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Distribution Industry News Archives:
News from the week of July 5, 2004

Manufacturing survey predicts robust recovery, growth
Hughes Supply boosts Q2 guidance
Factory orders slip in May
June unemployment rate remains unchanged
Applied names director general of Applied Mexico
SDI names general manager of Mexican subsidiary
ISA launches Web site
Former Fairmont Supply, I.D.A. president Bill Todd dies
Guardair Corporation acquires Nortech Corporation
IBC members receive Boss Mfg. awards

Manufacturing survey predicts robust recovery, growth
The momentum of the recovery in the manufacturing sector remains strong, according to the quarterly Manufacturers Alliance/MAPI Survey on the Business Outlook.

The June 2004 composite index of 80 is the highest in the survey’s 32-year history. It surpasses the previous high of 78 in March 2004 and concurs with the general consensus of economic indicators.

The survey reflects the views on current and future business conditions of 60 senior financial executives representing a broad range of manufacturing industries. While a variety of indexes are included in the survey, the business outlook index is a weighted sum of shipments, backlogs, inventories and profit margin indexes.

A composite business index above 50 indicates that overall manufacturing activity is expected to increase over the next three months. It should be noted, however, that the index measures the direction of change rather than the absolute strength of activity in manufacturing.

“The rise in this index, along with the strength shown by all the individual indexes, indicates that the expansion of manufacturing activity is real and robust,” said Donald A. Norman, Manufacturers Alliance/MAPI economist and survey coordinator.

Nearly all components of the index maintained the high levels achieved in the previous quarter.

Respondents also were asked about the impact of higher commodity prices on their businesses. A large majority (83 percent) expects overall prices will rise moderately in 2004, but remain below 4 percent.

Key commodities senior financial executives expect to rise this year include steel, natural gas, oil and gasoline, chemicals, and shipping. Among the commodities projected to remain at their current level or fall are aluminum, copper, rubber and coal.

Companies responded in a number of ways to higher prices. The most important action taken has been a greater reliance on longer term supply contracts for key commodities, identified by 52 percent of the respondents, followed by hedging, cited by 27 percent. The most important effect of higher commodity prices has been to reduce company earnings (39 percent) followed by the need to devote more time and effort to ensuring supplies of key commodities (36 percent).

When asked what factors would contribute most to lower commodity prices, 40 percent of the respondents cited an expectation of a slowdown in China’s economy, while 27.5 percent said expanded production of commodities.

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Hughes Supply boosts Q2 guidance
Hughes Supply Inc. said its revenue and earnings for its second quarter ending July 30 are expected to exceed the company's previously issued guidance.

Hughes cited continued strong demand and higher commodity prices in most of its businesses for the increase.

Revenues for the second quarter of fiscal year 2005 are now expected to be in the range of $1.115 to $1.125 billion, an increase over the previous year of 37 percent to 38 percent, with estimated same store sales growth of 14 percent to 16 percent.

Net income is expected to be $35 million to $36.6 million, an increase over the previous year of 87 percent to 96 percent. Earnings per diluted share are expected to be $1.13 to $1.18, compared to 80 cents per diluted share in the prior year's second quarter, an increase of 41 percent to 48 percent.

The acquisition of Todd Pipe & Supply is expected to add approximately 4 cents to diluted earnings per share in the second quarter and is included in the revised outlook.

"We continued to see strong demand and higher prices across most of our businesses in the months of May and June," said Tom Morgan, Hughes president and CEO. "Residential construction activity remained robust, driven primarily by the high-population-growth markets we serve, and the improved level of commercial construction activity we began to see in the second half of last year has strengthened further. However, higher commodity prices, which we have successfully passed on to customers, are beginning to moderate in many cases.

"As we indicated in our previous guidance, we expect commodity prices to correct themselves in the next few months, with a corresponding decrease in sales and margins," he said. "In addition, the pick-up in commercial and public sector construction that began in the latter half of the previous fiscal year, will make comparisons in the third and fourth quarters more challenging. We remain cautious for the remainder of the year; therefore, the outlook for the third and fourth quarters of fiscal year 2005 remains unchanged. We will provide a detailed outlook for the third quarter in our second quarter earnings conference call."

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Factory orders slip in May
New orders for manufactured goods decreased in May by $1 billion, or 0.3 percent, to $358.2 billion, according to the Commerce Department. This followed a 1.1 percent April decrease.

New orders for manufactured durable goods orders fell 1.8 percent in May to $188.6 billion, revised from the previously published $3.2 billion decrease.

Durable goods are costly manufactured products designed to last three or more years.

Nearly all broad categories suffered declines in orders during May. New orders for machinery fell 1.2 percent, while new orders for computers and electronic products dropped 2.6 percent. Orders for Electrical equipment, appliances and components declined 4 percent and new orders for transportation equipment dipped 2.9 percent.

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June unemployment rate remains unchanged
The unemployment rate held steady at 5.6 percent in June, the same rate for each month but one in all of 2004, according to the Labor Department.

In the goods-producing sector, manufacturing employment fell by 11,000 jobs after increasing by 75,000 over the prior four months, showing that industry sector to be floundering in spite of reports of job growth. Durable goods employment was little changed during the month.

"Without question, the 11,000 drop in manufacturing employment was...an unwelcome surprise," said National Association of Manufacturers chief economist David Huether. "However, one month does not make a trend and I do expect the employment recovery in manufacturing to get back on the positive track in short order because domestic manufacturing production has been accelerating in recent months and our members have generally been optimistic on the employment front."

A closer look at the June jobs report from the Labor Department shows more startling statistics. Though the civilian labor force increased by 305,000 in June, the number of workers not in the labor force increased by 1.8 million during the past year.

The average length of time a person remains unemployed is now 19.9 weeks, down only slightly from the record high of 20.3 weeks set in February 2004. Lastly, there are 1.6 million people with two or more part-time jobs, which is up 51,000 from the same time in 2003.

"[The] lackluster government report on jobs is evidence that employers are still unconvinced that significant hiring is necessary," said John A. Challenger, CEO of global outplacement firm Challenger, Gray and Christmas Inc. "Job creation did not even keep pace with population growth in June. Further evidence of employers skepticism comes from the fact that monthly job cuts are still averaging 20,000 to 25,000 above pre-recession levels."

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Applied names director general of Applied Mexico
Sergio Nevarez was named director general of Applied Mexico, the Mexican subsidiary of Applied Industrial Technologies. Nevarez will oversee operations at all nine Applied Mexico locations; he will be based in Chihuahua.

Nevarez worked previously as director of sales and operations for Applied Mexico. He joined Applied with the November 2003 acquisition of Rodamientos y Bandas de la Laguna, S.A. de C.V. (Rybalsa), a distributor of bearings, power transmission products and hydraulic and industrial hoses. Nevarez founded Rybalsa in 1985 after working for eight years in the power transmission industry.

"With his 27 years of power transmission experience, Sergio brings the industrial products and geographic market expertise needed to head our healthy and growing Mexican organization," said Todd Barlett, vice president of global business development for Applied. "Since the addition of Rybalsa, Applied Mexico significantly expanded its ability to serve our multinational customers in Mexico and we look forward to having Sergio at the forefront of the entire organization."

Applied Mexico operates service centers in Mexico City, Monterrey, Saltillo, Guadalajara, Chihuahua, Cuidad Juarez, Hermosillo, Cananea and Nacozari.

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SDI names general manager of Mexican subsidiary
Strategic Distribution Inc. (SDI) appointed Cris G. Ferregur general manager of Strategic Distribution de Mexico (SDM), the company's Mexican subsidiary.

Headquartered in Juarez, Chihuahua, Mexico, SDM is the largest on-site integrated supplier in Mexico.

Ferregur will oversee all management aspects of SDM. He will generate new business by securing long-term contracts and manage day-to-day operations. He is taking over responsibilities of F.M. "Duffy" Shea, who left to pursue other opportunities.

Prior to joining SDI, Ferregur served as the vice president of sales and marketing for a mid-sized integrated supplier specializing in the aerospace industry. He also worked for the Norton Company's Saint Gobain Corp. for more than 14 years. Based in Mexico City, Ferregur served as the national sales manager for the Saint-Gobain Abrasives division.

"SDM is experiencing amazing growth and we're excited to have someone like Cris Ferregur, with his credentials, at the helm," said Don Woodring, SDI president and CEO. "Cris' depth of experience in integrated supply chain management is an excellent complement to the service delivered by SDM. Our customers will benefit from his experience in providing even greater value through global sourcing and enhanced inventory management."

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ISA launches Web site
The Industrial Supply Association (ISA), formed by the consolidation of the Industrial Distribution Association (I.D.A.) and the Industrial Supply Manufacturers Association (ISMA), officially launched its Web site July 1.

The site is located at www.isapartners.org.

The launch of the Web site coincides with the official opening date of ISA. As of July 1, all current members of ISMA and I.D.A. are automatically rolled over and become members of ISA.

"ISA's Web site will be the best online resource for information on the industrial supply and distribution channel," said ISA president-elect Tom Berger.

The Web site is a dynamic site with frequent updates that provide the most essential data, facts and issues for suppliers and manufacturers.

"Members of ISA, industry journalists and others interested in MROP manufacturers and distributors should visit the site often to stay on top of the latest developments in the industry," said ISA executive vice president John Buckley.

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Former Fairmont Supply, I.D.A. president Bill Todd dies
William "Bill" T. Todd II, of Washington, Pa., former president of Fairmont Supply Co., died on Tuesday, June 15, 2004. He was 70.

Todd was president of the Industrial Distribution Association from 1994-1995. Active in a number of community organizations, Todd served on the board of the United Way of Washington County, Association for Retarded Citizens, Washington County Council of Economic Development and Presbyterian Senior Care.

After graduating from the University of South Carolina and serving overseas as an officer in the U.S. Navy, in 1956 Todd joined the family business, Somers, Fitler and Todd Co. He remained with the company after it was sold to Fairmont Supply Co. He rose to become president of Fairmont Supply in 1988 and served in that position until he retired in 1998.

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Guardair Corporation acquires Nortech Corporation
Guardair Corporation acquired the assets of Nortech Corporation of Midland Park, N.J., a manufacturer of pneumatic-powered vacuums. Nortech will operate as a division of Guardair and will be based at Guardair’s Chicopee, Mass., headquarters. The Nortech product line includes more than 20 different vacuum models in addition to a complete set of accessories and options.

“We are extremely excited about the Nortech acquisition as it compliments our pneumatic tool business and provides additional opportunities for our existing product line in the industrial cleaning market,” said Guardair president Thomas C. Tremblay.

Guardair manufactures safety air guns, spray equipment and accessories for sale into the industrial MRO market. Its products are used in a wide range of industrial and commercial applications including food processing, metalworking, pulp and paper, textiles and transportation. Guardair developed the world's first safety air gun and during the 1970s worked closely with OSHA to write the original (and existing) specifications for air gun usage.

In 1999, Guardair acquired the assets of Allpax Gasket Cutter Products Inc., expanding the product line to include gasket cutters, hollow punch tools and accessories.

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IBC members receive Boss Mfg. awards
Two members of IBC-IndustrialSupplyPlus received Customer of the Year recognition from Boss Manufacturing Company. Abrasive-Tool Corporation of Rochester, N.Y., and Geisler Company of Redford, Mich., were among five companies that received the award for exceptional partnership performance as a distributor.

Based in Kewanee, Ill., Boss Manufacturing is a 111-year-old manufacturer of protective clothing, including gloves, work boots and rainwear for the industrial and agricultural markets in the U.S. and Canada.

"Abrasive-Tool and Geisler have distinguished themselves in the industrial market. Their consistent dedication and commitment to growth allows us to honor them with this prestigious recognition," said Samantha Robbins, national sales manager for Boss.

"Continuous quality improvement is a way of life here at Abrasive-Tool Corporation," said company president Mike Hanna. "Every day our office staff, sales team and technical specialists work hard at delivering a higher level of customer service than the day before. Carrying the Boss Gloves line has afforded us the opportunity to provide our customers an exceptional product in an important protective category."

"Boss provides us the opportunity to distinguish ourselves in the marketplace," added Geisler Company president Norm McRitchie. "Their customer service and field support help us serve our customers in a world-class manner, making our job in the field even more effective."

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