WESCO Looks to Cut Costs by $100 Million in 2009 as First-Quarter Profit Falls 45%

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Researched by Industrial Info Resources (Sugar Land, Texas)--WESCO International Incorporated (NYSE:WCC) (Pittsburgh, Pennsylvania), a provider of electrical maintenance, repair and operation (MRO) products, has announced that its first-quarter 2009 profit fell 45.4% to $23.3 million, compared with $42.7 million in the same period a year ago. Sales fell 19.5% to $1.18 billion from $1.47 billion as a result of a steep decline in demand, the company said. "The market decline that we encountered in late November and December worsened quite a bit during the first quarter and considerably more than we had anticipated," Chairman and CEO Roy Haley said. "Activity levels have dropped, and we have experienced some deferrals in certain project opportunities where we believe that we would be successful bidders."

Chief Financial Officer Steve Van Oss said sales of products with heavy copper and steel content dropped $65 million versus the first quarter of 2009 due to lower pricing. "Deteriorating end-market activity throughout the quarter resulted in lower sales to customers in our industrial OEM, construction and utility end markets," he said.

As a result of the weak performance, WESCO closed five underperforming branches, affecting 500 workers during the quarter, Van Oss said. "Discretionary spending was reduced in excess of 30% during the quarter," he said. "Furthermore, capital expenditures have been deferred or eliminated, resulting in a 75% reduction in cash outlays versus last year's first quarter."

Looking forward, he said the company expects capital expenditures of about $16 million this year. Van Oss said the company is taking steps to reduce costs by about $100 million in 2009, although he did not disclose further details.

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