Stanley Black & Decker Of a corporation
Financial officers are spending more time and money building partnerships with battery and chip makers to ease pressure on tool makers’ supply chains.
The company, best known for its power tools, is looking for manufacturers of batteries and computer chips that agree to supply components in return for their investment. Stanley Black & Decker has a tentative partnership with a Korean battery maker on a production line that will begin manufacturing batteries in Malaysia next year, said Chief Financial Officer Donald Alan Jr. The company is also discussing potential partnerships with other companies in Asia and the United States.
Alan said negotiations with suppliers have become “a more important part of my job” since the coronavirus pandemic disrupted the international supply chain. He has been CFO of Stanley Black & Decker since 2008 and was given the additional role of president earlier this year.
Based in New Britain, Connecticut, Stanley Black & Decker has invested approximately $ 500 million this year, of which approximately 10% to 15% will be devoted to supply chain partnerships and other related initiatives. Prior to the pandemic, such spending accounted for less than 5% of the capital investment budget, Alain said.
“We will co-invest,” Alain said. “If it costs $ 100 million to set up a line, we’ll put in $ 50 million.”
Stanley Black & Decker already has a small partnership with a company that builds specific tools and production lines for the company.
Stanley Black & Decker, which requires batteries for cordless power tools and uses computer chips throughout its portfolio, manufactures most of its products in the United States and Europe. Alan said he wanted to set up new production lines in these regions and pointed out challenges related to sourcing from Asia. This increases the waiting time for components to arrive at the factory. The company expects demand for components such as batteries and chips to continue to grow over the next few years.
Many of Stanley Black & Decker’s competitors like Japan
Makita Co., Ltd.
And based in Hong Kong
Techtronic Industries Co., Ltd.
Nigel Coe, managing director of research firm Wolfe Research LLC, said that it has the potential to manufacture most of its products in Asia and facilitate access to batteries and chips. Stanley Black & Decker has a longer and more complex supply chain than some of its rivals, Ko said.
According to Alan, the company, which sources from more than 10,000 suppliers worldwide but spends 80% of its budget on less than 1,000 suppliers, is looking to deepen its relationship with core manufacturers from the spring of 2020. Stanley Black & Decker has identified about 30 suppliers considering important and long-term contracts with many suppliers. He said he is currently looking for a contract term of about five years from a year or two last year.
Before the pandemic, many US companies, including him, were bidding and “choosing the lowest price,” but now we need a broader relationship. [with suppliers]”Mr. Alan said.
Investment bank Robert W. Baird’s senior research said that rising prices for batteries and chips could have a significant financial impact, as the largest percentage of products sold at Stanley Black & Decker are components. Analyst Timothy Wyeth said. & Co. Higher costs of raw materials such as steel and resins used to make plastics will also be added to the bill, he said.
In late April, the company expects inflation to increase costs by about $ 235 million this year, and according to earnings records, it said it would increase by $ 160 million from early-year forecasts. Stanley Black & Decker aims to return two-thirds of the increase to its customers and offset the rest by improving efficiency and cost savings (called the Margin Resilience Program). Alain said.
Stanley Black & Decker began raising prices for some products this quarter and will continue to raise prices in the future. According to Alan, it aims to implement a “price increase of hundreds of millions of dollars this year.”
The company expects to release $ 100- $ 150 million annually through its margin resilience program, said Justin Bergner, senior research analyst at research and brokerage firm G.research LLC. I will.
Stanley Black & Decker’s first-quarter operating profit was $ 711.4 million, up 16.9% of net sales, up from 8.8% in the year-ago quarter.
The company plans to acquire the remaining 80% of MTD Products Inc., which it does not yet own, so more batteries may be needed in the future. Based in Valley City, Ohio, MTD manufactures lawnmowers and other outdoor equipment and plans to move to more electric motors in the coming years. “I think this is a big opportunity,” Alain said of the planned acquisition.
Write to Nina Trentman Nina.Trentmann@wsj.com
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Stanley Black & Decker CFO seeks partnership with battery and chip makers
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