A number of trends are converging so that the industrial market sees an uptick in growth.
Bishop tracks 13 companies in the industrial market sector. This market had mixed results, as measured by these 13 companies’ revenues, in the last six quarters. In 2013, these companies contracted 0.6% year over year. In 1Q14, the combined revenues of these companies grew 1.8% year over year and in 2Q14 grew 1.1% over the prior year. In comparison to these companies, the cable assembly market for the worldwide industrial market sector grew 3.6% in 2013 and is forecast to grow 9.5% in 2014.
Bishop follows electronic interconnects sales trends in 13 markets. The combined annual revenue of all the market sectors was $4.24 trillion in 2013 and grew 0.8% over 2012. Of the 13 market sectors, industrial was the tenth fastest growing market sector in 2013 at -0.6%, with combined revenues of $528.8 billion. Profitability was $42.7 billion at 8.1% of sales.
Baker Hughes had the most growth of the industrial companies at 8.9% year over year in the first half of 2014 with sales of $11,666 million. The company manufactures equipment and chemicals and provides services for oil extraction, pipelines, and refining. Baker Hughes attributes its quarterly growth to increasing business in North America, Russia, the North Sea, the Middle East, Asia Pacific, and Latin America.
FMC had the second largest increase in sales in the first half at 8.0% year over year to $1,930 million. 2Q14 revenues were up 13% year over year. The company produces chemicals used in agriculture, health/nutrition, and minerals. The agriculture segment was up 20% year over year in 2Q14.
Schlumberger grew 7.4% year over year in the first half of 2014 to $23,433 million. The company provides products and services in the oil exploration and production industry. Schlumberger CEO Paal Kibsgaard commented, “Strong Schlumberger second-quarter results were driven by significantly higher activity both offshore and in key land markets. Growth was strongest internationally as activity rebounded in a number of regions, but North America was also markedly higher with strength offshore and extremely solid progress on land in spite of the Canadian spring break-up.”
Siemens’ sales grew 1.5% year over year in the first half of 2014 to $48,482 million. In local currency, the company actually contracted slightly and Siemens reported that currency translation affected their sales efforts and results.
Danaher sales grew 5.4% year over year in the first half of 2014 to $3,411 million. The company states that sales were up organically as well as through acquisitions.
Deere contracted 7.1% year over year in the first half to $19,448 million. In 2Q14, agriculture and turf sales were down 11% year over year. Worldwide construction and forestry business was up 19% year over year.
The “nuts and bolts” industrial companies, like Ingersoll Rand, Parker Hannifin, and Johnson Controls, had modest gains for the first half of 2014 with growth ranging from 1.6% to 5.4% year over year.
The following table shows the results for the 12 companies we track in the industrial market sector.
As shown in the following chart, year-over-year sales growth has been modest or negative over the past six quarters. Sequentially, second quarter 2014 sales grew 5.1% from the first quarter of 2014.
Trends in the Industrial Market
The industrial market sector tends to do well when medium to heavy industry is doing well, which will drive demand for cable assemblies.
- In a strong automotive market, updating and expansion of the production lines means more cable assemblies required to operate robotic systems and welding equipment. Additional mold and stamping presses are also required to produce parts, and this equipment also uses cable assemblies.
- The strong commercial aircraft market has increased requirements for equipment used in the production of parts and assemblies.
- For energy exploration, cable assemblies are used extensively in seismic exploration equipment, pipe production equipment, and drilling equipment. On the production side, cable assemblies are found in the pumping and monitoring equipment.
- In electrical generation and distribution equipment, smart grid technology is allowing the services providers to do more with existing infrastructure, thus saving them money and improving service. Smart grid is controlled by SCADA (supervisory control and data acquisition) equipment which is forecast to grow at a 7% CAGR during this forecast period. This equipment includes bay controllers, substation servers, sectionalizer controllers, and other equipment that uses cable assemblies extensively.
Additionally, the economic recovery in the mature economies will help drive a broad spectrum of industrial growth.
Bishop & Associates projects the worldwide market for industrial cable assemblies to grow 9.5% in 2014 to $14.6 billion. At 15.0% year-over-year growth, China will be the fastest-growing region in 2014 for this market sector.
Dave Pheteplace, VP, Bishop & Associates, Inc.