With its landmark $4.5 billion acquisition of Anixter complete as of June 22, electrical and industrial products distributor WESCO International reported its 2020 second quarter financial results on Thursday.
The figures showed a considerable year-over-year (YoY) organic sales decline that was in line with many other publicly-traded distributors amid impacts from COVID-19. And while Anixter's nine days of legacy results only factored in for the tail end of the quarter that ended June 30, it had a considerable impact on total sales.
Pittsburgh, PA-based WESCO reported total Q2 sales of $2.09 billion, down 2.9 percent YoY. Excluding Anixter, the company's organic sales fell 12.3 percent, as the acquisition had a 10.3 percent benefit on overall sales.
WESCO will begin a new financial reporting segment for Anixter beginning with the company's Q3 report.
WESCO's Q2 operating profit was $15 million, compared to $98 million a year earlier. Adjusted for merger-related costs of $73 million, Q2 adjusted operating profit was $73 million, and adjusted for Anixter's nine-day legacy results, operating profit was $70 million.
Largely due to merger-related costs, WESCO had a Q2 net loss of $34 million, compared to a $63 million profit a year earlier.
"The second quarter will prove to be a watershed period in our history, as we successfully closed on our industry-shaping merger of WESCO and Anixter," WESCO chief executive John Engel said. "In combining two industry-leading Fortune 500 companies with successful track records, we are creating the premier electrical, communications and utility distribution and supply chain solutions company in the world."
While Q2 organic sales were down 12.3 percent, WESCO said that sales improved sequentially throughout the quarter — going from down 13 percent YoY April to up 9 percent in May and up 5 percent in June. And that has continued into July and August, as WESCO said that while pro forma Q3 sales were down 8 percent YoY, they're up 11 percent from Q2.
By WESCO end market in Q2:
- Industrial core sales of $765 million (35.4 percent of total, compared to 37.6 percent in Q1) were down 20.6 percent YoY, with organic sales down 19.6 percent. Sequential organic sales were down 12.7 percent from Q1.
- Construction core sales of $707 million were down 18.7 percent YoY, with organic sales down 17.6 percent. Sequential organic sales were down 8.3 percent from Q1.
- Utility core sales of $348 million were up 6.7 percent YoY, with organic sales up 7.0 percent. Sequential organic sales were up 9.1 percent from Q1.
- Construction-Institutional-Government core sales of $338 million were down 6.4 percent, with organic sales down 5.2 percent. Sequential organic sales were up 10.7 percent from Q1.
Core sales don't account for Anixter's $222 million of nine-day legacy revenue at the end of Q2.
Geographically, WESCO's Q2 US core sales of $1.62 billion (75.5 percent of total) were down 11.5 percent YoY, with organic sales down by that same amount. Canada core sales of $417 million were down 20.4 percent YoY, with organic sales down 17.4 percent, while International core sales of $119 million were down 13.2 percent, with organic sales down 7.3 percent.
With the addition of Anixter, WESCO closed Q2 with liquidity of $819 million, including $585 in revolver availability.
"We have been executing a detailed, rigorous and process-oriented integration planning effort over the last several months. Now, all of our integration efforts and organizational focus shift from planning to execution and synergy realization," Engel continued. "We are off to an excellent start in our first six weeks since closing, and have already completed actions to deliver over 50 percent of our year one cost synergy target of $68 million. We have also begun to realize our first sales synergies through leveraging our expanded global footprint and cross-selling our broader product and services portfolio."