This article describes the industrial liquids applicators company. For baby products, see Newell Rubbermaid (NWL).NYSE: GGG) makes devices to handle and apply industrial liquids - which can include lubricants, sealants, and paint. The company's customers are generally in the manufacturing and construction industries. Graco owns a 60% share of the paint sprayer market.
In fiscal 2007, Graco's revenue increased across the board, except for a 4.31% decrease in revenue from contractors, a confluence of rising steel prices, the main raw material used in Graco's products, and a sluggish construction industry, a main driver for most contractors' businesses. A weak dollar helped offset these trends, and Graco's overall revenue increased by 3.04% from 2006 to 2007.
In 2007, favorable exchange rates accounted for 2.08% of the 3.04% growth in total revenue. Rising steel prices and decreasing spending in the construction industry led to this stagnant growth, particularly affecting the contractor segment.
From April 2007 to April 2008, the price of steel rose significantly, up from $617/tonne to $915/tonne for a hot coil of rolled steel. Rising steel prices negatively impact Graco's business because it raises the costs of manufacturing, especially in the contractor segment, thus decreasing the profit the company obtained from its products.
Graco's contractor segment primarily caters to the construction and home maintenance markets, and thus depends on the economic well-being of both. From May 2007 to May 2008, the value of total construction put in place fell from approximately $1,154.60 billion to $1,085.23, a 6.40% decrease. This decrease in spending on construction affected Graco's contractor segment, factoring in to the 4.31% decrease in contractor revenue from 2006 to 2007.
Because Graco reports its revenues in U.S. dollars but obtained 40.52% of its 2007 revenue internationally, it is heavily affected by exchange rates. When the value of the dollar depreciates, Graco's international sales grow in dollar terms. From 2006-2008, the dollar depreciated relative to the currencies of its main markets: the Euro, the Canadian Dollar, and the Japanese Yen. In fiscal 2007, these favorable exchange rates led to an increase of $17 million in revenue, or 2.08 of the total 3.04 percent growth.
|Company||2007 Revenue ($ in millions)||2007 Revenue for Adhesives/Fluid Dispensers ($ in millions)||2007 Operating Income ($ in millions)||Operating Margin|
|Illinois Tool Works||16,170.61||N/A||2,623.76||16.23%|