Cooper's Hachigian Speaks at NEMRA

Feb. 10, 2012
Attendees at the general session of last week's annual conference of the National Electrical Manufacturers Representatives Association (NEMRA), in San

Attendees at the general session of last week'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 at the top of 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.

That's 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 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. 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.