WESCO Industrial Market Slides Further In Q2; Total Sales Flat

Industrial market organic sales sunk another 10 percent in Q2, following a 13.7 percent slide in Q1, while organic sales grew in WESCO's Construction, Utility and CIG markets.

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Pittsburgh-based WESCO International — No. 6 on Industrial Distribution's 2015 Big 50 List — on Thursday reported its 2016 first quarter fiscal performance, led by flat year-over-year sales growth and profit.

The company posted Q2 total sales of $1.91 billion, down 0.3 percent from a year ago, while organic sales declined 3.1 percent. Sequentially, total sales increased 7.6 percent from Q1 and organic sales increased 4.8 percent.

Total Q2 profit of $49.8 million was down 3.9 percent from last year's $51.8 million, while operating profit of $88 million was down 2.5 percent.

Organic sales were down 3 percent in the U.S. and down 3 percent in Canada. WESCO's organic sales have declined in each quarter since Q1 2015, although this past quarter's decline was sequentially much smaller than Q1 2016's decline of 6.7 percent.

"While the industrial end market continues to pressure our top-line, all three of our other end markets posted positive organic sales growth in the quarter, including construction," said John Engel, WESCO chairman, president and CEO.

Organic sales in the industrial end market — which comprises 37 percent of WESCO's business — were down 10.1 percent from last year, following a 13.7 percent decline in Q1. Organic sales were down 9 percent in the U.S. and down 21 percent in Canada.

"Headwinds remain strong with reduced demand outlook, weak commodity prices and strong U.S. dollar weighing on manufacturing sector causing deferred project and maintenance spending," the company commented about the industrial end market.

Construction market (33 percent of WESCO) organic sales increased 2.3 percent year-over-year, following a 3.6 percent decline in Q1. Organic sales were up 2 percent in the U.S. and up 4 percent in Canada. WESCO said sales growth to commercial construction contractors more than offset continued weakness with contractors serving the industrial market.

Utility market (16 percent of WESCO) organic sales increased 0.6 percent year-over-year, the same as Q1. Growth was flat in the U.S. and up 4 percent in Canada.

CIG market (14 percent of WESCO) organic sales increased 0.8 percent year-over-year, following 0.4 percent growth in Q1. Organic sales grew 2 percent in the U.S. and grew 10 percent in Canada.

John Engel, WESCO Chairman, President & CEOJohn Engel, WESCO Chairman, President & CEO

WESCO narrowed its full year sales outlook, expecting sales to range from flat to 2 percent decline.

"We expect weakness in commodity-driven end markets and foreign exchange headwinds to continue into the second half of this year," Engel said. "In this challenging environment, our One WESCO value proposition is more important than ever in providing the comprehensive product and service solutions customers need to cost-effectively meet their MRO, OEM, and capital project management requirements."

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