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NEMRA 2012 Report

March 1, 2012
Many reps and manufacturers at this year's NEMRA Conference said they believed the worst of the economic downturn may finally be over.

Attendees at the general session of last month's annual conference of the National Electrical Manufacturers Representatives Association (NEMRA), in San Diego, were treated to an intriguing industry overview by Kirk Hachigian, chairman, president and CEO, Cooper Industries, Houston.

From his perch atop a $5.4 billion electrical manufacturer that has built a presence in virtually all key electrical markets through internal growth and more than 40 acquisitions since 2000, Hachigian's perspective is an interesting one for all electrical distributors, manufacturers and independent reps that focus on the commercial, industrial, utility and residential markets.

His perspective is interesting because if you took Cooper Industries' market mix and laid it on top of the market mix of many mainstream electrical distributors, its commercial, industrial and residential business mix would directly overlap the business mix of many electrical wholesalers, with the exception of Cooper's focus on the utility market (25% of its sales).

Hachigian, who has been a senior executive at Cooper Industries for the past 11 years, said he is “modestly bullish” on industry growth for this year and is looking for at least 3% to 5% growth overall in 2012. He expects good growth in the commercial, utility and residential market segments in 2013 and 2014 and good 2013 growth for the industrial business but less industrial growth in 2014.

However, he told the audience of reps and manufacturers that the volatility they have endured over the past few years won't subside anytime soon and that macroeconomic factors including the European debt crisis, global political instability, the political wars in Washington, D.C., natural disasters, wars and “flash crash” events on Wall Street will continue shaping the economic fortunes of the U.S. economy. The key word in his analysis of future challenges was “volatility.” He said Cooper Industries got a taste first-hand of the volatile stock market in 2011, when its market capitalization swung $4.6 billion from peak-to-trough.

Despite these challenges, Hachigian said the best days of the electrical industry are still ahead and that it will continue to provide Cooper Industries with solid growth, great margins and predictable cash flow. He sees growth for the company and the industry in energy efficiency, the solar and wind markets, the smart grid, LED lighting, the oil, gas and mining markets, and the safety, electronics and interconnect business segments.

Hachigian said another positive trend in the electrical industry is the growing impact of new products on the sales mix of electrical manufacturers. New products now account for 29% of Cooper Industries' total sales, and he said that in just five years, manufacturers of electrical products have almost doubled their overall spending on research and development from 1.9% of sales to 3.5% of sales.

He also says the electrical market will continue to consolidate and become more global, as companies from outside the United States look to build their business in this country and U.S. businesses look to expand globally, pointing to ABB's recent acquisitions of Thomas & Betts and Baldor Electric as an example. The T&B acquisition was a popular topic of conversation at this year's conference.

Cooper itself has dramatically increased its global presence, as 39% of its 2010 total sales (excluding its 2010 sales from its Tools business segment which are now part of Apex Tool Group) came from outside the United States. Hachigian told NEMRA attendees that globalization, technology and consolidation will force all companies to be more nimble, smarter and more creative in providing customer value and that reps should continue targeting niche growth markets, balancing their end-market exposure and running with manufacturers that invest in their businesses.

About the Author

Jim Lucy | Editor-in-Chief of Electrical Wholesaling and Electrical Marketing

Jim Lucy has been wandering through the electrical market for more than 40 years, most of the time as an editor for Electrical Wholesaling and Electrical Marketing newsletter, and as a contributing writer for EC&M magazine During that time he and the editorial team for the publications have won numerous national awards for their coverage of the electrical business. He showed an early interest in electricity, when as a youth he had an idea for a hot dog cooker. Unfortunately, the first crude prototype malfunctioned and the arc nearly blew him out of his parents' basement.

Before becoming an editor for Electrical Wholesaling  and Electrical Marketing, he earned a BA degree in journalism and a MA in communications from Glassboro State College, Glassboro, NJ., which is formerly best known as the site of the 1967 summit meeting between President Lyndon Johnson and Russian Premier Aleksei Nikolayevich Kosygin, and now best known as the New Jersey state college that changed its name in 1992 to Rowan University because of a generous $100 million donation by N.J. zillionaire industrialist Henry Rowan. Jim is a Brooklyn-born Jersey Guy happily transplanted with his wife and three sons in the fertile plains of Kansas for the past 30 years. 

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