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WIKI ANALYSIS
Thomas & Betts (NYSE: TNB) designs and produces components for the electrical products in industrial, construction, utility applications. TNB also produces commercial heating and ventilation units and steel structures for utility transmission. It derives revenue from three business segments: electrical (83.7% of net sales), steel structures (11% of net sales), and heating, ventilation, and air-conditioning products (5.3% of net sales).[1] TNB's earnings are affected by rising commodity prices and its acquisitions for diversification of its product offerings.
Business Growth
In 2010, net sales increased 9.4% to $2.0 billion. Net income increased 36.4% to $137.74 million. This is attributed to TNB's acquisition of three business during the year, allowing it to divest its product offerings and increased demand in TNB's end markets.[2]
Trends and Forces
Increased commodity prices negatively impacts TNB's profitability
The price of energy and commodity raw materials (such as steel, aluminum, copper, zinc, resins, and rubber compounds) has risen in the past few years. For example, due to increased demand and less production, the cost of European hot-rolled steel coil rose 25% in the first quarter of 2010.[3] Meanwhile,the cost of crude oil is projected to increase from $2.78 in 2010 to $3.63 per gallon in 2011 due to increase in demand and inflation.[4] Manmade and natural disasters can also disrupt supply of commodities and increase prices. Because TNB is reliant on commodity supplies for its products, a disruption in the supply and price of commodities can decrease its profitability.[5]
TNB's acquisitions allow the company to diversify and positively affect its bottom line
In FY 2010, TNB's three acquisitions accounted for $98.7 million of sales for the year, or 5.4% of the sales increase out of the total 9.4% increase. By acquiring businesses outside of its usual product line, TNB is able to enhance its product mix and expand its portfolio of leading brands. For example, in October 2010, TNB acquired Cable Management Group, Ltd, a producer of cable protection systems, which allows TNB to vertically integrate along its supply chain and effectively compete in industrial markets.[6] In turn, its acquisitions are able to bring in more business and increase TNB's brand name, leading to increased sales.
Competitors
Utilities
Industrial and Construction
TNB has different product lines and no single business competes directly with TNB in all of its lines. There have also been trends of consolidation within the industry. TNB is not the largest company in its industry and while it has some technological advantages, its competitors' large sizes could lead to lower unit prices and downward pressure on TNB's selling prices for its products.[7]
References
- ↑ http://investor.tnb.com/phoenix.zhtml?c=111871&p=irol-SECText&TEXT=aHR0cDovL2lyLmludC53ZXN0bGF3YnVzaW5lc3MuY29tL2RvY3VtZW50L3YxLzAwMDA5NTAxMjMtMTEtMDE0NTc2L3htbA%3d%3d
- ↑ http://investor.tnb.com/phoenix.zhtml?c=111871&p=irol-newsArticle&id=1521475
- ↑ http://www.bloomberg.com/news/2011-05-11/arcelormittal-posts-1q-ebitda-of-2-6-billion-beating-estimates.html
- ↑ http://www.eia.gov/EMEU/steo/pub/contents.html
- ↑ http://investor.tnb.com/phoenix.zhtml?c=111871&p=irol-SECText&TEXT=aHR0cDovL2lyLmludC53ZXN0bGF3YnVzaW5lc3MuY29tL2RvY3VtZW50L3YxLzAwMDA5NTAxMjMtMTEtMDE0NTc2L3htbA%3d%3d#D78823104
- ↑ http://investor.tnb.com/phoenix.zhtml?c=111871&p=irol-newsArticle&ID=1485339&highlight=acqui
- ↑ http://investor.tnb.com/phoenix.zhtml?c=111871&p=irol-SECText&TEXT=aHR0cDovL2lyLmludC53ZXN0bGF3YnVzaW5lc3MuY29tL2RvY3VtZW50L3YxLzAwMDA5NTAxMjMtMTEtMDE0NTc2L3htbA%3d%3d
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