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» Hubbell Inc. Q2 2010 Earnings Call Transcript
Now, let me turn the call over to Tim.Tim Powers Thank you. Welcome everyone and thank you for joining us this morning. As we typically do on these calls, I will provide you with some overview commentary on the results we announced this morning and then, Dave will provide you with a more detailed discussion of our financial performance. I will then share some early thoughts 2012 and then we will open up the call for your questions. We will refer to presentation materials that you can find on our website, I will start on page 3. We are very pleased to report that the positive momentum from the first half of the year continued into the third quarter. Our sales increased by 12% with growth being realized and virtually all of our businesses. We reported operating margins of 16.4% which represented an impressive improvement from the second quarter was as expected was below the prior year due to a less favorable product mix and higher commodity costs. I am very proud of our results in the quarter as half of our markets remain at trot levels and working through a challenging pricing and commodity cost environment. Looking at our end markets, we continue to experience strong demand on incoming orders during the quarter. The utility market strength was broad with higher demand in distribution products and increase in spending on larger transmission projects as well as improved international demand. The industrial market continued to improve with most of our businesses including those tied to the energy markets realizing higher sales in the quarter. The new construction spending in the US non-residential market remains quite challenging, but we continue to benefit from higher demand for renovation and relight projects. On the residential side demand remains weak. I will share an early view of our 2012 end markets towards the end of my comments.
So, the volume story was quite favorable, but the commodity cost pricing dynamic has been a challenge while price increases added to sales in the quarter, they were somewhat below our expectations. Price realization proved to be more difficult in certain pockets of our business most notably the construction markets.Also materials remain above last year’s levels and did not moderate quite as much as we anticipated. We will continue to adjust pricing to recover commodity cost increases and have raised prices in certain businesses in September. In summary, I’m extremely pleased with the organization’s ability to produce these impressive results in both the third quarter and for the year. Let me hand it over to Dave to provide more details on the results, Dave. Dave Nord Okay. Thanks, Tim. Good morning, everybody. Let me jump into the results, I’ll start on page 4, you know, first on the sales side, we’re reporting sales of $764.3 million up 12%. As Tim mentioned really broad based improvement through all of our businesses particularly strong, we’ll talk more about our utility business. In that 12%, there is some price and currency that combined are about 4%, so our core volume grew up 8%. I think price and FX in that 4% are about equally split. So, good results there. On the gross margin side, 33% gross margin in the quarter, now that’s down from last year’s third quarter, for a couple of reasons. One, our commodity cost still in excess of price realization, we had forecasted and we’ve been working toward getting the parity in the third and maybe some improvement in the fourth. But, as Tim mentioned, the pricing environment turned out to be unfortunately a little more challenging than we expected. The other big driver to that decline is this less favorable mix and you recall we talked about that in the third quarter of last year, some very strong project business coming out of our industrial sector, particularly our high voltage in telecom. I think that had a significant, we would estimate that’s close to almost 1.5 of margin impact last year. Read the rest of this transcript for free on seekingalpha.com