MRO distributor’s sales increase 15 percent for first six months of 2010
Grainger , the giant MRO distributor, today reported second-quarter sales of $1.8 billion, an increase of 16 percent versus the 2009 second quarter. Net earnings for the quarter increased 40 percent to $129 million versus $92 million in 2009. Earnings per share increased 43 percent to $1.73 versus $1.21 for the second quarter of 2009.
"We are very encouraged by the strong organic growth in the quarter and the resulting earnings power demonstrated by our business," said chairman, president and chief executive officer Jim Ryan. "Performance this quarter was the result of a complete team effort. Our businesses in the United States and Canada, along with the majority of our international operations, contributed to a solid quarter for both sales and earnings."
Ryan added: "Although there continues to be uncertainty as to the extent and duration of the economic recovery, our strong execution and results in the first half of the year give us confidence to raise and narrow our 2010 sales growth guidance to a range of 12 to 14 percent and our earnings per share guidance to a range of $6.10 to $6.40, excluding unusual items."
Previous guidance, issued by Grainger in April 2010, forecasted sales growth of 9% to 12% and earnings per share of $5.70 to $6.10 for the full year 2010.
Daily sales for the company increased 16 percent in April, 16 percent in May, and 18 percent in June. For the quarter, foreign exchange contributed 2 percentage points to the increase. Acquisitions added another 5 percentage points to the growth in the quarter. Pricing was flat while volume increased 9 percent. Sales of products used to assist with the oil spill clean up in the Gulf of Mexico contributed approximately 1 percentage point to sales growth in the quarter. This growth was, however, essentially offset by sales in the 2009 second quarter of H1N1-related product that did not repeat.
The company has two reportable business segments, the United States and Canada, which represent approximately 96 percent of company sales. The remaining operating units (Japan, Mexico, India, Puerto Rico, China, and Panama) are included in Other Businesses and are not considered a reportable segment. In June of 2010, Grainger announced its investment in a joint venture in Colombia. Results of operations for the Colombian business will be included in the Other Businesses beginning in the 2010 third quarter.
Sales for the United States segment increased 11 percent, 9 percent excluding acquisitions, in the 2010 second quarter. Daily sales increased 8 percent in April, 10 percent in May, and 14 percent in June. Sales of products used for the oil spill clean up contributed approximately 1 percentage point to growth in the quarter, although this contribution was essentially offset by the strong sales of H1N1-related product in the 2009 quarter that did not repeat in 2010. There was no material effect in the quarter from the sale of seasonal products. All customer end markets within the United States posted sales growth versus the 2009 second quarter with the exception of the contractor and government sectors, which were down slightly.
Growth was led by the heavy manufacturing sector, which was up more than 20 percent versus the prior year. The Lab Safety Supply/Grainger Industrial Supply integration also contributed to segment performance. When the integration was announced in late 2008, the company forecasted total integration benefits of $70 million -$100 million in incremental revenue and $20 million -$30 million in cost savings over an 18-month period. The integration is now substantially complete and has generated more than $88 million of additional revenue and $40 million of cost savings.
Sales for the Acklands-Grainger business in the quarter were up 29 percent in U.S. dollars versus the 2009 second quarter. In local currency, sales were up 14 percent for the quarter and on a daily basis were up 17 percent in April, up 12 percent in May, and up 14 percent in June. Comparisons were more difficult in May and June due to strong sales of H1N1-related product in 2009, which did not repeat in 2010. The sales increase in Canada was led by strong growth to customers in the agriculture and mining, oil and gas, heavy manufacturing and forestry sectors of the economy, partially offset by a decline in sales to the government.
Sales for the Other Businesses, which include Japan, Mexico, India, Puerto Rico, China and Panama, increased 226% in the quarter versus prior year, due primarily to incremental sales from the acquired businesses in Japan and India, along with strong growth in Mexico, China and Puerto Rico.
Operating earnings for the Other Businesses were $2 million for the second quarter 2010 compared to a $3 million loss a year ago. In addition to the earnings contribution from Japan, the business in Mexico returned to profitability and the business in China reduced its loss versus the prior year.
For the six months ended June 30, 2010, Grainger reported sales of $3.5 billion, an increase of 15 percent versus the six months ended June 30, 2009. Net earnings increased 21 percent to $228 million versus $189 million in the first half of 2009. Earnings per share for the six months increased 24 percent to $3.04 versus $2.46 for 2009, before unusual items