by Gary Mintchell | Apr 30, 2014 | Automation, Commentary, News, Operations Management
I’ve been extremely busy for the past couple of months. It’s been hard to find time to write here. One of my projects completed Sunday. The new Maintenance Technology & Asset Performance website went live. Lots of work to launch one of those babies! Kudos internally to our digital guru Greg Pietras. Also to long-time friend Jon DiPietro and Authentia for putting it together.
ABB Financial News
ABB just released first quarter financial results. Overall, business looks good. There are two nuggets worth mining, though.
The company has begun divesting (OK, the opposite of M&A) pieces of companies that it has acquired over the past couple of years. ABB Chief Executive Officer Ulrich Spiesshofer said, “With the divestiture of Thomas & Betts HVAC business, and the Power-One Power Solutions business we announced yesterday, we are making good progress in our portfolio pruning efforts.”
I noticed an executive shuffle a couple of years ago moving some talented executives from the systems business to the power business. Well, now I see why. Check out this statement from Spiesshofer:
“We remain on track in four divisions who combined to deliver higher early-cycle orders, steady earnings and stronger cash flow in the first quarter. Strong order growth and cash generation in Discrete Automation and Motion and solid revenue execution in Low Voltage Products were highlights in the quarter. Power Products maintained its solid profitability, and operational EBITDA margin in Process Automation was at record levels.
“We are disappointed with the continued poor performance in Power Systems and are rigorously executing actions that go well beyond the previously-announced strategic realignment,” Spiesshofer said. “After a thorough review, the new leadership has initiated a ‘step change’ program and already taken a number of corrective decisions. These include the discontinuation of bidding for solar EPC projects and further management changes. The transformation of PS will take longer than originally expected, but we remain confident that the outcome will be a strong and competitive business.
“Looking ahead, our ambitions in 2014 are to continue the solid performance in four of our five divisions and drive the turnaround in PS.” he said. “At the same time, our leadership team is making good progress on our longer-term strategic plan and we look forward to presenting it at our capital markets day in September.”
Manufacturing M&A Business
Meanwhile, I received this information from PwC US (PriceWaterhousCoopers).
In the first quarter of 2014, the total value for merger and acquisition (M&A) activity in the industrial manufacturing sector surpassed both the previous quarter and the same time period in 2013, largely driven by the successful completion of several mega deals, or transactions worth more than $1 billion, according to PwC US. While the total number of deals dropped slightly from fourth quarter of 2013, activity was in line with the first quarter of last year.
The first quarter of 2014 recorded 33 transactions (with values of $50 million or more) in the industrial manufacturing sector for a total deal value of $14.7 billion compared to 40 deals in the fourth quarter of 2013 worth $9.8 billion. Deal activity was more in line with the first quarter of 2013, which similarly recorded 33 deals but only logged $11.3 billion in total value. The significant increase in value in the first quarter of 2014 stemmed from four mega deals totaling $9.1 billion or 62 percent of total value. Mega deal activity drove an increase in average deal value to $447 million compared to $245 million in the fourth quarter of 2013 and $343 million on a year-over-year basis.
This corresponds to some information I’ve picked up through other means about interest in acquisitions in the industrial automation space. This could be an interesting year for playing with the Control magazine Top 50 list.
by Gary Mintchell | Jul 23, 2013 | News
PwC Bobby Bono
The spread between those optimistic about the domestic economy versus those optimistic about the global economy over the next 12 months was 32 percent, representing the second highest quarterly total since these questions were first asked in the third quarter 2003 survey. At the same time, PwC’s Global Manufacturing Current Assessment and Outlook indices show a reduction in overall pessimism among manufacturing executives compared to the first quarter, which appears to be driven by more bullishness over total sales, driven by the U.S., offsetting in part increasing bearishness over international sales.
Views on US and World diverge
“There remains a persistent dichotomy in viewpoints regarding the outlooks for the U.S. and world economies. Optimism regarding the domestic economy has increased, while worldwide economic sentiment remains restrained, with global uncertainty reaching the highest level in the past 12 months,” said Bobby Bono, U.S. industrial manufacturing leader for PwC. “The U.S. is starting to show signs of healthy demand trends and improving pricing power, supporting positive overall sentiment in the year ahead. However, as a result of the mixed global outlook, combined with the moderate domestic recovery and the specter of increased legislative and regulatory pressures, management teams are continuing to carefully manage their costs, while maintaining a focus on growing profitably.”
Reflecting the healthy level of optimism pertaining to the domestic economy, 82 percent of industrial manufacturers surveyed expect positive revenue growth for their own companies in the next 12 months, with only three percent forecasting negative growth. The projected average revenue growth rate over the next 12 months was 4.6 percent, up from 4.3 percent in the first quarter, but down from 5.6 percent in last year’s second quarter. Despite the reduced rate of forecasted growth, the outlook for the U.S. continues to contrast with the international picture, where optimism regarding commerce in the next 12 months was only 31 percent, compared to 36 percent in the first quarter. In addition, the projected contribution of international sales to total revenue over the next 12 months remained low at 32 percent, consistent with the first quarter survey, but down from 37 percent in the second quarter of last year.
With regard to capital spending, 40 percent of respondents plan major new investments during the next 12 months, off three points from 43 percent in the first quarter, but well below the 55 percent recorded in the second quarter of 2012. The mean investment as a percentage of total sales of four percent was also lower than the prior quarter’s 4.8 percent, indicative of moderate spending among respondents, and reflecting in part a reduction in planned spending increases from the peak post-recessionary period, which benefitted from pent-up demand.
Operational spending to grow
Plans for operational spending also remained notably below prior year levels. Looking at the next 12 months, 73 percent of respondents plan to increase operational spending, similar to 71 percent in the first quarter, but down from 87 percent in the second quarter of last year. Leading increased expenditures were new product or service introductions (45 percent) and research and development (38 percent). Plans for geographic expansion remained low at 15 percent, up from 10 percent in the first quarter, but down significantly from 33 percent last year.
“Sustained global uncertainty has likely led the way in fostering a more measured approach to capital spending, in conjunction with a return to more normalized spending patterns commensurate with the current stage of the post-recession cycle,” continued Bono. “We are also continuing to see little enthusiasm for overseas expansion, while management teams target spending primarily on R&D, new product launches and IT. This suggests they are focusing inward on innovation and leveraging their core strengths in a competitive domestic environment.”
According to the latest survey, 42 percent of industrial manufacturers plan to add employees to their workforce over the next 12 months, off three points from the first quarter. Only five percent plan to reduce the number of fulltime equivalent employees, and 53 percent will stay about the same. The net workforce projection stayed at plus 0.9 percent, similar to last quarter’s plus one percent, indicating some new hiring continuity among several of these industrial manufacturing companies. The most sought-after employees will be production workers (23 percent), skilled labor (23 percent) and professionals/technicians (18 percent).
Similar to levels recorded in the first quarter, second quarter survey respondents highlighted legislative/regulatory pressures (53 percent) and lack of demand (47 percent) as the biggest barriers for growth over the next 12 months. Oil/energy prices were viewed by 22 percent as a barrier to growth, a significant drop from 35 percent in the first quarter and 48 percent in last year’s second quarter.
“We’re seeing a significant moderation in concerns regarding energy costs among industrial manufacturers, consistent with other recent PwC studies. It appears that the increase in shale oil and gas production domestically is having a positive effect on energy costs and is now impacting strategic planning among some industrial manufacturers. This is a welcome development for management teams given the moderately growing economy and the continued emphasis on controlling costs,” added Bono.
