General Cable 2013 Analyst Day Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

$BGC General Cable Corp Analyst Day Notes

“Today, we’re around 14,000 people, 57 plants, 26 countries, selling into probably 100-plus countries. So again, a heavy product that is somewhat freight-sensitive. There are regional specifications. So the serving area, generally, is 1,000 or 2,000 miles around that plant, depending on where it is.”

“we’re more of a late cyclical. And as we see, the construction cycle begin to kick back in again, led by North America. That’s a good thing for us”

“knowing we’re in a fast-moving local business, but knowing there are certain things that can separate us over time from our competitors, we developed a view — I’m sure others have done it, but what we really said is “Let’s not get a big corporate center, but let’s make sure if we have a breakthrough in the Philippines today, that it’s known in Zambia in 10 minutes.”

“we’ve really seen almost no construction recovery unlike the typical peak to trough and maybe 7 years, if you look back over economic history”

“demand from the electric utilities by approximately half or more from where it was in the last decade”

“We see a lot of capacity that was built in the 5, 6, 7, 8, 9 years ago, coming out of the business or not working. A lot of companies are for sale in the industry because again, it’s been 5.5 years of fairly tough times. So we need the utilization to come up. In some markets, we’re in the 80s, in the 60% percent range. There is no independent figures for utilization. But that will help drive. As utilization comes up, we both get a net contribution margin against our fix. We have plenty of open capacity, generally, as well as occasionally, you get some pricing power.”

“It’s a $175 billion industry, which few people have thought about in terms of that size and scale.”

“We do have a culture of we’re going to be better tomorrow than today, which is continuous improvement.”

“I think we really — we came out of that crisis [’02,’03], which is a very difficult time for the company and said, we’re going to be really good in a very tough business.”

“lean was one of the big legs that help carry us through that ’02, ’03 timeframe and a very important piece of everything we’re doing today”

“We’re not going to run away from businesses that are thought as commoditized. We’ve got some great positions in key markets where what you would think of is commoditized products has been some of our most successful products.”

“in this business, if you can see into what’s being sold, you can reduce your capital employed. So what we love is we have a distributor that says, will you look into our distribution center and as we sell something, will you go ahead and hit an automatic replenishment? We also will do that backward with our suppliers. So as we really grow with these customers, we try to get into the business where we look at each other’s mistakes or weak points, eliminate them so we can make a seamless integration between the companies. So we’ll sell through distribution, which is a bit more than half the business. so we have a channel partner that may call on this hotel who’s about ready to rewire the hotel. We’ll try to specify our gen speed data cable and other things, sell a package through a Graybar at WESCO, Sonepar, Rexel. It depends on the project. We’ll also sell directly to OEMs. We’ll also sell to utilities. And then there’s all kinds of subspecialist like industrial distributors, electronic distributors, communications distributors; some of them are hybrids. But again, it reaches the market in lots of different ways. We’re measuring within those channels the inventory velocity, the cycle time, breakage or below the line cost. So you have your sell price minus — and then your gross profit and then you have all the places where money can leak out from transportation to rebates allowances and so on. So we’re constantly looking at channel profitability and pricing”

“So again, the long-standing relationships, we’re tough on each other because we’ve got to be successful in a tough business. So this is nothing taken for granted. But we really know these folks well. We meet at the highest levels, at my level to be sure we’re pointing the right direction together. If we have issues, we need to get them out on the table, as well as integrate right through it operationally. And this isn’t just about lowest price. This is about can you run the material? What’s the quality of the material, or how is the supply chain running?”

“One of the things that I think is our key advantage over our competitors is the fact that we really offer everything they need in just about every situation. So when I walk into a customer or I walk into a building, or even you just look in this room, you can see that this room doesn’t just sell data cable, yet you have a lot of our competitors that, that’s really all they do. But when I look up and look around in this room, you can see that there’s portable power, you can see there’s LED lighting, you can see there are lighting signs, you can see there’s outlets on the wall. And we sell all those things, and customers buy those things at the same time. And we worked very, very hard in the last 5 to 6 years to try to leverage that purchase into one package, and we really gained some good traction”

“We actually have an organization with salespeople that are responsible for all of our products. And I’ve worked for several wire and cable companies, and I can tell you that’s not the case in many of the wire and cable companies that are out there. And having the ability for a salesperson to represent electronics, to represent our broadcast, to represent our data, is a very powerful tool. And we’re also finding with our distributors that they have the same desire to try to collapse this decision process into a single process that leverages all of these types of cables.”

“In many organizations, problems might be subdued, they might be hidden; they might be covered. In our organization, the philosophy is we want those problems to surface, because those are opportunities and those become the next way for optimizing that value proposition to customers.”

“I don’t get too concerned about telling our story and about our journey of Lean. And part of the reason that I don’t fear that we’re giving away any secrets or competitive advantage here is because this is not easy to imitate. Lean is not a plug-and-play model.”

“Now having said that, we prefer practitioners over academics. What I mean by that is we want people who are willing to go out and try something as opposed to think about what the perfect ideal solution may be.”

“we always talked about net contribution margin. So you can run one more of the average product [indiscernible] product, $0.12 to $0.20 falls to the bottom line in terms of operating income. If you can do that. And then there’s pricing power if we ever get into the high 80s, low 90s, where you begin to see a scarcity build around that product. Which you saw in ’06, ’07 with some products.”

“We can see projects being quoted. We are probably a short backlog business, other than some projects that have a forward look, most of our stuff is sort of a 14-day backlog. But, yes, no, I feel the U.S. is gathering after a softening second half of last year and a soft-ish first quarter. We see a little bit of pace to it. But I would say it’s more the resi side taking up; the non-resi, looks like more of the same. But we don’t know much more than the newspapers other than we are with channel partners quoting on projects, industrially, non-resi, et cetera, so we do get that view.”

“I think the Chinese are getting serious about standards and quality, and doing business the right way.”

“The greenfields are hard. We’ll get them to work. But I prefer to acquire than build. The reason we did the greenfields was the expectations were so high among the sellers because of this road of the sky [ph] around ROW that we felt, let’s go ahead — around the developing countries facilities, we’ll go ahead and build these facilities. I those expectations have come down. It has been a sobering 5.5 years. So, broadly, what we’re seeing today, even in the developing world, is a lot of companies for sale. And we’ll just be careful about what we do in terms of both management time and talent, as well as the upside in this business.”

” if you took the metal out, with your margin on the work that you do in the cable, they’re actually double-digit margins generally…So I have the tendency to think that the margin we make on the value-added, which is generally the double digits and if copper were down, you’d still need to make $400 million on operating income or $300 million otherwise you don’t have a business”

“Wire and cable is about 65% of the overall demand for copper”