Profits Solid despite Sales Decline for Generac in Q4, Full Year

Feb. 18, 2016

3 min read

While the oil slump is hurting demand for many of Generac39s products the company39s internal improvements and acquisitions should help position it for 2016 — While the oil slump is hurting demand for many of Generac's products, the company's internal improvements and acquisitions should help position it for 2016.

Generac Holdings posted net sales of $357.8 million during the fourth quarter of 2015 compared to $404 million in the fourth quarter of 2014, including a $14.9 million contribution from a recent acquisition. Residential product sales increased 1.8 percent to $195.8 million compared to $104.9 million the previous fourth quarter, primarily because of the contribution from a recent acquisition, mostly offset by a decline in shipments of home standby generators as a result of lower power outage activity.

Commercial and Industrial product sales totaled $131.9 million compared to$185 million in the year-ago quarter, primarily because of a drop in shipments into oil and gas and general rental markets, driven by the decline in energy prices. However gross profit margin during the fourth quarter improved to 36.6 percent compared to 34.3 percent a year ago.

For the full year, net sales were $1.317 billion compared to $1.461 billion in 2014, a 9.9-percent drop. Residential product sales slid 6.7 percent to $673.8 million. Commercial & Industrial product sales slid 15.9 percent to $548.4 million, for the same reasons as in the fourth quarter along with reduced shipments to telecom national account customers and the negative impact of foreign currency.

As Generac announced yesterday, the company agreed to acquire a majority ownership interest in PR Industrial S.r.l. and its subsidiaries, makers of Pramac generators, based in Siena, Italy. The acquisition is expected to close before the end of the first quarter.

“Despite the ongoing low power outage environment, shipments of residential products improved organically on a sequential basis during the fourth quarter and exceeded our expectations,” said Generac president and CEO Aaron Jagdfeld. “This strength helped us to largely offset additional weakness with shipments of mobile products caused by the ongoing decline in energy prices. We achieved our second half 2015 goals for inventory reductions and margin improvements, which led to a record level of free cash flow during the fourth quarter. On the acquisition front, the Pramac acquisition announced yesterday accelerates our strategy of expanding geographically and elevates us to a major player in the global power generation market.”

The company expects net sales to increase between 10 and 12 percent in 2016, assuming the contribution from the Pramac acquisition. Total organic sales on a constant currency basis are expected to decline between 5 and 7 percent on a constant currency basis, with most of the decline expected to be from ongoing weakness in mobile product shipments into the oil-and-gas and general rental markets.

Jagdfelt said the company made progress during 2014 on driving awareness of its products, developing and expanding distribution, investing in new products, and implementing manufacturing improvements.

For more on the Pramac acquisition, click on: http://rermag.com/headline-news/generac-acquires-italian-generator-manufacturer-pramac

About the Author

Michael Roth

Editor

Michael Roth has covered the equipment rental industry full time for RER since 1989 and has served as the magazine’s editor in chief since 1994. He has nearly 30 years experience as a professional journalist. Roth has visited hundreds of rental centers and industry manufacturers, written hundreds of feature stories for RER and thousands of news stories for the magazine and its electronic newsletter RER Reports. Roth has interviewed leading executives for most of the industry’s largest rental companies and manufacturers as well as hundreds of smaller independent companies. He has visited with and reported on rental companies and manufacturers in Europe, Central America and Asia as well as Mexico, Canada and the United States. Roth was co-founder of RER Reports, the industry’s first weekly newsletter, which began as a fax newsletter in 1996, and later became an online newsletter. Roth has spoken at conventions sponsored by the American Rental Association, Associated Equipment Distributors, California Rental Association and other industry events and has spoken before industry groups in several countries. He lives and works in Los Angeles when he’s not traveling to cover industry events.