Less than three weeks after announcing a $4.5 billion merger agreement with Anixter International following a bidding battle, electrical/industrial distributor WESCO International reported its 2019 fourth quarter and full-year financial results on Thursday.
The numbers showed that the company achieved record Q4 and full-year sales, despite an overall market slowdown in the industrial supply space amid weakened demand.
WESCO posted Q4 total sales of $2.1 billion, up 4.4 percent year-over-year (YoY) and down 2.3 percent from Q3, with organic sales up 3.9 percent. Operating profit of $83.8 million was down from $90.5 million a year earlier, while total net profit of $53.1 million was likewise down from $58.1 of a year earlier.
For the full year, WESCO had total 2019 sales of $8.4 billion, a company record that was up 2.2 percent over 2018, with organic sales up 2.6 percent. Operating profit of $346.2 million was down slightly from $352.5 million in 2018, while 2019's net profit of $223.4 million was similarly marginally down from $227.3 million in 2018.
"We achieved record fourth quarter and full year sales results against end market conditions that were more challenging than expected," commented WESCO chairman, president and CEO John Engel. "Notably, all of our end markets and geographies grew on a year-over-year basis for the third consecutive year. Gross margin was down versus prior year driven by business mix and the impact of supplier price increases, which we continue to work into the market."
WESCO was No. 11 on Industrial Distribution's 2019 Big 50 List, on account of its $3.0 billion in 2018 industrial sales.
By end market in Q4:
- Industrial, which comprised 35.5 percent of total sales at $746 million, saw organic sales grow 1.3 percent YoY (+0.6 percent sequentially). The company's analyst presentation noted that "Manufacturing demand remains in soft patch."
- Construction, which comprised 33.0 percent of total sales at $692 million, saw organic sales grow 1.4 percent YoY (-1.5 percent sequentially). The company's presentation noted that "Contractors continue to be challenged by tariff-related budget pressures and an exceptionally tight skilled-labor market."
- Utility, which comprised 16.0 percent of total sales at $335 million, saw organic sales grow 9.8 percent YoY (-4.8 percent sequentially).
- Commercial-Institutional-Government (CIG), which comprised 15.6 percent of total sales at $327 million, saw organic sales grow 10.6 percent YoY (+3.5 percent sequentially).
By geography in Q4, US core sales of $1.54 billion (73.9 percent of total) had 4.0 percent organic growth YoY; Canada core sales of $415 million had 1.5 percent organic growth; and International core sales of $128 million had 12.7 percent organic growth.
WESCO's 2019 sales percentage by product category was as follows:
- General supplies - 41 percent
- Communications & security - 16 percent
- Wire, cable & conduit - 14 percent
- Lighting & sustainability - 11 percent
- Electrical distribution & controls - 10 percent
- Automation, controls & motors - 8 percent
WESCO reiterated its 2020 outlook that it provided in its 2019 Q3 results, saying the company expects sales growth in the range of flat to 4 percent. Meanwhile, the merger with Anixter is expected to close in Q2 or Q3 of 2020, pending stockholder and regulatory approvals. The deal is expected to create a combined electrical/industrial/data solutions products supplier with approximately $17 billion in total 2019 sales. Anixter had 2018 full-year sales of $8.4 billion and a net profit of $156 million.
"As announced earlier this month, the transformational combination of WESCO and Anixter will create a premier electrical and data communications distribution and supply chain services company," Engel said. "As a result, we expect 2020 to be a watershed year for WESCO and we look forward to the substantial value creation for our stockholders, customers, suppliers, and people."