 | |
- close
- close
|
|
Topic
Top news source/blog that we're missing
Why do you recommend this news source?
|
||
WIKI ANALYSIS
Gardner Denver (GDI) is a manufacturer of industrial compressors and vacuums, and petroleum pumps. The company earned more than 60% of its revenues outside the US during 2008 and considers itself an industry leader in quality.[1] Gardner Denver operates two divisions, the compressor and vacuum division, which accounts for 80% of the company's revenue, and the fluid transfer division, which accounts for the rest.[1]
As an industrial manufacturing company, Garnder Denver is susceptible to economic conditions because industrial production is closely tied to aggregate demand; accordingly, revenues for Q1 2009 are down 12% from Q4 2008 revenues. Also, the majority of GDI's revenues come from outside the US, this exposes GDI to exchange rate risk and also exposes the company to opportunities and risks present in developing countries.
Company Overview
Gardner Denver, Inc. is a designer, manufacturer and marketer of compressor and vacuum products, and fluid transfer products that it sells through independent distributors and sales agents, and directly to Original Equipment Manufacturers, engineering firms and end users. Gardner Denver's operations can be split in to two segments: the compressor and vacuum products segment and the fluid transfer products segment.[2]
Business and Financial Metrics
Financial Discussion: In 2008, Gardner reported revenues $2.02 billion, up from $1.87 billion in 2007 and $1.67 billion in 2006; revenue increased by 8% between 2007 and 2008 and 12% between 2006 and 2007.[1] Favorable changes in foreign exchange rates accounted for 2% of the increase in 2008 and 5% of the increase in 2007.[1] In 2008, Gardner reported a net income of $166.0 million, down from $205.1 million in 2007 but is up from $132.9 million in 2006; net income decreased 19% between 2007 and 2008 and 54% between 2006 and 2007.[1] These increases in revenue are primarily attributable to volume growth, price increases and favorable exchange rate changes.[1] 63% of Gardner Denver's 2008 sales came from outside the U.S.; of the international and total sales respectively, 59% and 39% were to Europe, 22% and 14% to Asia, 5% and 3% to Canada, 9% and 5% to Latin America and 5% and 3% were to other regions.[1] 59% of Gardner Denver's 2007 sales came from outside the U.S.; of the international sales, 59% were to Europe, 22% to Asia, 5% to Canada, 9% to Latin America and 5% were to other regions.[2]
2009 Q1: Through the end of the first quarter of 2009, Gardner Denver had revenues of $462 million, which is down from $496 million for the same period in 2008.[3] The increase in revenue is primarily attributable to unfavorable exchange rate changes and lower sales volume in both segments. During the first quarter of 2009, Gardner reported a net loss of $249 million, which is down from a $51 million gain for the same period in 2009.[3] The net loss for Q1 is attributable to a a $265 million impairment charge.
Business Metrics: Gardner Denver's management has not specified any specific internal business metrics that they use to evaluate their company's performance; however, inventory turnover, which is the number of times the company sells all of its inventory in one year; days sales outstanding in accounts receivable, which is the average number of days it takes the company to get paid by its customers; and gross margin can be used to assess the health of a manufacturing firm.
| Gardner Denver Internal Business Metrics | ||||
|---|---|---|---|---|
| Years | 2005 | 2006 | 2007 | 2008 |
| Inventory Turnover | 4.84[4] | 5.18[5] | 5.19[2] | 5.09[1] |
| Days Sales Outstanding | 59[4] | 54[5] | 56[2] | 63[1] |
| Gross Margin (in thousands) | $378,315[4] | $549,316[5] | $619,923[2] | $638,290[1] |
Business Segments
Compressor and Vacuum Products Segment (80% of Revenue)[1]
In the Compressor and Vacuum Products Segment, the company manufactures air compressors, blowers and vacuum pumps that it markets under manufacturing trademarks. The largest customers for this segment are goods manufacturers, process industries, manufacturers of printing equipment and waste-water treatment facilities. This segment has manufacturing plants and fitting plants in several countries around the world.This segment had sales of $1.6 billion[1] in 2008 and 1.4 billion[2] in 2007.
Fluid Transfer Products Segment (20% of Revenue)[1]
In the Fluid Transfer Products Segment, the company manufactures pumps, water jetting systems and various aftermarket parts used in oil and natural gas well drilling. The company markets this segment's products under the Gardner Denver and OPI trademarks. This segment operates factories in five countries. This segment had sales of $396 million[1] in 2008 and $429 million[1] in 2007.
Key Trends and Forces
Gardner Denver's business is susceptible to downturns in the global economy
As a manufacturing company, Gardner Denver is particularly susceptible to the cyclical economic conditions. As aggregate demand, which is an economic measure of a country's total demand, decreases, industrial production decreases with it. Sales during the third quarter of 2008 were $480 million[6] and then increased to $524 million[1] during the fourth quarter of 2008; however, sales decreased to $462 million during the first quarter of 2009, reflecting weak demand and decreased sales volume stemming from that weakend deman.[3]
In a recent press conference Gardner Denver's top management said that they expect sales to remain weak through the end of 2009 and possibly into 2010.[7] This statement was made less than a month after Gardner Denver closed one of its plants in Sheboygan, Wisconsin. In the same press conference, management also said that they would no longer use acquisitions as their primary driver of growth.[8]
Sales in Fluid Transfer Division are dependent on the world's demand for oil
The fluid transfer products segment manufactures products that are used in the oil and natural gas drilling industry. The company's products are used to bring wells into production after drilling has been completed. The demand for these products is subject to the number of wells that are going to be brought into production, which, in turn, is subject to the global demand for oil. The future of the global demand for oil and natural gas, as well as the products used to drill for them, is uncertain because of society's new preference for alternative, clean sources of energy. Over the past three years revenues for the fluid transfer segment have grown from $359 million in 2006,[5] to $429 million in 2007[2] and then fell to $396 million in 2008.[1] These changes in revenue follow the changes in the crude Spot Prices and futures prices over the past three years. The growth in revenue from 2006 to 2007 coincides with the increase in average oil futures contract price from $68 in 2006 to $73 in 2007.[9] Oil spot prices peaked during 2008 at over $130 per barrel but decreased to around $35 per barrel by the end of 2008; the 2008 decrease in fluid transfer revenue reflects this drastic decrease in the price of oil.[10] Oil consumption is expected to reach 91.6 million barrels per day in 2010.[11]
Gardner Denver's international operations present opportunities for growth in developing markets but expose GDI to more exchange rate risk
Gardner Denver sells the majority of its products to customers outside the US, putting the company in a position to take advantage of growth in developing countries. The global market for water, for example, is expected to grow 8-10% and Gardner Denver's product lines are well positioned to capitalize on that growth.[12] As more and more developing countries begin to adopt western living standards, the demand for GDI's products will continue to increase.
As a result of conducting large amounts of business outside the United States, Gardner Denver assumes more exchange rate risk; In 2008, 63% of Gardner Denver's revenues came from outside the United States. The financial results of these international operations is subject to fluctuations in the currency exchange rates. In order to mitigate these risks the company borrows money in foreign currencies and owns several hedging contracts.[2] In 2008 the revenue growth in the compressor and vacuum segment, and fluid transfer segment attributable to favorable foreign currency fluctuations was 3% and 1%, respectively.[1] The same figures for 2007 were 5% and 3%.[2] In 2006 and 2007 the Euro, which is the largest currency that the company deals in besides the U.S. Dollar, was up 11.4% and 10.5%, respectively, relative to the U.S. Dollar.[13]
Competition
- IDEX (IEX) manufactures a wide variety of industrial products that it sells to niche markets. Gardner Denver primarily competes with Idex's Fluid and Metering Technologies segment and its Dispensing Equipment segment. In 2007, the Fluid and Metering Technologies segment had revenues of $571 million and a net income of $107 million.[14] In 2007, the Dispensing Equipment segment had revenues of $177 million and a net income of $36 million.[14]
- Ingersoll-Rand Company (IR) is a diversified manufacturing company that had revenues of $8.8 billion and a net income from continuing operations of $733 million in 2007.[15] Gardner Denver competes with Ingersoll-Rand's Industrial products division, which manufactures compressed air systems, tools, fluid and material handling, golf and utility vehicles and energy generation systems.[15]
- Flowserve (FLS) manufactures flow control systems that it markets to the oil and gas, chemical, power generation and water-treatment industries. Flowserve competes primarily with Gardner Denver's Fluid Transfer Products segment. In 2007, Flowserve had revenues of $3.8 billion and a net income of $255 million.[16]
References
- ↑ 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 1.13 1.14 1.15 1.16 1.17 GDI 2008 10K
- ↑ 2.00 2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.10 GDI 2007 10K
- ↑ 3.0 3.1 3.2 GDI 2009 Q1 10Q
- ↑ 4.0 4.1 4.2 GDI 2005 10K
- ↑ 5.0 5.1 5.2 5.3 GDI 2006 10K
- ↑ GDI 2008 Q3 10Q
- ↑ Reuters
- ↑ Reuters
- ↑ EIA Futures Prices
- ↑ EIA Spot Prices
- ↑ US DOE Energy Consumption Projections
- ↑ Seeking Alpha" Global Demand For Water Expected to Grow
- ↑ Bloomberg
- ↑ 14.0 14.1 IEX 2007 10K
- ↑ 15.0 15.1 IR 2007 10K
- ↑ FLS 2007 10K
| ||||||
|
|
