The 2020 Mid-Year Economic Update_long

Stanley Black & Decker European Security Business a Drag on 3Q Results

CFO: The business is struggling to integrate a 2011 acquisition.
Angela

Strong organic growth in many of Stanley Black & Decker's businesses continued during the third quarter, according to CFO Don Allan Jr. "However, the year-to-date performance of our security business has created pressure on our results which has, along with lower organic growth expectations within certain businesses and geographies, caused us to revise our full year 2013 earnings," Allan said.

Gross margin for Stanley Black & Decker decreased 1 percentage point to 35.8 percent during the third quarter as, according to a press release from the company, "the favorable impact of volume and cost synergies was more than offset by security margins."

The European security business, which Allan described as "struggling" during the Robert W. Baird Industrial Conference this week, was also a drag on sales for the quarter. While Stanley Black & Decker organic sales overall grew 4 percent, results could have been higher; organic sales for the security segment in Europe declined 4 percent.

"This is an area where we're struggling with the integration of the Niscayah acquisition," Allan said. "We've seen significant impact in our European security business as a result of this." SB&D completed the acquisition of Niscayah, a Stockholm, Sweden-based commercial security and monitoring company, in 2011 for SEK 7.6 billion (US$1.2 billion).

"The reality here is that the shortfalls in organic growth have gone beyond the 2-year shortfalls that we were expecting when we closed Niscayah," said COO James Loree, "and they're now cutting into the margin rates. And we haven't had much help from the macro environment, although, frankly, we didn't expect much."

To help turn around the business, Allan said, "We're assimilating a brand new sales force that is much more focused on hunting for new business versus farming existing business." He says SB&D has also made significant leadership changes across the region, which the press release refers to as "talent upgrades."

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