Choppy Activity in December Takes Toll on 4Q Distributor Results

The fourth-quarter MDM-Baird Distribution Survey results show growing optimism but still some uncertainty for 2013.

Though a quarter has three months, business activity in December seemed to be a major factor for companies participating in the fourth-quarter 2012 MDM-Baird Distribution Survey. "Choppy" activity due to uncertainty around the fiscal cliff and a disruptive midweek Christmas holiday took its toll on business results.

The good news is that revenues continued to grow in the fourth quarter across all sectors represented in the survey. Overall, average revenue growth for distributors was 3 percent, led by an 8.2 percent increase for the rental equipment segment. PVF – water & sewer revenues grew the least at 0.4 percent.

Overall growth is expected to continue into the first quarter of 2013, but unfortunately so is the uncertainty that has plagued the U.S. economy for the past year.

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"Even with the election and the fiscal cliff resolved, (there's) still lots of uncertainty going into 2013," wrote one respondent. As a result companies plan to keep a tight rein on inventories and expenses for the near future. Half of the survey respondents said they expect inventory levels to stay about the same for the first quarter of 2013; in the fourth quarter, about 40 percent maintained existing inventory levels.

That said, several respondents said they were "cautiously optimistic" that conditions were leveling out and that 2013 could be positive. End-markets tied to natural resource, light manufacturing, commercial industry and medical are expected to the strongest in 2013; construction and government are expected to be the weakest.

Across segments, revenues are expected to grow 3.4 percent in the first-quarter 2013 and 4.4 percent for the full year. Gross margins were up by 50 basis points in the fourth quarter 2012, and pricing rose 1 percent.

Thank you to all who participated in this quarter’s survey!

The quarterly survey with Robert W. Baird & Co. included more than 500 respondents in distribution (72 percent of respondents) and manufacturing in diverse sectors. The survey's goal is to gauge business trends and the outlook for the industry.

Read more about the results of the fourth-quarter 2012 survey, including results by sub-sector, in the Feb. 10, 2013, issue of MDM Premium.

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