US electrical distributor profits remain strong

The National Association of Electrical Distributors (NAED), a US-based trade association for the electrical distribution industry, reported in its 2008 Performance Analysis Report that the US electrical distribution industry’s financial performance remained solid despite current US economic conditions.

The report states that profit margins slipped slightly to a median of 3.2% in 2007, compared to medians of 3.7% in 2006, 2.9% in 2005, 2.1% in 2004 and 1.3% in 2003. Among the top performing 25% of ‘high profit’ distributors, the 2007 profit margin was almost twice as high at 6.3%. Accompanying the increased profits were 2007 median sales increases of 4.6%.

The report’s author, Dr Al Bates of Profit Planning Group, offered insight into this year’s results: “Even though things are a little tough, the high-profit firms continue to produce outstanding profits. I recommend that others in the industry examine what these high-profit firms are doing and mirror their actions.”

The annual Performance Analysis Report contains information to help distributors analyse the financial performance of their operations. Metrics in the report include inventory turnover, sales per employee, average collection period and return on assets. Results from the 2008 survey are based on data from 167 NAED-member electrical distributors. The typical distributor surveyed, based on median figures, had annual sales of US$48.4 million, with 22% gross margin and inventory turnover of 4.3% in 2007.