Motion Industries Reports Slight Drop In Q3 Sales, Narrows Outlook

Motion Industries, the industrial distribution arm of the Genuine Parts Company, has reported that its Q3 sales were down 0.7%.

Motion Industries, the industrial distribution arm of the Genuine Parts Company (GPC), has reported that its Q3 sales were down 0.7%, including a 2.5% underlying sales decrease and an approximate 2% benefit from acquisitions. 

The company also reduced its industrial sales guidance to flat to down 1 percent from a previous flat to up one percent. GPC says although its industrial business has shown some signs of stabilization, there are no signs of a meaningful recovery until 2017.

Acquisitions are expected to remain a key strategy for GPC’s growth. In the past year the company has completed some 16 acquisitions across its four business groups: automotive, industrial, office products and electrical/electronics. Those acquisitions have resulted in some $600 million in revenues.

Earlier this month, for example, Motion acquired the Braas Company, a multiregional distributor of products and distribution services for industrial automation and control with estimated annual revenues of $90 million.

The growth prospects for this segment of the industry including robotics, motion control and industrial networking are “compelling, and the addition of such a well-positioned business will substantially enhance our automation capabilities,” said Paul Donahue, president and CEO.

Sales at EIS, GPC’s Electrical/Electronic business were down approximately 9%, while sales for S. P. Richards, its Office Products Group, were up 5%, consisting of an 11% contribution from acquisitions offset by a 6% underlying sales decrease.

GPC reduced its electrical sales outlook for EIS to down 5% to down 6% from a previous down 2% to down 3% and maintaining its Office sales guidance at plus 2% to plus 3%. The company said the electrical market was affected by continued weakness in the energy sector including oil, gas, as well as coal.

EIS recently acquired Communications Products and Services, a distributor of plant product solutions for both aerial and underground broadband cable and wireless network infrastructure. CPS further strengthens EIS’s cable operations in the Western U.S. and generate approximately $12 million in annual revenues, according to the company.

Core sales for S.P. Richards were down 6% in the third quarter, a decrease from the 4% core sales decrease in the second quarter.

The facilities and breakroom supplies category, or FBS, posted strong growth in the quarter, while traditional office supplies, furniture and technology products each posted sales declines. Donahue said GPC, going forward, is now focused on the overall diversification of the business with a heavy emphasis on the growing FBS category.

“Our growth strategy involves strategic bolt-on acquisitions to further enhance our capabilities in this category as well as the execution of our ongoing share-of-wallet and market share initiatives to grow this business, despite the challenging end market conditions that persist in this industry,” Donahue said.

To deal with the weakness in the company’s overall end markets, GPC has closed or consolidated a number of distribution centers and branches, and reduced its headcount by approximately 1%.

“Although these steps are meaningful, not all of the savings are in our numbers yet, and importantly, you’ll see many more opportunities for further consolidations,” Doanhue said.

Total sales for GPC in the quarter were $3.94 billion compared to $3.92 billion for the same period in 2015.  Sales for the Automotive Group were up 1.5%, consisting of a 2.5% contribution from acquisitions and a currency tailwind of 0.5%, offset by a 1.5% core sales decrease. For the full year 2016, the Company is updating its sales guidance to Flat to up 1% from up 1% to 2%,

Donahue added in a statement that the company’s third quarter results fell short of expectations. 

“We continue to operate in a tough sales environment, but our teams are working hard to overcome these challenges and generate growth. We recognize there is room for improvement and are working towards that in all aspects of our business. Our goal is to show improved results in the quarters ahead and better position the company for sustainable growth well into the future. We have a strong balance sheet and excellent cash flows to support our efforts.”

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