In a recent interview with MDM, Profit Planning Group’s Al Bates says that distributors must manage their loss of sales volume in a down economy.
If sales are down 20%, you’ve got to make dramatic changes. In that scenario, too often distributors do what I think is absolutely the wrong thing in an attempt to free up cash,” he says. “They try to lower accounts receivable and reduce inventory to make up for selling less. Inevitably that leads to sales declines getting even worse. Back orders go up. Customer service goes down and what might be a 10% sales decline becomes a 15% sales decline.” While cutting inventory and accounts receivable is a normal reaction, Bates tells MDM that the moves are compounded by the fact distributors don’t have much cash.
Regal Beloit Corp., Beloit, WI, has acquired Joyce Court Holdings Ltd. and Grand Delight Investments Ltd., sole shareholders of Wuxi Hwada Motor Co. and Wuxi New Hwada Motor Co. (collectively Hwada) in Wuxi, China, for $27.6 million in cash.
Hwada is a designer and manufacturer of Integral IEC and NEMA electric motors, which are used in various industrial applications such as compressor, pump, paper and steel processing, and power plants. The product line includes motors up to 5000 kw (6700 hp). Approximately 50% of Hwada’s product sales are in the China industrial markets. The other 50% is exported to Europe (35%), the U.S. (10%) and Southeast Asia (5%). The business will be reported as part of the Company’s Electrical Segment.
SYSCO Corp., Houston, TX, reported sales for the third quarter fiscal 2008 were up 6.7% to $9.15 billion, from last year’s third quarter.
Profit was up 9% to $240.9 million. Food cost inflation, as estimated by the change in SYSCO’s cost of goods, was 6.2% for the quarter.
Year-to-date, sales increased 7.7% to $27.79 billion from the same period last year, and profit was up 10.7% to $772 million. Food cost inflation, as estimated by the change in SYSCO’s cost of goods, was 6.0% year-to-date in fiscal 2008.
In a challenging business environment where restaurant sales growth appears to have been flat to down, we continued to grow and we leveraged that growth to our bottom line, particularly in the Broadline segment,” said Richard J. Schnieders, …
Architecture is the art and science of designing buildings and also describes the act of providing services. “Software selection”is the art and science of determining the best solution for automating the operation of your business, but there is more to the process than just selecting the software. Just as a home owner wouldn’t spend thousands of dollars on a new home without assistance; we expect business owners would treat buying software as an equally complex task and call on similar outside assistance.
In some ways this complex task has become simpler. The software market is shrinking due to acquisition. The software vendors are providing graphical users interfaces (GUI) as a standard feature. The web and EDI has provided a standard approach to the sharing of data and …
3M plans to build a new facility in Singapore to produce coatings for film-based products used in commercial, electronic and automotive applications. By establishing a local film coating center, the facility will help the company better serve the Asia market.
This investment brings us closer to our customers and creates a regional source of supply, which significantly simplifies our supply chain and helps us respond more quickly to our customers’needs in the fast-growing Asia market,”said Kevin Kuck, vice president, 3M film manufacturing.
Construction on the new facility, which will be located in the Tuas Industrial Park, will begin in the second quarter of this year and is expected to be completed in 2009. 3M operations already in Singapore include a customer …
Atlanta, GA-based Industrial Distribution Group, Inc., will move forward with a plan to be acquired by Luther King Capital Management, accepting the private equity firm’s $12.10 per share offer -close to $136 million. Platinum Equity notified IDG that it will not match or beat LKCM’s bid.
LKCM said it would reimburse IDG for the 3% break-up fee required when IDG breaks the Platinum merger agreement.
We are very excited about this transaction with Luther King Capital Management, which we believe provides excellent value to our stockholders,” said Richard M. Seigel, IDG’s Chairman of the Board. “We believe that this transaction with our largest stockholder is a great fit for both IDG and Luther King Capital Management.”
Al Bates, founder and chairman of Profit Planning Group, Boulder, CO, wants to change how distribution executives think about their business. In this interview, he addresses dysfunctional behavior, alternatives to typical mindsets and ways that distributors can manage better in a turbulent economy. Based on his experience as a corporate financial planner and decades of data analysis, he’s not afraid to buck conventional wisdom. In fact, he enjoys it. Bates has studied financial performance across dozens of wholesale distribution sectors for more than 25 years. His firm conducts the annual benchmarking report series, PAR reports, for more than 40 wholesale distribution associations. This interview discusses key themes from his new book, Profit Myths in Wholesale Distribution: …
The bidding war for industrial distributor Industrial Distribution Group Inc., Atlanta, GA, continues, but WESCO Distribution Inc., Pittsburgh, PA, has bowed out. At press time (early April 25, 2008), Luther King Capital Management, Fort Worth, TX, had the highest bid with $12.10 per share in cash, or close to $134 million.
Luther King Capital current owns 15 percent of IDG’s stock. The firm presented IDG with an equity financing commitment letter from an LKCM investment fund.
Platinum Equity, the original victor with its offer of $10.30 per share for the distributor, had upped its bid to $11.80 per share in cash in response to WESCO Distribution’s bid of $11.75, or $130 million.
The back and forth comes after IDG agreed in February 2008 to be purchased …
These 24 select product groups provide a snapshot of inflation trends based on the Producer Price Index from the U.S. Bureau of Labor Statistics. First quarter 2008 is compared with first quarter 2007, and fourth quarter 2007 with first quarter 2008. Download the full document below.
MSC Industrial Direct’s latest Safety Products Catalog launch is part of its strategy to further penetrate existing customer accounts, according to Erik Gershwind, MSC’s senior vice president of product management, marketing and strategy.
The interest in safety products has been building in our customer base for the past few years,”Gershwind said. “We definitely saw a demarcation point after 9/11. Our customer base has a heightened sense of awareness of keeping the workplace safe and protecting the well-being of their employees.”
Gershwind said that penetration of existing accounts was a key growth strategy for the industrial distributor, based in Melville, NY. The company is also working to sell more MRO and safety products to customers acquired when it bought J&L …
Crawford Electric Supply, Dallas, TX, a subsidiary of Sonepar USA, has opened a new branch in New Orleans, LA. The facility includes a 48,000-square-foot warehouse, with a full-service counter area focused on the pipe, wire, lighting, and electrical business. More
PrimeSource Building Products Inc., Carrollton, TX, will buy Miami, FL-based Coast to Coast Building Products Inc., according to news reports. The acquisition expands PrimeSource’s network into the Southeast as well as the Caribbean and Central America. More
HD Supply, Atlanta, GA, has launched its two new proprietary brands, Seasons and Brigade. The …
Why have three investors been raising the price for Industrial Distribution Group (IDG), the traditional whipping post of the investment community?
Last year, when IDG’s board pursued an exit strategy to free itself from the constraints of public ownership, the M&A market in distribution was still near its peak. In a year’s time, we have shifted dramatically from a financial frenzy to a quieter, more strategic buyer’s market. In today’s risk-averse debt markets, show me the money has taken on new meaning in the bidding war for IDG.
The three bidders active in this deal -Platinum Equity (owns Strategic Distribution), Luther King Capital Management (owns 15 percent of IDG stock), and WESCO (owns Bruckner Supply) -know the strengths and weaknesses in IDG. Based on …
WESCO International, Inc., Pittsburgh, PA, provider of electrical MRO products, construction materials and integrated supply services, reported sales for the first quarter 2008 were $1.46 billion, up 2.9% after adjusting for a divestiture.
Sales for the quarter from acquisitions were $12 million.
Net income in the first quarter was $44.8 million versus $48.2 million in the comparable 2007 quarter.
Mr. Roy W. Haley, WESCO’s Chairman and Chief Executive Officer said: We have seen some deterioration in certain markets related to residential construction activity. We are cognizant of the near-term risks of a slowing economy, and we are balancing the increased investment in business development initiatives with cost containment actions in other areas of …
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This table highlights key financial metrics and trading multiples for 30 publicly traded distributors in the industrial and building products industries up to March 31, 2008. Download this data below. Also find graphic illustrating median EBIDTA multiples for the same distribution …
Modern Distribution Management’s March Inflation Index, which measures a cross-section of industrial supplies, was up 0.74% from the previous month, and up 4.24% from March 2007.
Summary of MDM Inflation Index for the past 12 months:
March 2008 Index 281.1 February 2008 Index 279.0 January 2008 Index 277.2 December 2007 Index 275.9 November 2007 Index 274.7 October 2007 Index 273.6 September 2007 Index 273.5 August 2007 Index 273.3 July 2007 Index 272.4 June 2007 Index 271.7 May 2007 Index 271.2 April 2007 Index 270.8 March 2007 Index 269.6
Please click below to view a print-ready pdf of the MDM Inflation Index for March 2008, listing the ten individual product categories that make up the …
Cleveland, OH-based Applied Industrial Technologies reported third-quarter sales were up 1.7% to $530.1 million from the prior-year period. Profit for the quarter was up 8.7% to $23.6 million.
For the nine months ended March 31, 2008, sales increased 5% to $1.6 billion. Profit increased 15.7% to $71 million.
Sales during the quarter were impacted by the continued deterioration of the housing and the automotive markets, and this weakness appears to be migrating into other sectors as consumers and businesses are becoming a bit more anxious about the economy,” said David L. Pugh, CEO. “While we do not expect significant economic improvement during the fourth quarter, based on our results to date and the continued strength in our operational controls, we expect …
Kennametal Inc., Latrobe, PA, reported sales for its fiscal 2008 third quarter increased 12% from the prior-year quarter, including organic sales growth of 4%.
Our global growth strategies and initiatives continued to deliver results as we grew sales in both of our business segments at a solid pace in the March quarter. The team achieved this growth despite reduced industrial activity in North America and in some market sectors,” said Kennametal CEO Carlos M. Cardoso. “Our sales gains, along with a robust improvement in the operating margin of our metalworking business, made a strong contribution to Kennametal’s overall operating performance.”
“Our advanced materials business, however, was challenged during the quarter by continued slower conditions in certain …
Builders FirstSource, Inc., Dallas, TX, reported a net loss of $15.8 million on sales of $270.5 million for the first quarter ended March 31, 2008. Sales volume was down 32.8%.
The macroeconomic conditions that affect our industry have deteriorated for eight consecutive quarters. Housing starts in our markets fell 39.1% in the quarter ending March 2008 when compared to the quarter ending March 2007. On a sequential basis, actual housing starts in our markets were down an estimated 17.9%, but we saw a slight seasonal improvement in March,” said Floyd Sherman, Builders FirstSource CEO.
“With the prolonged decline in macroeconomic conditions, we are experiencing pricing pressure from both our customers and competitors. As a result of these pricing pressures and the …
Recent data offer persuasive evidence that the U.S. recession and financial crisis are having a material impact on the near-term prospects for economic growth in key industrialized regions, most notably Canada, the Eurozone, and the United Kingdom, according to a new report from the Manufacturers Alliance/MAPI.
But while weaker growth is likely in these areas, there are not signs of significant instability in the global picture and a soft landing” for industrialized countries and overall world growth remains within reach, the report says. Further, economic activity remains strong in South Asia and East Asia outside of Japan.
In the MAPI Quarterly Forecast of U.S. Exports, Global Growth, and the Dollar: Second Quarter 2008 Through Fourth Quarter …
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