COMPANY PROFILE Stanley Black & Decker, Inc. REFERENCE CODE: F1952A6E-A751-4E62-9438-66F71ADAE095 PUBLICATION DATE: 22 Aug 2013 www.marketline.com COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED. Stanley Black & Decker, Inc. TABLE OF CONTENTS TABLE OF CONTENTS Company Overview..............................................................................................3 Key Facts...............................................................................................................3 SWOT Analysis.....................................................................................................4 Stanley Black & Decker, Inc. © MarketLine Page 2 Stanley Black & Decker, Inc. Company Overview COMPANY OVERVIEW Stanley Black & Decker, Inc. (Stanley or "the company") is a global manufacturer and marketer of power tools and accessories, and engineered fastening systems. The company primarily operates in the US, France and Canada. It is headquartered in New Britain, Connecticut and employed 45,327 people as on December 29, 2012. The company recorded revenues of $10,190.5 million during the financial year ended December 2012 (FY2012), an increase of 8% over FY2011. The operating profit* of the company was $661.7 million during FY2012, a decrease of 13.2% as compared to FY2011. The net profit was $883.8 million in FY2012, an increase of 31% over FY2011. *Note: operating profit is adjusted for interest item. KEY FACTS Head Office Stanley Black & Decker, Inc. 1000 Stanley Drive New Britain Connecticut 06053 USA Phone 1 860 225 5111 Fax Web Address http://www.stanleyblackanddecker.com Revenue / turnover 10,190.5 (USD Mn) Financial Year End December Employees 45,327 New York Stock Exchange Ticker SWK Stanley Black & Decker, Inc. © MarketLine Page 3 Stanley Black & Decker, Inc. SWOT Analysis SWOT ANALYSIS Stanley is a global manufacturer and marketer of power tools and accessories, and engineered fastening systems. Strong brand equity enables the company to build loyal customer base and help deliver stable cash flow as well as business growth. However, intense competition may have an adverse impact on the company's profit margins and may erode its market share. Strengths Weaknesses Strong brand equity Manufacturing and operational efficiency through Stanley Fulfillment System Impact of unfunded pension obligations Opportunities Threats Focus on high growth region through acquisition of Infastech Increasing emphasis on organic growth Growing global electronic security systems market Intense competition Uncertainty regarding the economic recovery in Europe Foreign currency exchange risks Strengths Strong brand equity Stanley has established strong consumer based brand equity throughout its business divisions. The company has a strong portfolio of brands associated with its robust product-line including Stanley, FatMax, DEWALT, Black & Decker, Porter-Cable, Bostitch, Facom, Mac, Proto, CRC, Emhart Teknologies, Vidmar, and Niscayah. The Stanley, Black & Decker and DEWALT brands are recognized as three of the world's well recognized brands and are amongst the company's most valuable assets. The sustained brand support has yielded a steady improvement across the spectrum of legacy Stanley brand awareness measures.The company’s brands have experienced strong improvement in there unaided awareness metrics which is a measure of the number of people who, without prompting, express knowledge of a brand or product. For instance, the company’s unaided Stanley hand tool brand awareness grew from 27% in 2005 to 47% in 2012. Strong brand equity not only ensures customer retention, but also enables the company to continuously launch more products under its own labels. Hence, strong brand equity enables the company to build loyal customer base and help deliver stable cash flow as well as business growth. Stanley Black & Decker, Inc. © MarketLine Page 4 Stanley Black & Decker, Inc. SWOT Analysis Manufacturing and operational efficiency through Stanley Fulfillment System Stanley employs range of continuous improvement techniques to streamline its operations and drive efficiency throughout the supply chain. For instance, the Stanley Fulfillment System (SFS) helps the company to efficiently generate capital from acquired assets to fuel further diversification and expansion. It synchronizes the front end of the business with an improving supply chain. SFS operates through five primary elements that work in tandem: sales and operations planning (S&OP), operational lean, complexity reduction, global supply management, and order-to-cash excellence. It helps in improving the company's business operations such as procurement, quality in manufacturing, maximizing customer fill rates, integrating acquisitions and other key business processes. It operates as a continuous improvement program focused on the needs of the company's customers. Moreover, SFS acts as a blueprint for company's success and roadmap for continued growth. SFS has been influential in the reduction of working capital which is demonstrated by the improvement in working capital turns for legacy Stanley from 4.6 in 2003 to 8.6 at the end of 2009, directly preceding the merger. Following the merger with Black & Decker, the working capital turns for the combined company were 5.7. Since then, the company’s working capital turns have experienced a 32% improvement from 5.7 at the end of 2010 to 7.5 at the end of 2012 which has created significant opportunities for the company to generate incremental free cash flow. Going forward, the company plans to further leverage SFS to generate ongoing improvements both in the existing business and future acquisitions with a goal of achieving 10 working capital turns by 2105. Hence, the manufacturing and operational efficiency achieved by deploying SFS across the company’s business processes supports Stanley in further driving its profitable growth. Weaknesses Impact of unfunded pension obligations Stanley has significant unfunded pension obligations. The company provides benefit pension plans for most of its employees. As of January 2012, Stanley's US pension plans were underfunded by $406.3 million and its non-US pension plans were underfunded by $356.1 million. The accumulated benefit obligation for all defined benefit pension plans was $2,551.1 million at December 29, 2012. The funded status was declined due to adverse equity and credit markets, which reduced the market value of planned assets. The pension funding obligations could increase significantly due to a reduction in funded status as a result of a variety of factors, including weak performance of financial markets, declining interest rates, investment decisions that do not achieve adequate returns, and investment risk inherent in the company's investment portfolio. Moreover, if the total values of the assets held by Stanley's pension plans decline and/or the returns on such assets underperform its return assumptions, the pension expenses would generally increase and could materially adversely impact the company's financial position. Stanley Black & Decker, Inc. © MarketLine Page 5 Stanley Black & Decker, Inc. SWOT Analysis Opportunities Focus on high growth region through acquisition of Infastech In years to come, Stanley aims to expand its footprint in emerging markets especially in the high growth region of Asia-Pacific. In this regard, in February 2013, Stanley acquired Infastech, a global manufacturer and distributor of specialty engineered fastening technologies headquartered in Hong Kong. Infastech is one of the largest Asia based global players in the specialty mechanical fastener market with revenues exceeding $500 million. More than half of Infastech’s 2012 revenues were generated in the Asia-Pacific region and once combined with Stanley Engineered Fastening, the enlarged business is expected to generate close to 40% of its revenues from this high growth region. Furthermore, total company revenues from the emerging markets is expected to increase to approximately 16% which would be an important step towards the company’s mid-decade goal of 20%. Infastech’s comprehensive product portfolio, including leading brands Avdel, ELCO and iForm, provides patented and proprietary technologies and customized solutions to customers in more than 150 countries worldwide. The combined engineered fastening platform will generate approximately half of its revenues from automotive manufacturing, a third from industrial fastening applications and 20% from high growth verticals such as electronics. With the acquisition of Infastech, the company’s engineered fastening platform is estimated to be approximately $1,500 million in annual revenues which is in line with the company’s 2015 revenue goal for the platform of $1,000 to $2,000 million. Hence, the acquisition could help the company increase its business scale, expand global presence, and open new end markets for the growth of its specialty fastening business. Increasing emphasis on organic growth In recent years, the company has intensified its focus on increasing organic growth. The company’s management has concentrated on six major areas which include increasing presence in emerging markets in the power tools, hand tools and commercial hardware mid-price point categories. The company also plans to create a smart tools and storage market using radio frequency identification (RFID) and real-time locating system (RTLS) technology and leverage the AeroScout RTLS capability into the electronic security market including the acute care vertical within its healthcare business. Additionally, Stanley aims to expand its market penetration with US government customers in the healthcare, security, and industrial verticals. The other major area of focus is offshore oil and gas pipeline service revenue in the company's CRC-Evan's business. Furthermore, the company’s management plans to continue to identify and realize revenue synergies associated with the Black & Decker merger. Over the next three years the company will invest approximately $150 million ($100 million of recurring operating expense and $50 million of capital) to support these initiatives. The company expects that investment and achievement in these growth areas will generate approximately $850 million of Stanley Black & Decker, Inc. © MarketLine Page 6 Stanley Black & Decker, Inc. SWOT Analysis incremental revenue over the same three year period which could help increase its organic growth rate commensurately and supports its business growth. Hence, increased emphasis on organic growth strategy could aid the company in the process of its business expansion which in turn may enhance its market presence and expand its customer base. Growing global electronic security systems market The global electronic security systems market has witnessed a sharp recovery in its growth in the last few years. The increase in safety and security needs and rising crime rates increased the demand for electronic security systems. According to industry estimates, the market for electronic security systems is expected to reach a value of approximately $46 billion by the year 2015. Europe continues to remain the largest regional market for electronic security systems. Asia-Pacific is the fastest growing regional market, accelerating at a compounded annual growth rate (CAGR) of more than 5% over the analysis period. Inspired by burgeoning economies such as China and India, increase in foreign investments, and rise in new business establishments, Asia-Pacific has been witnessing increasing demand for electronic security systems in recent years. By product, alarms represent the largest product market. CCTV/Video surveillance equipment market is the fastest growing segment increasing at a CAGR of more than 7% over the analysis period. Moreover, the market is expected to be driven by increasing concerns over terrorist activities, crime rates, technology developments, and other security related factors. Stanley offers a wide range of electronic security systems. Therefore, growing global electronic security systems market could boost demand for the company's products and services, which in turn would drive its top line performance. Threats Intense competition Stanley encounters active competition in all of its businesses from both larger and smaller companies. The company's products compete on the basis of, among other things, its reputation for product quality, its well-known brands, price, innovation and customer service capabilities. Stanley competes with both larger and smaller companies that offer the same or similar products and services or that produce different products appropriate for the same uses. Also, certain large customers offer house brands that compete with some of the company's product offerings as a lower-cost alternative. Stanley's competitors include Eaton, Danaher, Illinois Tool Works, Masco, Newell Rubbermaid, Ingersoll-Rand, Snap-on, and Sherwin-Williams. These companies are often located in countries such as China, Taiwan and India where labor and other production costs are substantially lower than in the US, Canada and Western Europe. In addition, the company may have to reduce prices on its products and services, or make other concessions, to stay competitive and retain market share. Price reductions taken Stanley in response to customer and competitive pressures, as well as price reductions and promotional actions taken Stanley Black & Decker, Inc. © MarketLine Page 7 Stanley Black & Decker, Inc. SWOT Analysis to drive demand that may not result in anticipated sales levels, could also negatively impact its business. Therefore, intense competition may have an adverse impact on the company's profit margins and may erode the market share of the company. Uncertainty regarding the economic recovery in Europe The ongoing concerns about the debt crisis in Europe could have a detrimental impact on the global economic recovery which may negatively impact the demand for the company’s products and services. Currently, the Eurozone is witnessing its longest recession since it was created, after GDP fell by 0.2% in the first three months of 2013. Economic sluggishness in France, Italy, Spain and the Netherlands drove the downturn, while Germany grew by a meager 0.1% during the period. This economic slowdown could negatively impact Stanley which generates approximately 30% of its revenues from Europe. Each of the company’s divisions generate sales from the European marketplace, with the sales activity being concentrated within France, the Nordic region, Germany and the UK. While the company believes any downturn in the European marketplace would be offset to some degree by sales growth in emerging markets and relative stability in North America, the company’s future growth, profitability and financial liquidity could be affected due to depressed consumer and business confidence in developed region of Europe which may decrease demand for its products and services. Foreign currency exchange risks The company is exposed to market risk from changes in foreign currency exchange rates. Its predominant exposures are in European, Canadian, British, Asian and Latin America currencies, including the Chinese Renminbi. If the US dollar strengthens relative to local currencies, the company’s earnings could be negatively impacted. For instance, in 2012, foreign currency fluctuations negatively impacted revenues by approximately $270 million and diluted earnings per share by approximately $0.10. Furthermore, the company sources many products from China and other Asian low-cost countries for resale in other regions. To the extent the RMB or other currencies appreciate, the company may experience cost increases on such purchases. Hence, if the company fails to pass on the rising cost of production to its customers through price increases, its profitability may be adversely impacted. Stanley Black & Decker, Inc. © MarketLine Page 8 Copyright of Stanley Works SWOT Analysis is the property of MarketLine, a Datamonitor business and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.
