Applied's Q2 Sales Dip 0.8% Amid 'Tepid' Demand

Applied Industrial Technologiesz

Cleveland, OH-based Applied Industrial Technologies — a distributor and technical solutions provider of industrial motion, fluid power, fluid control and automation technologies — reported its 2020 second quarter financial results on Wednesday for the period ended Dec. 31, showing that overall sales dipped slightly year-over-year, with a notable drop in organic sales.

Applied Industrial TechnologiesApplied — No. 10 on Industrial Distribution's 2019 Big 50 List — reported 2020 Q2 sales of $833.4 million, down 0.8 percent year-over-year (YoY), and down 2.9 percent from Q1. Q2 Organic sales declined 4.0 percent YoY, as acquisitions boosted total sales by 3.2 percent.

Of the 4.0 percent organic decline, Applied saw Service Center segment sales decline 3.5 percent, while Fluid Power & Flow Control segment sales fell 4.9 percent.

Applied's Q2 total profit of $38.0 million dipped from $38.7 million a year earlier, while EBITDA of $74.5 million was likewise down slightly from $76.0 million in Q2 2019.

"We are executing on our earnings commitments midway through fiscal 2020 despite tepid demand industry-wide, and are on track to achieve record free cash flow," commented Neil Schrimsher, Applied president and CEO. "In the current slow environment, we remain focused on expense control, leveraging our technical and cross-selling capabilities, and pursuing M&A that enhances our earnings and return potential long term."

Applied said it expects full-year 2020 sales to be down 2 percent to flat, including down 5 percent to 3 percent organically. Those updated figures compare with a previous forecast of sales down 2 percent to up 2 percent, including organic sales down 5 percent to down 1 percent.

"As we enter the second half of our fiscal year, we expect ongoing benefits from these internal initiatives," Schrimsher said. "That said, end-market demand remains challenging and uncertain, with our recent quarter impacted by an unusually slow December. While likely impacted by typical seasonal variability this time of year, we expect subdued industry demand to persist near-term as customers slowly rebound from an evolving trade and industrial production backdrop. Our track record of cost control and cash generation is once again apparent and key in this type of environment, while our leading technical position across motion control, fluid power, flow control, and automation provides significant and differentiated long-term growth potential."

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