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Blog: WESCO Outlook

By Jack Keough

WESCO, one of the largest MRO/electrical distributors in the country, recently reported a 13 percent increase in sales for its second quarter and is taking several important steps to continue traveling along its solid growth path.

WESCO said it will open several more branches in Canada and the U.S. as well as a large hybrid distribution center in the second half of this year.

In addition, WESCO will be completing a regional hybrid distribution center for its Datacom business in the U.S. and a new hybrid distribution center in Montreal, Canada.

“These continuing investments improve our ability to provide One Wesco solutions to our customers and support delivering our profitable growth objectives,” John Engel, chairman and CEO of WESCO told financial analysts in a conference call after the company released its earnings report.

Engel and Kenneth Parks, CFO and vice president of WESCO, said the company was especially pleased with the results of its recent acquisitions such as Conney Safety Products, which grew 5 percent this quarter on top of a 4 percent increase in the prior quarter. Integrating EECOL Electric Supply Corp. in Calgary, Alberta is also progressing well and it remains on track to deliver its EPS accretion expectation of $1 this year. WESCO bought EEOCL Electric last October for about CAD $1.14 billion. The Conney acquisition was completed in July, 2012.

“We put substantial investments into Conney and they’re paying off, and — we’re now getting some Global Accounts leverage and Integrated Supply leverage with that business,” Parks said according to a transcript of the call as provided by www.seekingalpha.com

The company intends to continue vigorously looking for mergers and acquisitions opportunities, Engel said.

“Our acquisition pipeline remains strong and continues to be actively managed, and we see excellent opportunities to further expand and strengthen our portfolio in the second half of 2013 into 2014,” Engel said, according to the transcript.

WESCO also continues to grow its integrated supply business.

“We continue to implement the new customer wins from last year and we’re pleased to report that we were awarded an integrated supply program in the second quarter to provide a large Investor-owned utility (IOU) with supply chain management and logistics services for their entire power generation and distribution network,” he said.

The company also saw its Datacom business expand during the quarter and it secured some “nice new construction wins” including a large electrical project for a precious metal mining operation in Canada.

Sales momentum in Canada, however moderated for WESCO driven by a late and rainy spring. In the second quarter, WESCO’s Canada sales were up 1% versus prior year. EECOL’s Canadian sales were down approximately 2% versus prior year. Construction projects came to a halt and contractors redirected their activities to storm recovery efforts as Alberta experienced its worst flooding in history

In its earlier earnings reports, the company had indicated that the economic recovery was expected to be weighted to the second half of the year, with a flattish organic top line in the first half and mid-single-digit organic growth in the second half, Including EECOL.

WESCO said it now expects full year sales to grow between 16% and 18% for the full year. The first half results for 2013 have been consistent with that outlook; organic daily sales are down a little more than 1 point to date.

The company revised its outlook for the year. “We no longer expect mid-single-digit organic growth in the balance of the year. Instead, we now expect flattish organic sales for the full year with only modest organic sales growth in the second half, offsetting the small organic decline in the first half,” Engel said.

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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