|
TWST: What is Regal-Beloit?
Mr. Barta: Regal-Beloit is a global manufacturer and marketer of a
comprehensive line of electrical products, including HVAC motors, AC and
DC commercial/industrial motors, electric generators, controls and
capacitors, and electrical connecting devices. In addition, we are also
a global manufacturer and marketer of mechanical motion control
products. Included in those products are gears and closed gear drives,
specialty transmissions for automobile and marine applications, and
other complementary mechanical products. TWST: Would you give us an idea of what the overall market dynamics are,
including competition and growth opportunities?
Mr. Barta: The sales by end market break down as follows: about 40% in
residential applications, 38% in the industrial, and 22% in commercial
markets. Each one of those end markets has its own set of dynamics and
competitive set based on the specific products and applications. For
example, in the residential markets, our products are used in a variety
of consumer-oriented products. Basically, anything you see moving or
turning in a residential setting will likely have a motor in use
somewhere in the product and potentially even a gear drive. An example
is the sump pump that you find in most houses. Additionally, our motors
could be used in HVAC applications, fans and are even used in exercise
equipment. The specialty auto transmissions we make are used in
automobile aftermarket applications, such as high-performance autos, kit
cars, and weekend racers. We also make specialty transmissions that are
used in ski boats and other similar pleasure craft. The HVAC motor
business is the largest end market within the residential arena. About a
third of our total sales come from the residential HVAC side of our
business. Primary competitors include AO Smith and Emerson. Obviously,
new home construction is a factor in this market, but it is only about
25%-30% of the industry sales. The remaining 70%-75% is replacement
driven, making it a very replacement-oriented business. This means about
23% of REGAL-BELOIT's total sales go into residential HVAC replacement
applications. The market dynamics have been very interesting in the HVAC
channel, given the 13 SEER legislation that went into effect in January
of this year, requiring improved efficiency in residential HVAC
systems. This factor and the hot weather last summer resulted in an
industry that was basically running close to, if not at, maximum
capacity from about July of last year into this year. This has created a
market dynamic that is out of the ordinary. The expectations are for
this channel to continue to be a healthy growth opportunity for the
company, given the replacement nature of the products. If you look at
the history on new home construction, the number of new homes that have
been built over the last 10 years has been constantly increasing. The
number of homes with central HVAC systems has also gone from 75% to over
90%. So it is a very attractive replacement market. It is difficult to
talk about the other markets the company is in, given that we market so
many different products and we are in just as many different end
markets. For example, industrial machinery is about 19% of our total
sales and industrial equipment is about 11% of our total sales. Those
applications include everything from material handling equipment,
commercial HVAC, pumping applications, high intensity lighting and
conveyor systems. That has been a very solid market place for us. There
are many competitors in that arena. In addition to AO Smith and Emerson,
there are other motor manufacturers, such as Baldor and Weg as well as
numerous specialty manufacturers found throughout the world. The
dynamics of this marketplace are closely tied to industrial production
and also to other factors such as industrial construction and the
general expansion of the industrial landscape. This also has been a
positive marketplace, and it is one that we continue to feel has good
opportunity for growth, certainly as far as out as we can see. The
economy has been strong for the last several years. And we continue to
see good strength in the industrial side of our business. We feel that
the mid- and late-cycle businesses, such as mining, oil and gas, paper
and chemical are still in the expansion mode. The last segment, as we
divide our business, is the commercial segment. Product applications in
this segment include exercise equipment, commercial heating, ventilating
and air conditioning systems, other commercial equipment, escalators and
elevators. Basically anything you might see moving or turning could very
well be an opportunity for our products. This segment is very closely
tied to commercial construction as well as refurbishment and replacement
activities. The dynamics have been very positive over the last several
years and we continue to see, as we do on the industrial side of our
business, a very good market.
Tickers included in this excerpt: RBC
For more information call (212) 952 7433. The
Wall Street Transcript does not endorse any of the comments made by interviewees, and does
not make stock recommendations.
|
|
