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Blog: Wesco’s Strategies For Growth

By Jack Keough

Wesco reported record results in its third quarter earnings report and its acquisitions, LEAN initiatives, one-stop shopping program, and improvement in its construction business bode well for future sales.

In particular, company executives for the giant Pittsburgh, Pennsylvania-based electrical/MRO distributor, were pleased that organic sales grew in all four end markets versus the prior year. Organic sales increased 3.2 percent.

John Engel, chairman, president, and CEO of Wesco, told financial analysts during a conference call that acquisitions are also playing a key role in the company’s success. It was just a year ago next month that Wesco closed on the biggest acquisition it has made in the company’s history, EECOL Electric Corp. headquartered in Calgary, Alberta, Canada. EECOL, which was purchased for CAD 1.4 billion, has 57 locations across Canada and 20 locations in South America. EECOL had reported sales of 0.9 billion when it was purchased.

In the third quarter, Wesco said EECOL sales were $233 million and grew 9% sequentially from the second quarter. EECOL remains on track to deliver its full year EPS accretion expectation of $1 in 2013.

Engel also noted, according to a transcript of the call, that its integrated supply business continues to shine and Wesco continues to emphasize its one-stop shopping approach for its customers.

“Our Global Accounts and Integrated Supply pipeline increased to over $2.5 billion, and we remain focused on providing a one-stop shop for our customer supply chain needs,” Engel said. “As a result, in the third quarter, we renewed a long-term contract with a large Canadian mining company. The scope of supply includes electrical MRO and project-based materials, with the opportunity to expand the service footprint outside of Canada.”

Sales to construction customers improved in the quarter, marking the first quarter of growth in construction since Q2 of last year.  Wesco also said it experienced another quarter of solid growth in lighting, driven by LED and retrofit applications. The company also saw a return to growth in Data Communications in the third quarter, after sales declines in the previous 4 quarters, extending back to Q2 of last year.

Wesco’s strategy is to increase organic sales results and continue to seek acquisitions particularly in MRO.

Once thought of as primarily an electrical distributor, Wesco has expanded beyond that product area. Its acquisition of Conney Safety was significant in that it was beyond the company’s traditional approach. And that acquisition is paying off. Conney Safety sales grew 10 percent in the quarter and company officials said they were “thrilled” by the company’s performance, noting that Conney has been fully integrated into Wesco. Conney, in fact, had its best September in its history.

Engel said Wesco has a very active pipeline on mergers and acquisitions.

“At any given time, we have 1 dozen to 2 dozen non-disclosed agreements, confidentiality agreements in place, where we’re evaluating companies,” Engel said. “That has not stopped. It is one of the 2 value creation legs for the company. First being — first and foremost, organic. Organic growth with our pull-through and getting the value creation there. Secondly, acquisitions. We see excellent opportunities to continue to further expand and strengthen the portfolio as we close out this year and enter next.”

Engel said the company has three components: Industrial MRO, nonelectrical; Industrial, inclusive of electrical, OEM and direct materials and value-added assemblies and services; and capital projects. “And increasingly, I think these acquisitions will support all 3 legs, but in particular, MRO,” he said.

Whatever Wesco is doing seems to be working. Consolidated sales for the third quarter were $1.93 billion, an increase of 16.6 percent compared to the same quarter last year. While all this was good news for Wesco, the company’s sales were somewhat affected by the decline in government spending and sequestration.

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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