WESCO Sees Strong Growth in Non-Residential Market

By Jack Keough

In releasing its third quarter earnings, WESCO International said it was optimistic about the fourth quarter and into 2015, noting the growth in the non-residential construction market as well as improvement in the security, broadband, Datacom, lighting and other markets.

John J. Stengel, WESCO’s CEO and chairman, said the non-residential market had the best growth rate the company has seen since the first half of 2012.  “We had growth in both the U.S. and Canada from a geographic perspective, and we had very good, balanced growth across the U.S. and by region,” he said during a conference call with financial analysts.

Both were up in the very high single digits growth organically.  “We clearly see ourselves in the nonresidential construction recovery portion of the cycle…our bid activity levels are very high, seeing a lot of opportunities, and we’re pleased with how we built some momentum this quarter,” he added.

Engel also said that WESCO’s utility business continues to deliver above market sales growth.

Sales to WESCO’s utility customers grew 11% in the quarter on top of the double-digit growth the company experienced in the third quarter of last year. This marked the 14th consecutive quarter of year-over-year sales growth, driven by new wins and an expanding scope of supply with existing utility customers.

Engel pointed out that WESCO was awarded a multiyear contract to provide material management and logistics services for a large transmission line project, further demonstrating its capability to provide solutions across the entire utility power chain.

He also said its acquisition two years ago of EECOL Electric Corp. has allowed the company to extend its supplier relationships and provide a more complete solution for customers.  EECOL, headquartered in Calgary, Alberta, Canada has 57 locations across Canada and 20 in South America.

“In acquiring EECOL, we didn’t just acquire this terrifically well-run business, but we also acquired some new supplier relationships and positions that we did not have in those regions in Canada, specifically on the core electrical side,” he said.

“So I think this is all part of the strategy,” Engel said.  “We’re in a better position to provide even a more complete solution for customers.

WESCO was also pleased with its growth in the construction side of its business with sales up about four percent overall, which includes an eight percent growth in the U.S. and three percent in Canada. The three percent growth in Canada was on a local currency basis.

The Pittsburgh-based company completed three acquisitions in the first half of this year and Engel said the integration of those businesses is going well.

“Our acquisition pipeline remains strong, and we see excellent ongoing opportunity to further strengthen our company. Our leverage is within our target range, and our free cash flow generation supports our ongoing acquisition strategy of strengthening our electrical core and adding new products and services to our portfolio,” he said.

Those three acquisitions were Hi-Line Utility Supply, a provider of utility MRO and safety products, Hazmasters, a safety supply distributor in Canada, and LaPrairie, an electrical distributor in Ontario, Canada.

WESCO has made more than 15 acquisitions in the past few years, including several outside of its traditional core electrical businesses, allowing Wesco to provide total product solutions for customers in a variety of markets.

“We’re pleased with the progress we’re making to strengthen our business and deliver above-market growth, “Engel said. “Our One WESCO value proposition provides customers with the comprehensive product and service solutions they need to meet their MRO, OEM, and capital project management requirements.”

In a press release Engel said that organic sales grew 7% with growth accelerating through the quarter and that sales were up in all four of WESCO’s end markets for the second consecutive quarter.

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

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