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WIKI ANALYSIS
Gardner Denver (GDI) is a manufacturer of industrial compressors and vacuums, and petroleum pumps. The company earns almost 70% of its revenues outside the US during and considers itself an industry leader in quality. Gardner Denver operates two divisions, the Industrial Products Group, which accounts for 58% of the company's revenue, and the Engineered Product Group, which accounts for the rest.[1] The company generated $1.78 billion in revenue and $165 million in net income in 2009.[2]
As an industrial manufacturing company, Garnder Denver is susceptible to economic conditions because industrial production is closely tied to aggregate demand; accordingly,. 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: Industrial Products Group and Engineered Products Group
Business Segments[3]
Industrial Products Group (58% of Revenue)
The Industrial Products Group, the Company designs, manufactures, markets and services the following products and related aftermarket parts for industrial and commercial applications: rotary screw, reciprocating, and sliding vane air and gas compressors; positive displacement, centrifugal and side channel blowers; and vacuum pumps, primarily serving manufacturing, transportation and general industry and selected OEM and engineered system applications.
Fluid Transfer Products Segment (42% of Revenue)
The Engineered Products Group segment designs, manufactures, markets and services a diverse group of pumps, compressors, liquid ring vacuum pumps, water jetting and loading arm systems and related aftermarket parts. These products are used in well drilling, well servicing and production of oil and natural gas; industrial, commercial and transportation applications; and in industrial cleaning and maintenance. This segment also designs, manufactures, markets and services other engineered products and components and equipment for the chemical, petroleum and food industries.
Business Growth
FY 2009 (ended December 31, 2009)[2]
- Net sales decreased 12% to $1.78 billion. The company attributes the decline to lower sales in both segments as a result of the weak economic environment. The company also incurred a 2% decline due to foreign currency exchange impacts.
- The company incurred a net loss of $165 million compared to a gain of $166 million in the prior year.
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. As a result of lower sales in both of the company's segments, net sales declined by 12% in 2009.[2]
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. These changes in revenue follow the changes in the crude Spot Prices and futures prices over the past three years. Oil consumption is expected to reach 98.3 million barrels per day in 2015.[4][5]
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.[6] 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; 68% of Gardner Denver's revenues come from outside the United States.[1] 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.
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.
- Ingersoll-Rand Company (IR) is a diversified manufacturing company. 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.
- 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.
References
- ↑ 1.0 1.1 GDI 2009 10-K "Executive Overview" pg. 3
- ↑ 2.0 2.1 2.2 GDI 2009 10-K "Selected Financial Data" pg. 23
- ↑ GDI 2009 10-K "Markets and Products" pg. 7-9
- ↑ US DOE Energy Consumption Projections
- ↑ GDI 2009 10-K "Raw Materials and Supplies" pg. 11
- ↑ Seeking Alpha" Global Demand For Water Expected to Grow
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