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WESCO Sees Opportunities in the U.S. and International Markets

By Jack Keough

In the past four years, WESCO International, the giant electrical/MRO distributor, has made some 11 successful acquisitions and, in a recent conference call with financial analysts, John Engel, chairman, CEO and president of the Pittsburgh-based company, made it clear that they are still on the lookout for strong acquisitions.

Engel made the comments after the company released its second quarter results showing consolidated record sales of $2 billion.

He told analysts that WESCO has a “robust pipeline” of possible acquisition candidates and the company has “some very attractive opportunities on a continuous basis.” He went on to say that the company would be ready if those opportunities presented themselves.

Engel, according to a transcript of the call as provided by www.seekingalpha.com, detailed three types of opportunities ahead for WESCO.

The first, he said, was to strengthen the company’s existing electrical core base, similar to its acquisition of EECOL Electric Corp. a deal that had been worked on for several years. Wesco acquired EECOL, headquartered in Calgary, Alberta, Canada in 2012. The company has 57 locations across Canada and 20 in South America.

The second opportunity, he said, would be attractive adjacent product categories that would enhance its One WESCO’s strategy, its Global account business, and its integrated supply business.

This is what WESCO did in its acquisition of Conney Safety in the U.S. and its Hazmasters acquisition in Canada. Hazmasters generates approximately $80 million in annual revenue from 14 branches across Canada and is a leading distributor of safety products servicing customers in the industrial, construction, commercial, institution, and government markets. The Hazmasters deal was completed earlier this year while Conney Safety was acquired in 2012.

The third step, Engel said in response to a question from an analyst, is the possibility of “selective” international opportunities.

“I think if we step back and reflect upon our global footprint today versus 5 years ago, we were in less than 5 countries with physical assets, people, capabilities and inventory,” he said.” And now it’s approximately 20. And so we’ve got a much stronger footprint and I think that — I wouldn’t say that’s the top priority of the 3 categories, but your question was what’s in the pipeline. So they fall into that third category as well. I would say the first 2 categories are where our biggest emphasis in priority is, strengthen our electrical core that adds to our scale and our leverage in the attractive adjacent categories.”

In looking back at is results for the quarter, WESCO was especially pleased with its six percent increase in organic sales growth, the best results since mid-2012.

Over the previous 7 quarters, WESCO’s organic sales growth had not exceeded 3%.

“More importantly, in the second quarter, we delivered growth in all geographies, in all end markets and in all product categories, with lighting and communications each being up double digits,” Engel said.

WESCO’s sales in the U.S. were up 5%. Sales in Canada were up 7% on a local currency basis, and sales for the rest of the world were up over 13%.

“We were awarded a new multiyear electrical MRO contract with a global oil and gas company for their downstream operation, that is the refining of their chemical and their pipeline operations, in the second quarter,” he said according to the transcript. “Our previous relationship with this customer included a responsibility for their upstream operations only. This noteworthy win demonstrates the growth potential that exists when we are successful in implementing our One WESCO strategy with customers.”

For the full year, Wesco expects sales to be up 4% to 5%.

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