Stanley Black & Decker
From the Raymond James Investors Conference:
Today the Tools & Storage business makes up almost 75% of the company and produces about $9 billion in revenue.
They noted that their stock has produced almost an 800% return since the turn of the century compared to 394% by their peer group, and 150% by the S&P.
They are expanding their operating margin rate by between 30 and 50 basis points per year and have very strong free cash flow conversion. Over the long term they reinvest 50% of cash flow back into mergers and acquisitions (M&A).
They expect very good organic growth in the Tools & Storage business for the next 3 to 5, potentially next 10, years. Growth will be driven by their acquisition of the Craftsman brand and their partnerships with Lowe’s and Amazon.
They started to experience commodity inflation in the spring and summer of last year and ended up with about $80 million last year. They are expecting $150 million this year. They are executing “surgically focused” price actions with many of their customers in certain product categories and families where they think it is appropriate. The two biggest categories they are seeing inflation in are steel and lithium ion battery cells. Price increases will start to go into effect in the second quarter of this year and be rolled out in the back half. They think they can offset about 60% of the commodity inflation in 2018 with price increases.
They are still in the planning phase with Lowe’s and working through the number of stores that will be rolled out in 2018 versus 2019, and also planning what type of promotional activity they can do with the stores that don’t get the full rollout.
When they introduce Craftsman to Lowe’s they’ll be removing some of their other branded products, which will produce a degree of cannibalization. They are still projecting $100 million per year and $1 billion over ten years in net incremental growth.
They believe there is going to be a supply-demand dynamic around lithium for at least the next three years. There are more players getting into the category and different types of cells, and the demand for the high-quality ones is intense right now.
They continue to evaluate other potential new battery technologies whether that means a different type of lithium cell or a different type of power source.
TTI/Techtronic industries reported that 2017 sales grew 10.6% to $6 billion. The power equipment business, which accounts for nearly 85% of total sales, saw sales grow nearly 15% to $5.1 billion. TTI/Techtronic is the parent company of Milwaukee Tool and Ryobi. Their brand portfolio includes AEG, Homelite, Hoover, Oreck, Vax and Dirt Devil.
From their FY 2017 Conference Call:
They have had eight consecutive years of revenue growth and nine consecutive years of margin improvement.
Milwaukee delivered more than 21% growth. The momentum of Ryobi ONE+ remained very strong, delivering double-digit growth.
Sales for the Power Equipment division grew 14.9% in North America and 13.8% in the challenging European market. North America accounted for 76.3% of the group’s revenue.
For ten consecutive years their sales have gown faster than their headcount. Last year in the US they hired more than 800 people.
CEO Joe Galli described the company as the “Silicon Valley of power tools.” They do not need to acquire other companies in order to make their numbers or projections. They are focused on organic growth.
They love residential construction, but it is not the driver of their company, and if the residential market collapsed, it would not change their expectations.
Their brushless motor technology, FUEL, has been a spectacular success. They want to have a new generation of FUEL every 18 to 24 months and are taking the same approach as Apple takes with iPhone.
They have launched a brand new category, drain cleaning, and expect to disrupt the industry globally with their range of cordless products.
They are committed to having the world’s broadest line of professional cordless lithium power tools and are planning on introducing many new items to the Milwaukee M18 line this year.
They believe tool storage is another enormous category that they have just begun to participate in with their rollout of a new line called PACKOUT in the US and Europe over the past six months.
They are also entering the data communications installations space with a new line of hand tools for electricians who install data communications for both residential and commercial customers. They are doing the hand tools first, then will do cordless hand tools and power assisted hand tools and expect to revolutionize the category.
The Ryobi brand is now the number one brand in the world for DIY, having taken that spot from Black & Decker. They will launch a series of new Ryobi ONE+ cordless products this year.
TTI is expanding their Power Equipment Group's operations in Anderson County, South Carolina. TTI is building a new 300,000-square-foot Corporate Innovation Center at its facility at 1428 Pearman Dairy Road in Anderson. The $75 million expansion is expected to create 250 jobs.
Hitachi Power Tools
Hitachi Power Tools announced that the company is changing their name to Metabo HPT. Hitachi Koki purchased Metabo in a deal valued at about $180 million in late 2015. The Hitachi Power Tools name is being replaced with HiKoki in Europe, and the parent company, Hitachi Koki/Koki Holdings, decided that there needed to be a change in North America as well. After significant research, the company decided that the new name needed to be aligned with a known name, and since the company already owned Metabo, they went with that. They say they are not merging Metabo and Hitachi; according to the company the two brands will remain separate. Products will retain their current brand identity with the same color, model numbers, warranties and battery interchangeability. The transition to the new name and logo will happen over the next 24 months.
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