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Hubbell Inc. (NYSE: HUBa)
Chief Executive Officer:
G. Jackson Ratcliffe
Revenues (1997): $1.378 billion
Earnings (1997): $171.6 million
Employees: 8,800
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Business New Haven
4/20/1998
By: BNH
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Incorporated in Connecticut in 1905, Hubbell Inc. has been manufacturing electrical products since 1888. Over 1997, however, the rate of growth in Hubbell's sales and profits slowed, and the company took a major charge against earnings. Is this a danger sign?
Because of its long history, Hubbell operates through scores of subsidiaries. Bryant Electric, for example, produces and sells electrical wiring devices, while Killark Electric Manufacturing concentrates on electrical products suitable for hazardous locations with an increased risk of fire or explosion. Unenco Services manufactures motion detectors and other detection systems. Last year Hubbell acquired Fargo Manufacturing, specializing in distribution and transmission products for electric utilities.
This diversity of product lines within electrical equipment is not matched by a particularly international focus, though Hubbell does have markets and subsidiaries around the world, including major production facilities in Puerto Rico. Over 1996-97, international sales amounted to only 14 percent of overall revenues, and of that 60 percent went to Canada. So while currency fluctuations and international economic events might affect Hubbell at the margins, its fortunes rise and fall with the North American market.
Without a special charge against earnings of $52 million (see Business Wire), Hubbell's 1997 results would have shown substantial improvement over 1996. The pace of accelerating sales and earnings, however, slowed from 1996's blistering results. In 1996, Hubbell's sales grew 13.5 percent to $1.297 billion, while gross profits increased 15.4 percent to $392 million. In 1997, however, sales growth slowed to 6.2 percent, and pre-charge gross profits advanced 9.7 percent to $430 million.
That $52 million special charge went toward consolidating manufacturing options. Hubbell intends to expand its current manufacturing facilities in Mexico and Canada, while closing five other plants. The company projects cost savings of up to $25 million yearly after implementation is complete.
In Hubbell's favor, the company has a long institutional memory to fall back on, and has managed to raise dividends every year for more than 30 years. The very 1996 results that Hubbell turned in came in part from another similar cost-cutting and efficiency campaign. That version ran from 1993 to 1997, courtesy of a $50 million charge, and also involved the consolidation and reorganization of manufacturing and distribution. Past results, then, suggest a brighter future for Hubbell and its shareholders.
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