Headwinds limit Anixter’s Q1 sales growth

Anixter’s report on its Q1/12 sales showed a 4% sales increase over Q1/11, leaving sales at $1.52 billion. The company noted that sales increased 5% organically, subtracting two key items.

In a conference call, Ted Dosch, Anixter’s executive vice president and CFO, explained, “…it is important to note the headwind from both currency and copper in the first quarter of 2012 compared to the strong tailwind from both currency and copper in 2011. While currency and copper each contributed a positive 2% to revenue in the first quarter of 2011, currency and copper each contributed unfavorable 1% in the current quarter.

“In addition to the impact on revenue, the 13% drop in copper price year-on-year for the quarter reduced gross profit by $3.3 million…”

Large dividend declared

Anixter does not pay out a regular annual dividend. In the first half of the 2001-2010 decade, it declared two special dividends of $4.50 and $1.50. On April 24, 2012, the company said it would pay out another $4.50 per share. Total cash outflow is $150 million.

CEO Robert Eck said, “Substantial balance sheet deleveraging has resulted in a debt to total capital ratio of 44 percent at the end of the first quarter, which falls below our target range of 45–50 percent. This presented us with the opportunity to return capital to our shareholders while still maintaining ample resources to support foreseeable growth.”

On the same day, Anixter went to the market and sold $350 million of seven-year senior notes—tacking on more debt. The company explained the uses for the money, saying, “The net proceeds will be used to pay down outstanding debt under the company’s receivable securitization program and short term borrowings, as well as provide additional liquidity for maturing indebtedness and for general corporate purposes.”

Eck also said, “Within our end markets, the OEM Supply business delivered the highest sales growth rate with 12 percent improvement year-on-year. Despite a slowdown in billings due to project delays in both cabling businesses, Electrical Wire & Cable and Enterprise Cabling delivered 6 percent and 3 percent organic sales growth, respectively.”

Dosch noted in the conference call that worldwide OEM sales “is the only one [of the company’s three key operations] that has delivered double-digit, year-on-year growth each of the last 8 quarters, averaging 22% organic growth during that time. Organic sales in North America increased 12% year-on-year.”

Gross margin of 22.9% in the quarter was down 10 basis points from Q1/11 and down 40 basis points from Q4/11.

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