Anixter Talks
Available at no charge over at SeekingAlpha.com, the transcript
of Anixter’s Q4 earnings call with analysts runs 12,400-plus words. Some comments
of interest:
Enterprise cabling decline: As we evaluate where we are in this economic
cycle, it is important to note on a sequential basis from the third to fourth
quarter of 2009, we saw enterprise cabling sales decrease by 5%. This decrease
is primarily due to the combination of the previously discussed consecutive
quarter effects of the number of holidays as well as the previously announced
ending of our contractual relationship with Alcatel-Lucent in the middle of
the fourth quarter.—Dennis Letham, executive vice president of finance/CFO
Security: The security industry is experiencing continued demand
for secure public and private places while also seeing growth in the deployment
of Internet Protocol-based security systems. The continued move in the market
toward IT video surveillance drives a corresponding need for very high performing
infrastructure. Our unique technical capabilities in IP infrastructure and security
have us well positioned to assist customers with this evolving technology.—Bob
Eck, president/CEO
Gross margins: Looking across the past three quarters, gross margins
have been relatively constant. Specifically, the gross margin after adjusting
for the Venezuela inventory write-down was 24% to 22.7% in the fourth quarter,
22.6% in the third quarter, and 22.7% in the second quarter. We believe this
trend is another clear indicator along with the flat daily sales run rates and
slight uptick in OEM supply of a bottoming in the current economic cycle.—Letham
Acquisitions: For the most part, there continues to be a shortage
of good strategic acquisition opportunities available in the market. While we
are open to assessing acquisition opportunities, our near-term approach to evaluating
opportunities will remain biased to the conservative side until we see a more
definitive pattern of economic recovery firmly in place. Instead, in the near-term,
we will more likely use excess capital to reduce outstanding common shares or
further reduce borrowings.—Letham
On copper prices:
Question: I assume those price increases you referenced were maybe
when copper was a little bit higher from here. And you also talked about the
lag that you are experiencing in actually having to recognize those. Is that
lag stabilized or is it still stretching, or is it shortening at all?
Eck: I think the lag isn’t necessarily lengthening or shortening. The
lag is just the nature of how much inventory in work-in-process sits in the
supply chain and has to work its way through. The lag may have been longer
very early in the cycle as inventories were being taken down.
But right now, our expectation is that those price increases that have been
announced will start to impact the market, as the lower-cost inventory works
its way through. And I think the important thing is, how that works its way
through depends on whose inventory is turning the slowest, because when the
market clears an order, that’s going to be based on who has the cheapest average
cost inventory.
And that basically says that if we are turning our inventory quickly, but
we have competitors who are turning it more slowly or a manufacturer who has
more inventory on the floor than we might have expected, it could cause a little
more delay there.
But the good news is that there are announced price increases on the products
that trade on a price list in the wire and cable market, and that ultimately
will be helpful as we get through the year.
Rexel SA’s Earnings Presentation—Verbiage
TedMag research turned up a 21,190-word FD Wire transcript of the Feb. 11 Rexel
SA “earnings presentation.” There’s no link available, as you have to pay to
see this. Below, find some brief snippets, limited (to stay within what the
copyright law allows):
On North American sales, from Jean-Charles Pauze, president/CEO:
“If we are now to turn to North America, sales in the fourth quarter continued
to suffer from a consistent slowdown on all our end markets, especially for
commercial construction, which accounts for approximately 50% of our activities
[there].”
On the need for branch offices (!!!), from Pascal Martin, senior vice
president of business development & corporate operations:
“…customers are more and more demanding. They want expertise, and they want
a narrow focus on the right technology to meet their requirements. We’ve seen
major changes in electronic systems, on-board electronic systems, Blackberry,
and so on—and we’re able to provide answers with communication plans that are
fully fledged…
“To be more specific, the very idea of a branch office is now being challenged.
In the Netherlands, for instance, only 3% of our sales are conducted through
our branch offices, just to give you an example of how much our business model
has changed.
“And in logistics, we have more and more requests for electronic connections
that make it possible to exchange data, and we’re also asked to provide solutions
in a hurry, on an emergency basis, so that our business model is really changing.
And it’s changing faster and faster.”
On U.S./U.K. “structural adjustments,” from Pauze:
“…we’re focusing more and more on certain countries where, beyond the adjustments
due to the business climate, structural adjustments were required, in our view.
The U.K. is one, the U.S. is another, particularly our Rexel network; and Spain.
“…In the U.S., we’re going to pursue the work that we already undertook to
consolidate Rexel. Its history was fueled by different regional acquisitions.
We want to consolidate that; shore up what we have.
“So there’ll be an impact of all this in 2010. In the U.K. and the U.S., the
goal is to get back to—for the next few years—to get back to profitability levels
that are average for the group.”
WESCO’s End-Of-Year Discussion
Although transcripts of previous conference calls with analysts can be found
on www.SeekingAlpha.com,
the Q4 WESCO call—which took place Jan. 28—is not posted. TedMag found it instead
via the FD Wire; here are some limited excerpts from the 12,490-word document:
Richard Heyse, vice president/CFO—“…it really stands out to me that
WESCO’s fourth-quarter earnings-per-share is nearly four times
the average quarterly EPS rate delivered in the recession of 2001 through 2003.”
Steve Van Oss, senior vice president/COO—“…customers’ desire to control
and consolidate MRO spending resulted in global account bid activity
levels that were up 40% over last year….our opportunity pipeline expanded to
$750 million…for the full year, we added 28 new global account customers…we
maintained our 100% [national/global account] renewal rate for the 14th
quarter in a row…we currently have a majority of the Fortune 500 companies as
our customers with multiyear contracts.”
Also from Van Oss—“…we have increased our emphasis on programs to deliver
more value and secure more sales in a multibillion-dollar outdoor area lighting
market, as LED technology innovations and stimulus funding provide catalysts
for increased spending.”
Also from Heyse—“…we expect that the economic recovery will be slow
and market trends in 2010 will reflect gradual recovery in industrial,
international, and government markets, offset by contraction in nonresidential
construction and utility markets. In total, we anticipate that demand in our
served markets will drop 3% to 5% from 2009 levels.”
John Engel, president/CEO—“…construction overall, as we
define it, which is roughly 39% of our portfolio, was down 5% sequentially.
But we were lumping commercial, institutional, and governmental into that. If
you were to spike out the CIG market, we were down 1%—we were down less, sequentially.
“And if you were to look at datacom, which is roughly 12 to 13 points of
our mix for the portfolio, that actually grew sequentially in the quarter.
“So just to kind of put a fine point on it, construction is broad. It’s made
up of many different segments.”
From Van Oss—“If you look at a specific area of the pricing with
commodities, pricing is rising throughout the year; that should be positive
as we go into 2010 on a full-year basis. Copper has moved up dramatically through
the entire year and been stabilized, for a period of time, and the same thing
on steel.
“…in our discussion with our supplier[s]…that there will be modest price
increases in 2010, driven primarily by commodity-related pricing that’s been
in place for the last couple of quarters.”
From Engel—“We have a terrific lighting business, and
a terrific set of capabilities, and we have been applying additional resources
and investing in our capabilities to offer a more complete lighting solution
that’s independent and was prior to the stimulus.
“The stimulus, if you look at our addressable opportunities, lighting is
a large addressable opportunity. To put a point on that, in the fourth quarter
vs. third quarter sequentially, lighting was down under two points.
“[comparing the company’s 2009 portfolio with 2008] lighting is a point
higher—a one percentage point higher [part] of our mix…and datacom increased
two points. So if you look from a product portfolio perspective, wire and
cable down two points, datacom up two points, lighting is up a point, general
supplies is up a point, and distribution equipment flat. And controls and
motors was down a bit.
“So that portfolio shift to what I will call ‘higher value-added’—and we
believe, higher-margin—characteristic products, is very consistent with our
strategy.”
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