Pittsburgh-based electrical and industrial supplies distributor WESCO International reported its 2020 fourth quarter and full-year financial results on Tuesday, marking the second full fiscal quarter since the company's landmark $4.5 billion acquisition of Anixter International that completed this past June.
The company's year-over-year results were expectedly heavily skewed year-over-year due to Anixter, with Q4 sales up 97 percent from a year earlier and full year sales up 48 percent from 2019.
Due to Anixter, it may be more appropriate to look at WESCO's sequential results as a better performance indicator. In Q4, WESCO's sales of $4.13 billion were up 4.4 percent from Q3 on a daily basis, as Q3 had three additional work days, comparatively. Due to Anixter, WESCO's Q4 cost of goods doubled year-over-year to $3.4 billion, while gross profit also nearly doubled to $772 million. Sequentially, that gross profit total was down 1.7 percent from Q3, while gross margin of 18.7 percent was down slightly from 19.0 percent in Q3.
WESCO had a Q4 operating profit of $93 million, up from $84 million a year earlier and substantially less than the $178 million in Q3, due to acquisition-related costs and an out-of-period adjustment. Adjusted Q4 operating profit of $172 million was down slightly from Q3. Q4 operating margin of 2.2 percent was down from 4.0 percent a year earlier and 4.3 percent in Q3.
Q4 total profit of $5.6 million was far below the $53 million of a year earlier and $66 million in Q3, largely due to the Anixter acquisition.
“Fiscal 2020 will be remembered as one of the most important in WESCO’s history," said John Engel, WESCO chairman, president and CEO. "We completed the transformational acquisition of Anixter, doubling our size and changing our trajectory for years to come. We designed and launched a three-year integration plan which in just six months has delivered synergies in excess of our initial targets,."
By WESCO business segment in Q4:
- Electrical & Electonic Solutions (EES) sales of $1.67 billion increased 35.2 percent year-over-year and were flat compared to Q3, while operating profit of $64 million was flat year-over-year and down from $105.5 million in Q3. Prior to Q3, Industrial was one of WESCO's then-four business reporting segments. It appears Industrial has now been absorbed into the company's EES segment — where Industrial/MRO comprised about one-third of sales.
- Communications & Security Solutions (CCS) sales of $1.37 billion dwarfed the $228 million that segment had a year earlier and were down slightly sequentially from $1.39 billion in Q3. Q4 operating profit of $85 million likewise dwarfed $11 million from a year earlier and was down from $90 million in Q3.
- Utility & Broadband Solutions (UBS) sales of $1.09 billion jumped from $637 million of a year earlier and was flat compared to Q3. Q4 operating profit of $64 million was up from $50.5 million of a year earlier and down from $74 million in Q3.
"In the six months since completing the acquisition of Anixter we have already reduced net debt by $389 million," Engel continued. "We are confident that we will exceed the synergy targets that we’ve set for our three-year plan. The combination of WESCO and Anixter creates cross-selling opportunities, with initiatives underway that have already delivered early successes. We enter 2021 with a record backlog, a new organizational structure, and the strongest management team we’ve fielded during my time with the company."
For the full-year, WESCO had 2020 total sales of $12.3 billion, compared to $8.4 billion in 2019 pre-Anixter. 2020 operating profit of $347 million on 2.8 percent of net sales was down from $346 million on 4.1 percent of net sales in 2019. Adjusted 2020 operating profit was $522 million at 4.2 percent of net sales. Total 2020 profit of $70 million was down from $233 million in 2019.