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Blog: WESCO optimistic about 2014 after slow start due to weather

By Jack Keough

WESCO, the giant electrical/MRO distributor, reported record sales and profit for 2013, but at the same time sales growth in the fourth quarter was below expectations and John Engel, WESCO’s chairman and CEO, said his company was “disappointed with the (fourth quarter) results.” ┬áStill, sales for the year for the Pennsylvania-based company increased 14 percent, and nearly all that increase was due to acquisitions.

Engel told financial analysts in a conference call that the first quarter is off to slow start, primarily because of the cold weather and currency fluctuations. Sales in January were tracking downward 4 percent compared to the same time frame in 2013. The company now expects sales to be flat or up to 3 percent for the first quarter, while sales for the year are forecasted to increase 3 to 6 per cent.

Several other distributors, including Grainger, have reported similar findings and base that slow start in January due to the inclement weather as well.

Despite the sluggish start to the year and a tough winter thus far, Engel said the company expects economic conditions to show improvement over 2013 with a strengthening recovery in nonresidential construction. Engel added that nonresidential construction markets were “challenging” in 2013 but began to show some improving momentum in the U.S. and Canada in the second half. Leading indicators in the nonresidential construction market, ABI and the continuing residential construction recovery, provided generally positive setup for an improvement in activity levels, he said.

Sales to WESCO’s industrial customers were down in the quarter, driven by non-repeating Industrial capital projects in the fourth quarter of 2012, and customers maintaining tight controls on their capital spending.

Sales to construction customers were flat in the fourth quarter and in the second half versus prior year, marking an improvement from being down 6% in the first half.

But a number of WESCO’s segments reported excellent sales numbers. Its lighting business, for example, saw solid growth driven by LEDs and retrofit applications, and continued growth in Data Communications. All of those businesses were the catalysts for the second half improvement.

“We are pleased with the strength of our Utility business in delivering ongoing above-market sales growth. Organic sales to our Utility customers grew 11% versus last year, following the double-digit growth we experienced in the first 3 quarters of 2013. The fourth quarter marks the 11th consecutive quarter of year-over-year organic sales growth, driven by new wins and an expanding scope of supply with our existing utility customers,” Engel said according to a transcript of the earnings call as provided by www.seekingalpha.com.

WESCO is also investing in new hires.

During the first half of 2013, WESCO added more than over 100 personnel into its Accounts, Integrated Supply, Utility and Safety businesses, as well as its pricing and supply chain management functions. Those new employees will help position the company for sales growth in 2014.

WESCO also has signaled that it will increase its acquisition activity. The company most recently that it had acquired LaPrairie, a Canadian-based utility distributor with annual sales of approximately $30 million.

WESCO says it also sees excellent opportunities to further expand and strengthen its portfolio via acquisitions this year.

Jack Keough was the editor of Industrial Distribution magazine for more than 26 years. He often speaks at many industry events and seminars. He can be reached at john.keough@comcast.net or keoughbiz@gmail.com

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