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Economic Trends
Economic Outlook for Distributors

Adam J. Fein, Ph.D., of Pembroke Consulting, recently reported his outlook for 2010 in an MDM Webcast. He provided an overview of macroeconomic conditions, data on sales and inventory trends for distributors, and major end market and sector trends. Here’s a summary of that Webcast, exclusively for MDM Premium subscribers.

The good news: We are in the midst of a recovery. Bad news: The aftereffects of the recession will last for a number of years. That was part of Adam Fein’s message in a recent MDM Webcast, “Growth Planning for 2010: Economic Update with Adam Fein.”

“It’s not going to feel as robust as previous recoveries because of some of the overhang, but it is going to be a recovery,” Fein said. “It is going to be growth.”

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Building Materials/Construction
US LBM Holdings Emerges on Scene

MDM spoke with leaders from the fast-growing US LBM Holdings to learn more about the new holding company’s business model and its growth by acquisition of building materials and lumber distributors.

The new player in the building materials world hasn’t wasted any time making its name known. US LBM Holdings was created in October 2009 when private equity firm BlackEagle Partners stepped in to purchase three markets that Stock Building Supply had slated for closure. Those three markets had 13 locations.

L.T. Gibson, president and CEO of US LBM Holdings, had worked with Stock Building Supply for around 20 years, most recently as the vice president of the north and central divisions, when the closures were announced. “I started talking with private equity firms to see if there was someone who wanted to take advantage of the opportunity that was being created,” he said.

Economic Trends
First Quarter Inflation by Commodity Group

These 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 2010 is compared with first quarter 2009, and fourth quarter 2009 with first quarter 2010. To access, premium subscribers should ensure they are logged-in to download the pdf below.

The product groups in this report:

Abrasives
Adhesives & Sealants
Cutting Tools & Accessories
Hand & Edge Tools
Fasteners
Power-Driven Hand Tools
Ball & Roller Bearings
Mechanical Power Transmission Equipment
Valves, Except Fluid Power
Pumps, Compressors & Equipment
Electrical Machinery/Equipment
Industrial Material Handling Equipment
Industrial Gases
Welding Machinery/Equipment
Fluid Power Equipment
Plumbing Fixtures & Fittings
Hardware
Sanitary Paper Products
Plastic Resins & Materials
Specialty Cleaning, Polish & Sanitary Products
Industrial Safety Equipment
Softwood Lumber
Metal-Forming Machine Tools
Metal-Cutting Machine Tools
Hardboard, Particleboard, Fiberboard Products
Hardwood Lumber
General Millwork
Plywood
Construction Products from Plastics
Gypsum Products
Air Conditioning & Refrigeration Equipment
Tools, Dies, Jigs, Fixtures, Industrial Molds
Fluid Power Valves

A pdf of these graphs is linked below for premium subscribers. If you do not see the link to Download pdf, log-in to mdm.com first.

Features
Distribution Financial Metrics and Trading Multiples: 1Q 2010

This table highlights key financial metrics and trading multiples for 27 publicly traded distributors in the industrial and building products industries up to March 31, 2010. Download this data below. Also find graphic illustrating median EBIDTA multiples for the same distribution companies.

These materials, prepared by Robert W. Baird & Co. for MDM, are for informational purposes only.

Features
First-Quarter MDM-Baird Survey: Optimism Grows

Robert W. Baird & Co., in partnership with Modern Distribution Management, conducted a survey of distributors and manufacturers to gauge business trends and the outlook for the distribution industry in diverse sectors. Here’s the exclusive look at all the results for premium subscribers to MDM.

First-quarter revenues among survey respondents were down 0.9 percent from last year, and pricing and gross margins were flat. Overall, survey respondents expect an average 3.1 percent increase in revenues in the second quarter 2010, and 3.9 percent growth for 2010 overall.

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Features
Balancing Online & Print Catalogs

Questions and even confusion persist as to the role online catalogs and online selling should play for distributors. This article examines those questions and the challenges that come with moving business online.

This is part of an occasional series of MDM articles on doing business electronically.

Over the past five years, more distributors and manufacturers have moved more of their business online, from offering product catalogs online to selling a broad range of items through electronic storefronts. And more customers are doing their research online before ever calling a distributor’s sales department.

According to a recent survey conducted by Robert W. Baird …

Features
U.S. Market Analysis: 2009 Plastics MRO

The industrial product group listed here – Plastics MRO – represented a market in 2009 of $X.XX billion, according to estimates by Industrial Market Information, Minneapolis. These charts show the top ten industries, by SIC code, consuming these products; and the 2009 end-user consumption of these groups sorted by the nine government market regions.

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Building Materials/Construction
Tracking Commodity Prices

Commodity prices have seen sharp ups and downs over the past two years. MDM spoke with experts to gain a broad perspective on current trends in key commodity price shifts and forecasts that impact distributors across many sectors. Included in this analysis: copper, iron ore (steel), lumber and gypsum.

Two years ago prices for finished steel and the products needed to manufacture it reached record highs. Price contracts couldn’t keep up with spot price increases and were often abandoned by suppliers.

After just a few months, prices plummeted to lows that made “breaking even” questionable …

Building Materials/Construction
New Wolseley CEO Outlines Strategy

At Wolseley’s first-half 2010 results call with analysts and investors, new Chief Executive Ian Meakins spoke for the first time at length about his plans for the struggling global distributor of HVAC/plumbing and building material products.

In one of his first in-depth presentations as the new chief executive of Wolseley, Ian Meakins was blunt with his appraisal of the global distributor’s business, which has seen some big highs and dramatic lows in the past five years.

Features
Tool Market Shifts Again

Cooper Industries and Danaher Corp. recently announced they would be merging their tool businesses in a joint venture. The soon-to-be CEO of the new joint venture, which is expected to close by the end of the second quarter, spoke to MDM about why the tool businesses were a good fit, and how the deal will impact distributors.

Danaher Corp. and Cooper Industries will be entering a joint venture to combine their Danaher Tool Group and Cooper Tools businesses. Danaher Tool Group executive Steve Breitzka, who will lead the joint venture when it closes at the end of second quarter, said that current market conditions provided …

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Companies
Ferguson’s Focus Post-Recession

MDM Editor Lindsay Konzak recently sat down with the leaders of Ferguson to talk about where they see the company going post-recession. They also discussed the joint venture Wolseley entered into last year for Stock Building Supply – in which it now has only a minority position – and what that means for Wolseley’s positioning in North America.

In this interview:

  • Frank Roach, CEO, Ferguson

  • Kevin Murphy, COO, Ferguson

  • Steve Petock, Senior Vice President, Business Groups, Ferguson

  • Jim Feltman, CMO, Senior Vice President, Ferguson

    • MDM: After a couple of down years, where does Ferguson sit?

    Frank Roach: Over the past several years the driving theme in Wolseley’s North American group was to centralize back-office cost and collaborate when appropriate between the individual companies: Ferguson, Stock Building Supply and Wolseley Canada.

    The exposure Stock had to the new residential construction market – which was roughly 80 percent of their business –

    Features
    The Trouble with ‘Best Practices’

    The authors of Value Creation Strategies for Wholesaler-Distributors implore distributors to define strategy in terms of closing gaps with the market rather than operational weaknesses. Tactically driven initiatives may meet intermediate goals, but they often produce unsatisfactory business outcomes.

    This is an excerpt from Value Creation Strategies for Wholesaler-Distributors reprinted with permission from the NAW Institute for Distribution Excellence. Order the book at www.naw.org/valuecreationstrateg.

    Strictly speaking, best practices are business operations that are statistically correlated with superior financial performance. The study of best practices is now widespread and has contributed to significant productivity improvements by wholesaler-distributors across all lines of trade. The most comprehensive review of distribution …

    Features
    Economic Update: Weather’s Impact on Latest Indicators

    Wind, rain, snow: Severe weather plagued much of the U.S. during the first months of 2010, with the East Coast bearing the brunt of the damage. And several economic indicators reflected the damage in the latest round of numbers.

    “Severe weather across the coasts of the United States last month disrupted transportation schedules,” said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, commenting on the latest Federal Reserve industrial production statistics. “Production in consumer durables industries was particularly affected.”

    Industrial production edged …

    Companies
    Why United Stationers Bought a Software Company

    MDM recently spoke with United Stationers President and CEO Dick Gochnauer about why the master distributor bought MBS Dev, a small Denver-based software provider for distributors. The move was part of a long-term strategy to help both its resellers and the technology providers that serve them to stay on top of capabilities necessary to stay competitive in today’s online environment.

    In February 2008, United Stationers President and CEO Dick Gochnauer told MDM the master distributor was well on its way to better integrating its customers – which it calls “resellers” – electronically through e-commerce, online marketing, and data tools and services.

    The Deerfield, IL-based distributor of office, jan-san, and industrial

    Features
    Download this Issue: MDM March 10, 2010

    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 seven years of online archives and market data. Call 1-888-742-5060 or email info@mdm.com to subscribe.

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