Houston-based pumping solutions and MROP products distributor DXP Enterprises reported its 2020 second quarter financial results on Thursday, showing considerable year-over-year (YoY) and sequential sales and profit declines that fall in line with many other industrial distributors and suppliers amid business impacts from COVID-19 and underlying weakened industrial demand.
DXP — No. 16 on Industrial Distribution's 2019 Big 50 List — posted total Q2 sales of $251 million, down 24.6 percent YoY and down 16.5 percent from Q1. Q2 gross profit margin was 27.7 percent, down slightly from 27.9 percent in Q1 and up from 27.6 percent a year earlier. The company's Q2 operating profit was $6.8 million on 2.7 percent operating margin, compared to $10.9 million/3.6 percent in Q1 and $22.8 million/6.9 percent a year earlier.
"Although the majority of lockdowns have been easing and economic activity is likely near trough levels, visibility on the economic outlook remains extremely limited," DXP CEO David Little said in the company's Q2 earnings release. "Specifically, the risk of a second wave of virus cases, the reinstitution of select geographic lockdowns, the upcoming election and the risk of lingering high unemployment create an uncertain economic environment that likely persists through the rest of 2020 based upon what we know today."
By DXP business segment in Q2
- Service Centers' revenue of $154 million was down 23.1 percent YoY and down 15.7 percent from Q1, with an 8.9 percent operating margin.
- Innovative Pumping Solutions' revenue of $60.5 million was down 25.3 percent YoY and down 13.6 percent from Q1, with a 14.2 percent operating margin.
- Supply Chain Services revenue of $37 million was down 29.0 percent YoY and down 23.6 percent from Q1, with a 9.0 percent operating margin.
"We delivered on our financial results as the market adjusted to various shelter-in-place orders," said David Little, DXP chairman and CEO. "DXP has a model that is characterized by high levels of MRO spend, low fixed costs, low capital expenditure requirements, and high levels of operating cash flow when the business cycles. For these reasons, and many others, we are highly confident in our ability to successfully navigate the situation. We believe our strong balance sheet and financial liquidity will allow us to continue making strategic investments in our business, where appropriate. Similar to the 2008, 2015 and 2016 business downturns, we believe our experienced management team positions us to best take advantage of a return to more normal business conditions in the future."