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WIKI ANALYSIS
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.[1]
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.[1]
Company Overview
Business Segments[2]
- North America - 34% of net sales
- Europe and North Africa - 36% of net sales
- Rest of the World (ROW) - 30% of net sales - consists of facilities in Latin America, Sub-Saharan Africa, Middle East, Asia Pacific, China, India, Australia, and New Zealand.
Products[3]
- Electric Utility Products - include low- and medium-voltage distribution cable, high and extra-high voltage power transmission cable and installation, and bare overhead conductor.
- Electrical Infrastructure Products - includes electrical infrastructure, portable cord products and transportation products and industrial harnesses. These products consist of wire and cable that are used for many applications: maintenance and repair; temporary power on construction sites; conduction of electrical current and signals for industrial original equipment manufacturers and commercial power, residential power, and control applications; and jacketed wire and cable products and harnesses for automotive and industrial applications.
- Construction Products - includes wire and cable products for construction markets such as construction cables, building wire, and flexible cords.
- Communication Products - are wire and cable products that transmit low-voltage signals for voice and data applications and electronic wire and cables. Some of the products include high-bandwidth twisted copper and fiber optic cables and multi-conductor cables.
- Rod Mill Products - include continuous cast copper and aluminum rod sold to other wire and cable manufacturers.
Business Growth
FY 2009 (ended December 31, 2009)[1]
- Net sales fell 30% to $4.4 billion. Sales fell in all of the company's geographic segments. The company attributes the loss to the weak global environment and an exceptionally weak demand for electric utility products in North America and construction products in Europe.
- Net income fell 43% to $108 million.
Trends and Forces
U.S. Energy Policy Act
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 European Electrical Power Industry
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.
Increase in raw materials prices
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.
High oil prices
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.
Competition
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.
Energy
- Prysmian (BIT:PRY): Prysmian, based in Milan, Italy, specializes in high-voltage electricity and high speed broadband. Prysmian is rapidly growing with subsidiaries in 36 countries and plants in 21 countries. Prysmian's expansion has shut out General Cable from projects, such as the joint project with Nexans, which it could have been sponsored for as well.
- Nexans: Nexans is a French company that maintains, designs, and manufactures cables for industrial and construction industries. One primary goal of Nexans is to expand its geographic coverage in China. Its plant in Nanning, Guangxi Province, China mainly manufactures railway signaling cables for China's growing high speed rail system, making it unique amongst its competitors in China.
Industry and Specialty
- Coleman Cable (CCIX): Coleman Cable, based in Chicago, is one of the Chicago metropolitan area's fastest growing public and private companies. Coleman Cable's strongest market is in the United States, where it is the most preferred choice of cable and wire users. Coleman Cable is General Cable's largest competitor in the United States.
Communications
- Optical Cable (OCCF): Optical Cable's long-term strategy is to expand its product offerings and provide more complete connectivity and cabling solutions.This company emphasizes growth by acquisition, similar to General Cable. Optical Cable competes directly with General Cable for acquisitions and markets for their parallel communications product lines, most notably their fiber optic cable lines.
References
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