By Jack Keough
As the reporting season continues for electrical distributors and manufacturers, it is apparent that the drop off in the gas and oil sector, as well as in OEM manufacturing, hurt companies in the second quarter.
EIS, for example – the electrical/electronics distribution arm of the Genuine Parts Company – reported recently that the group posted a 3.5 percent increase in sales for the second quarter, but company officials acknowledge that acquisitions drove the improved results. In fact, if you were to take out a major acquisition, the electrical segment recorded a 2 percent decline in sales.
“All of this decrease is attributable to the ongoing slowdown in the electrical side of the business,” said Thomas Gallagher, chairman and CEO of GPC in a conference call with analysts. “This is largely due to the continued challenges faced by a number of our OEM customers, challenges faced by our oil and gas customers, as well as a sizable reduction in copper pricing year-over-year.”
The Electrical/Electronic Group recorded sales in the second quarter of a $195 million. Their operating profit of $18.6 million is up 13 percent, and the margin for the group improved to 9.5 percent, which is up 70 basis points and a new record high.
For the year, sales for the group were $377 million and that translates into a 2 percent increase.
Strategic acquisitions are an important part of the growth strategy for EIS and Motion Industries, the industrial arm of GPC. In the first six months of 2015, GPC, through Motion, purchased Miller Bearings, while EIS acquired Connect-Air five months ago.
Connect-Air, headquartered in Seattle, is a North American specialty distributor of low-voltage wire and cable used in critical building applications, primarily HVAC (heating, ventilations and air-conditioning), security and fire alarm systems. Connect-Air, which was purchased in April, services the United States from seven sales offices and warehouses across the country.
Connect-Air complements the product lines carried by EIS. EIS products include process materials, production supplies, specialty wire and cable, and value added fabricated parts supplying the electrical OEM, apparatus repair and various assembly markets. The company has over 100,000 critical products from 39 branches and 7 fabrication facilities located in North America.
One year ago this month, EIS acquired the assets of Insulation and Wires (IWI), based in Oklahoma City, for an undisclosed sum. IWI distributes and fabricates process materials used in electrical OEM, motor repair and energy markets in the south central region of the U.S.
Despite the challenges that the electrical/electronic market has ahead, Gallagher says he expects “a solid second half from the wire and cable and fabrication and coating teams.”
Genuine Parts Company, a Fortune 500 company based in Atlanta, operates in four principal segments: automotive replacement parts; industrial replacement parts; business and office products; and electrical and electronic process materials and supplies.
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Keough was the editor of Industrial Distribution magazine for more than 26 years. He often speaks at industry events and seminars. He can be reached at john.keough@comcast.net or keoughbiz@gmail.com.
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