General Cable Corporation (NYSE: BGC) makes aluminum, copper, and fiber optic wire and cable products for use in telecommunications, power transmission, and construction. The company earned $4.4 billion in revenue and $108 million in net income in 2009.
Growth in the electric utility market and the increase in electricity consumption in North America has grown at a faster pace than the rate of utility investment. The market for energy and industrial products has increased over the years due to the need to upgrade the current electric transmission infrastructure. Investment in the energy grid has grown due to historical power outages in Canada and the United States, and reports from the North American Electric Reliability Council that have emphasized the need to upgrade power transmission infrastructure used by electric utilities. However, a sluggish global economy hampers the company's sales as customers cut back on upgrading infrastructure. As a result, the company's net sales fell 30% in 2009.
The U.S. government passed tax legislation that renewed tax credits for generating wind power and energy legislation to strengthen the transmission grid infrastructure and reliability of power availability, increasing the demand for General Cable's distribution and transmission cables.
Deregulation in the European Electrical Power Industry increases spending in European countries, as the rest of the developing world will increase spending on infrastructure in order to grow. Overall, global spending on infrastructure and energy increases as nations develop, driving demand for General Cable's industrial products.
General Cable primarily uses aluminum and copper to manufacture its wire and cable products. The prices of both copper and aluminum have been volatile in the past and have increased in the previous five years. 84% of the company's North American copper purchases and 85% of its North American aluminum purchases come from its two largest suppliers. As a security measure, General Cable requires that the volatility in the prices of aluminum and copper be "recovered" through negotiated price changes with customers. For this reason, General Cable's revenues have not been significantly affected by changes in metal prices, and the Company intends to match metal purchases with sales.
There has been high demand in the mining, oil, gas, and petrochemical markets for General Cable's products. This is in part due to high oil prices, which influence coal-mining, drilling, and research and investment in alternative energy sources such as wind power. Demand for General Cable's products has also increase due to the enormous amount of spending on industrial construction and rebuilding efforts associated with destruction caused by hurricanes.
The majority of the Company's products are made to fit industry specifications, and this allows them to be interchangeable with the products of other competitors.