about surplus inventory until the end of the year. During an annual inventory taking, it was obvious that we had accumulated way too much stock on our shelves.


Recently, we’ve …

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Praxair to Buy Linde’s Gases Business in Mexico

Companies, Finance, Free, Gases & Welding Equipment, Mergers & Acquisitions, News, Subscriber Only, Top Distributor Sectors /

Praxair Inc., Danbury, CT, has agreed to buy The Linde Group’s industrial and medical gases business in Mexico. Linde’s Mexican business operates under the name of AGA S.A. de C.V. The transaction excludes the Mexican assets of the BOC Group, which Linde acquired as part of its acquisition of BOC.

The sale of Linde’s Mexican business is part of a mutual agreement between Praxair and Linde under which Linde acquired the Turkey-based industrial gases producer Karbogaz A. S. in July 2006. Karbogaz was formerly a joint venture company between Praxair and Ismail Aytemiz of Istanbul, Turkey.

AGA S.A. de C.V. has sales of about $75 million in fiscal 2006.

The acquisition of AGA S.A. de C.V. will increase our presence in the metropolitan area of Mexico City and place …

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Interline Sales Grow 25% in 2006

Companies, Facilities Maintenance (MRO), Free, News, Subscriber Only, Top Distributor Sectors /

Interline Brands, Jacksonville, FL, reported sales for fiscal 2006, increased 25% to $1.068 billion. Average organic daily sales grew 8.3%.


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Profit was $31.2 million in 2006, compared with $28.8 million in 2005.


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The acquisition of AmSan in July 2006 added $129.8 million to the second half of 2006, and the acquisition of Copperfield in July 2005 added $18.6 million the first half of 2006. Average daily sales growth, as a result, grew 25.8% for the year.


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In the fourth quarter 2006, sales grew 30% to $67.3 million. Average daily sales growth was 29.8%. Average organic daily sales growth was 2.6%.


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Interline’s facilities maintenance market, representing 60% of sales in the fourth quarter, …

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Milacron Reports Net Loss for 2006

Chemicals & Plastics Distribution, Free, News, Power Transmission/Motion Control/Fluid Power, Subscriber Only, Top Distributor Sectors /

Milacron Inc., Cincinnati, OH, reported a net loss for the year of $39.7 million, compared with a net loss of $14 million in 2005.


Sales in 2006 reached $820 million, up from $809 million in 2005. New orders were $828 million compared to $819 million in the prior year.


In the fourth quarter of 2006 of $8.6 million, including $5.1 million in restructuring costs and $1.8 million in refinancing charges. This compared to net earnings in the fourth quarter of 2005 of $5.8 million, which included a $5.5 million tax benefit.


Fourth quarter sales were $198 million, down from $217 million in the year-ago quarter. New orders were $203 million, compared to $212 million in 2005. The bulk of new orders came late in the quarter, which negatively impacted …

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