Applied Industrial 'Anticipated' Slowdown - Modern Distribution Management

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Applied Industrial ‘Anticipated’ Slowdown

Company foresees headwinds, invests in growth & technology.

Although Cleveland-OH based Applied Industrial Technologies  (NYSE: AIT) continues to experience market headwinds, the current conditions did not come as a surprise to the distributor. The company "anticipated there was going to be some timeout," said Neil Schrimsher, president & CEO, in a call to discuss the company's fiscal second quarter results. 

Applied's sales to oil & gas producers eventually saw some stability in 2015, however, sales to drillers continued to decline. "Their sales run rates today really are mirroring what the rig counts are," said Schrimsher. "Rig counts are down in the mid-60 percentages, and so that's where we're at too for those folks." As for sales to producers, declines are currently in the mid-30 percentages.

Overall, Applied's second quarter sales were down 11.8 percent compared to the prior year, and the company experienced a year-over-year decline of 53 percent in the sales run rate to upstream oil & gas customers.

Although oil & gas was a dark spot, the company saw growth in 14 of the 30 industry performance variables it tracks – primarily construction-related.

Applied also sees opportunities for growth through acquisitions in its served markets in North America, Australia and New Zealand. Acquisitions made a 1.8 percent positive impact on sales in the second quarter, and the company's recent acquisition of HUB Industrial Supply marks its third in fiscal 2016.

Additionally, the company is focusing on operational improvements during this anticipated slowdown, including investing in its new platform.

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