Global Fastener News

Fastener Stocks: Sales and Profits Strong Despite Rising Energy Costs

Jason Sandefur

Strong fastener revenue growth, including organic sales gains, were reported by many fastener companies in both the fourth quarter and full-year 2005 results. Profits were also up for most companies, though several firms warned that rising energy and costs in certain regions could reduce margins in 2006.
While a few fastener companies reported damage from a devastating hurricane season along the Gulf Coast, both sales and profits for those firms remained robust.

Alcoa Fastener Revenue Rises
A double-digit jump in fourth quarter revenue at Alcoa”s Engineered Solutions segment, including fasteners, pushed sales up 9.7% to $5.04 billion in 2005. Segment operating profit from fasteners and other engineered products rose 9.8% to $45 million in Q4. However, operating income for the year declined 7.1% to $196 million.
As reported by FIN in October, Alcoa Fastening Systems highlights for 2005 included a decision to create two new 50,000 square-foot manufacturing sites in China to support rapidly growing commercial aviation and railway/rail car production and sub-assembly in that market.
The announcement followed news that AFS opened a full service logistics center in Shanghai in the first half of 2005 (see 5/12/05 issue of FIN).
Overall annual revenue at Alcoa climbed 13% to a record $26.2 billion, while profit dipped 5.9%, hit by rising energy and input costs.
Overall Q4 revenue rose 12% to $6.67 billion, driven by higher metal prices and strength in the aerospace market. However Q4 net income slipped 16.4% to $224 million.

Aerospace Fastener Sales Grow at PCC
Driven by aerospace sales, fastener revenue at Precision Castparts Corp. grew 14% to $199.8 million in the third quarter of fiscal 2006, while operating income rose 53% to $36.4 million.
Fastener Products” aerospace sales, which include revenue from Air Industries Corp., have grown more than 30% year over year, PCC stated. Well over half of that growth was organic, driven by excellent positioning on the “right” aircraft platforms and share gains, PCC commented.
“Despite some headwind in its automotive business, Fastener Products is doing a great job of working its aerospace acquisition growth strategy, incorporating those acquisitions smoothly, and driving operational margins to the next level of excellence,” noted CEO Mike Donegan. “In fact, this segment”s operating income during the quarter exceeded the annual operating income for [SPS Technologies] at the time of acquisition.”
PCC”s fastener segment continues to alter its product mix, with aerospace sales at approximately 68% of total sales in the quarter versus 60% a year ago. The success of its aerospace fastener business helped the Fastener Products segment overcome a year-over-year decline of nearly 15% in automotive/general industrial sales, due to a general downturn in the industry and calendar year-end order push-outs, the company commented.
Overall Q3 sales gained 16.2% to $864.4 million, while net income grew 46.9% to $91.2 million.

Fastenal Sales & Profit Soar
Despite rising fuel costs, Fastenal Inc. reported a 27.4% increase in profit to $166.8 million during 2005. Sales rose 23% to $1.52 billion, while operating income improved 29.3% to $267.9 million during the year.
After a slight decline during the first quarter, fuel costs rose 17.3% during the final three quarters, averaging $1,759 per vehicle each month during the fourth quarter.
Fastenal opened 222 new stores in 2005, bringing its total to 1,755 stores by year”s end. The fastener giant predicts opening as many as 316 new stores in 2006.
During the fourth quarter of 2005 sales grew 20.6% to $384.04 million, while operating income rose 24.6% to $62.8 million. Net earnings increased 17.7% to $39.3 million during Q4.
Textron Takes $53 million Charge for TFS in Q4 Having announced its intention to sell Textron Fastening Systems, parent company Textron Inc. posted a $53 million charge for discontinued operations during the fourth quarter of 2005. But sales and income figures for TFS are no longer included in Textron”s financial reporting.
Rumors have surfaced in the fastener industry regarding the sale of TFS. But communications director Tim Weir told FIN that TFS has not been sold.
Textron reported overall revenue for 2005 climbed 20% to $10.04 billion, but net income dropped 44.3% to $203 million, hurt by costs related to reclassifying TFS as discontinued operations.
Overall revenue during the fourth quarter of 2005 rose 14.7% to $2.7 billion, while net income fell 5.6% to $118 million.

Infast Helps Anixter Deliver Strong Quarter
Fastener revenue boosted sales growth at Anixter International during 2005. Infast, acquired July 8, 2005, contributed $126.4 million in sales during the second half of the year, with an additional $36.7 million coming from Distribution Dynamics, acquired during the first half of 2004.
Overall sales rose 17.4% to $3.85 billion, producing a 37% jump in operating income to $189.4 million. Annual profit climbed 22% to $90 million. Sales in North America increased 14.3% to $2.85 billion, while domestic operating income grew 34% to $161.3 million. Revenue from Europe in 2005 improved 31% to $726.1 million.
Infast drove European revenue increases during the final quarter of 2005.
“The major factor driving European sales growth [of 37%] was the July 8, 2005, acquisition of Infast, which added $61.5 million to European sales in the quarter,” explained CEO Robert Grubbs.
Overall Q4 sales rose 21% to $1.03 billion, boosted by a 17% revenue increase in North America and double-digit gains in both Latin America and Asia. Operating income soared 32% to a record $54.7 million, while profit declined 21% to $20.1 million due to a $7.7 million tax provision for the “repatriation of accumulated foreign earnings.”

North American Sales Boost ITW
Stronger demand in North America helped Illinois Tool Works Inc. report an 8% rise in revenue to $3.29 billion during the fourth quarter of 2005. Operating income grew 11% to $595.2 million, while profit increased 12% to $400.6 million.
North American Engineered Products, including fasteners, saw sales improve 10% from acquisitions and base revenue growth from the industrial and automotive business units. Domestic operating income grew 20% during the quarter.
Sales at International Engineered Products, including fasteners, grew 4%, with operating income gaining 7%.
Overall sales in 2005 grew 10% to $12.92 billion, while operating income increased 10% to $2.26 billion and net income rose 12% to $1.49 billion.
“We”re very pleased with our strong financial performance in both the fourth quarter and full year, including our North American core business growth and overall quality of earnings,” commented CEO David Speer.
ITW”s capital spending declined 3.7% to $1.8 billion in 2005.

Nucor Reports Another Record Year
Nucor reported sales of cold finished steel, including fasteners, increased 26.2% to a record 342,000 tons in 2005.
Overall revenue rose 12% to $12.70 billion during the year, with net earnings growing 17% to $1.31 billion. Average sales price per ton increased 4%, while the average scrap and scrap substitute cost per ton used increased 3% to $244. Total energy costs increased $7 per ton.
Sales during the fourth quarter of 2005 increased 4% to $3.21 billion, while net earnings remained flat at $341 million. Average sales price per ton dropped 10% during Q4, and the average scrap and scrap substitute cost per ton used decreased 14% to $240. Total energy costs during Q4 rose $10 per ton.

B/E Aerospace Fastener Sales Strong
Distribution sales, including fasteners, at B/E Aerospace rose 20.6% to $173.9 million during 2005, “driven by a broad-based increase in aftermarket demand for aerospace fasteners and continued market share gains.” A 10% increase in operational productivity helped boost operating income 34.7% to $34.9 million for the year.
B/E saw “strong revenue growth” for its distribution segment during the fourth quarter of 2005, with sales increasing 16.9% to $42.9 million. Q4 distribution operating earnings jumped 31.3% to $8.4 million, despite lost sales and overtime and expediting costs due to hurricane activity.
Overall sales during 2005 climbed 15.5% on organic growth to $844.1 million, while annual operating earnings soared 45.3% to $93.6 million. Net income for 2005 grew to $84.6 million compared with a $22 million loss in 2004.
Overall sales in Q4 improved 18% to $223 million, with net earnings growing to $62.1 million compared with a $9.3 million loss in the fourth quarter of 2004.

LISI Sees Strong Sales on Aerospace Strength
A “very favorable” climate in the aerospace industry helped French fastener maker LISI report a 14.2% increase in overall annual sales to Euro 617.6 million (US$749.6 million). Results included a strong fourth quarter performance, with revenue jumping 21.2% to Euro 166.7 million (US$202.4 million).
LISI Aerospace sales rose 15% to Euro 243.7 million (US$295.9 million) in 2005. More than 30% of aerospace sales were generated in the U.S., while Europe accounted for nearly 13% of revenue. LISI Aerospace was boosted by “the big comeback of Boeing, thanks to the success of the B787.
“This extraordinary year enhances the already excellent medium-term prognosis for the aerospace sector. So efforts are being put into increasing existing capacity,” LISI reported.
LISI Automotive revenue climbed 16% to Euro 339.3 mln (US$411.9 million), driven by the acquisition of German fastener and auto component firm The Knipping Group during the second half of 2005 (see the 6/29/05 issue of FIN). Knipping operates five industrial sites – four in Germany and another in Spain – plus 2 sales offices, with second-half sales of Euro 50.5 million.
“This strategic transaction marked an important step for LISI, because it lets it rebalance and expand its client portfolio among German manufacturers, while at the same time reducing its reliance on French manufacturers,” LISI stated.
LISI predicts “significant business growth” in 2006, with new product launches and strong performance of its international subsidiaries.

Grainger Posts Record Year
WW Grainger Inc. reported distribution sales, including fasteners, grew 10% during the fourth quarter of 2005, while operating earnings 14%, boosted by increased global product sourcing.
U.S. sales rose 9%, while operations in Canada reported a 15% revenue jump and distribution sales in Mexico increased 17% from higher sales to national accounts. The wind-down of integrated supply and automotive-related contracts resulted in a two-percentage point reduction in U.S. sales growth, the company stated.
Grainger”s market expansion program contributed approximately 1 percentage point to overall Q4 sales growth. To date, incremental sales from the program were approximately $150 million. During 2005 Grainger opened nine full-size branches and five Grainger Express locations, relocated 10 branches, expanded 11 existing branches and closed four.
Overall company sales rose 9% to a record $5.5 billion, pushing net earnings up 21% to $346 million. Q4 sales improved 10% to $1.4 billion, while net earnings rose 15% to $104 million.

GE Industrial Sales Rise
General Electric Co. reported Industrial segment sales, including fasteners, rose 6.2% to $32.6 billion in 2005, while Industrial profit soared 40% to $2.55 billion.
Industrial sales during the fourth quarter of 2005 edged up 1% to $8.45 billion, and segment profit rose 25% to $769 million.
Overall revenue in 2005 rose 11% to a record $146.7 billion, including organic revenue growth of 8%. Full-year earnings also set a record, with profit climbing 12% to $18.3 billion. All six GE businesses saw double-digit earnings growth.
Q4 revenue climbed 3% to $40.7 billion, while quarterly profit dropped 46% to $3.06 billion.
“We see continued strong growth in Asia and developing markets, mid single-digit growth in the Americas, and slow growth in Europe,” CEO Jeff Immelt stated.

W�rth Worldwide Sales Jump 11.1%
The W�rth Group worldwide sales rose 11.1% to a record Euro 6.89 billion (US$8.3 billion) for 2005 the German company”s 60th year.
Adjusted for exchange rates and acquired companies the organic growth amounted to 8.3%, W�rth Group calculated.
K�nzelsau, Germany-based W�rth”s global profits are projected to be Euro 440 million to Euro 450 million (US$531.3 million to $543.4 million), compared with Euro 395 million (US$477 million) for 2004.
W�rth reached the 50,000 employees in October and by the end of the year there were 50,767 employees worldwide or 8.1% more than at the start of 2005.
The number of sales representatives was up 5.4% to 27,488 worldwide.
Sales in Germany rose 9.6% to Euro 2.77 billion (US$3.34 billion). The number of employees in Germany increased 2.3% to 14,263.
The number of internal company employees grew 11.4% to 23,279, including 1,145 jobs added by acquisition of companies.

Sundram Margins Hurt by Steel Hikes
Sundram Fasteners reported sales rose 14.4% to Rs. 872.74 crores during the nine months of fiscal 2006, with nine-month export sales climbing 24% to Rs. 233.33 crores.
Gross income grew 11% to Rs. 110.26 crores, but net profit dropped 15.7% to Rs 43.08 crores.
The India-based fastener firm said operating margins were strained by “continuous pressure on domestic selling prices,” along with steep steel and oil hikes.

Aerospace Sales Continue Growth at Honeywell
Capping a profitable year, Honeywell Inc. reported aerospace sales, including fasteners, increased 7.7% to $10.5 billion, while segment profit grew 15% to $1.7 billion.
Aerospace sales during the fourth quarter of 2005 rose 8% to $2.72 billion, with net income gaining 10% to $469 million.
Overall sales increased 8% to $27.7 billion, while net income grew 29.2% to $1.66 billion.
Honeywell”s fourth quarter performance saw revenue rise 10% to $7.3 billion, with earnings more than doubling to $511 million.

Bossard Profit Returns
Swiss fastener firm Bossard Group announced sales for 2005 grew 3.6% to CHF 515 million (US$402.6 million). Bossard said sales rose 6.8% if adjusted for divestments during the year. Annual profit increased 10.5% to CHF 21 million (US$16.4 million).
“After a strong prior year, the group has again improved its profit, which is proportionally higher than sales growth,” the company said in a written statement.

Aviall Reports Double-Digit Gains
Aviall Inc. continued its double-digit annual growth trend as 2005 revenue rose 11% to $1.3 billion. Sales were driven by the addition of GE”s CF6 engine product lines and a general aviation sector increase. Operating income for the year increased 39% to $106 million, while net income grew 31% to $56.6 million.
In January 2006 Aviall announced a 10-year agreement with Smiths Aerospace to provide civilian aftermarket distribution services that could be worth as much as $140 million in annual sales.
During the fourth quarter of 2005, sales gained 28% to $347.9 million, operating income grew 45% to $26.4 million, and net income improved 44% to $13.9 million.

Unisteel Fastener Sales Soar
Singapore-based Unisteel Technology may see its stock value rise following SIAS Research”s decision to upgrade its rating for Unisteel to “buy”, AFX Asia reports.
SIAS called the precision fastener manufacturer “resilient” because fasteners are low-price products that comprise a very small portion of the company”s overall costs.
“The impact of cost down on its product, in the first place, is minimal. Secondly, it has diversified into different areas through the acquisition of Valen Technologies. We expect earnings to remain resilient due to a diversified customer base,” SIAS stated.
SIAS raised its target price for Unisteel to SGD 2.15 (US$1.31), according to AFX Asia. Unisteel stock recently closed at SGD 1.88.
During the third quarter of 2005, Unisteel”s fastener segment reported a 68.4% increase in sales to SGD 37.2 million (US$22.8 million). Overall Q3 net profit rose 29% to SGD 9.4 million (US$5.75 million) despite raw material price increases.
Unisteel also projected bringing two additional factories online in Shanghai by the end of 2005.

Electric Fastener Maker Going Public
Electric fastener tool maker Estic Corp. plans an initial public offering on the Tokyo Stock Exchange”s Mothers market, according to the Nikkei Report.
Estic has designed “servo nutrunners” that operate with a sensor and controller to constantly check rotation angles of nuts and bolts, as well as measure resistance.
“They also play the role of a quality control device” for an automobile assembly line because they can detect scars on nut or other registering abnormal resistance, Estic president Hiroshi Suzuki told the Nikkei Report.
Estic also offers handheld nutrunners for tightening larger bolts. Using proprietary technology, the tools reportedly offer a lower degree of shaking than conventional products as a mechanical reaction to resistance.
The company hopes to raise 600 million yen (US$5.2 million) for plant expansion and new product development, according to the Nikkei Report. Estic was established in 1993 and has 62 employees. \ �2006 FastenerNews.com