Supplier update
Stanley invests in MTD
Prior to Stanley's investment in MTD, the companies already had a partnership in which MTD manufactured select outdoor products under the Craftsman brand
Prior to Stanley's investment in MTD, the companies already had a partnership in which MTD manufactured select outdoor products under the Craftsman brand
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James Hardie names a successor for its CEO and Bosch enters the vehicle-sharing business
HNN Sources
Stanley Black & Decker buys a 20% stake in MTD Products; James Hardie's executive in charge of international business will replace its current chief executive; Bosch will be trialling an electric van sharing service at a number of hardware stores in Germany; Boral Timber will study making renewable diesel from sawmill residue; Hillman is acquiring a safety and work gear company; and Klein Tools has taken over a manufacturer of safety products.
SBD extends reach in lawn and garden sector

Stanley Black & Decker (SBD) has entered into a definitive agreement to acquire a 20% stake in MTD Products, a privately held global manufacturer of outdoor power equipment, for USD234 million in cash.

Under the terms of the agreement, SBD has the option to acquire the remaining 80% of MTD beginning on July 1, 2021. James Loree, SBD chief executive officer, said:
This investment in MTD increases our presence in the USD20 billion global lawn and garden market in a financially and operationally prudent way. We have always viewed outdoor products as an attractive growth category for us to expand our presence beyond handheld electric products.

SBD said the partnership "significantly enhances" its existing commercial relationship with MTD, which includes the manufacture of select outdoor products under the Craftsman brand. SBD purchased the Craftsman line of tools from Sears in January 2017.

Going forward, the two companies said they will "work together to pursue revenue and cost opportunities, improve operational efficiency and introduce new and innovative products for professional and residential outdoor equipment customers, leveraging their respective portfolios of strong brands".

In an interview with earlier this year, Mr Loree said he wants "to get into the lawn and garden market in a very clever way that avoids some of the downside of the lawn and garden space".
The lawn and garden retail market is a market that is pretty competitive and seasonal, so it has those negative aspects.

Mr Loree also described his growth strategy for SBD, one that makes generous use of acquisitions.
We have pretty good luck finding deals. We have literally become the consolidator of choice in the tool industry, people just come to us with tool deals. We can afford to pay the highest price because we have the highest amount of synergy opportunities. We have a strong ecosystem internally and bankers, etc. Then we have financial screens that we apply and if they meet the needs and we can negotiate a deal then we do it. We just keep doing it year in and year out.

MTD chairman and CEO Robert T. Moll said the investment by SBD gives the companies "more tools in the toolbox". He told Crains Cleveland:
I know it's a bad pun, but it really does give us more tools to work with, with brands and technologies and complementary skills...

Mr Moll said if SBD decides to exercise its option to buy the remaining stakes in MTD, MTD will have "done our job". But the company will have to be profitable and secure its leadership position in the market, he said.

For now, the two companies are still operating independently, though SBD would have board representation at MTD.

The two companies will be able to leverage one another's retail portfolios and expand who they're selling to. MTD sells to a lot of independent retailers, which is a market SBD has not cultivated, Mr Moll said.

Overall, the investment from SBD could also affect manufacturing at both companies is by taking advantage of what Mr Moll referred to as "interesting sourcing opportunities" in terms of materials used and the sharing of technology.

Electrification is a trend in the outdoor power equipment market, and working with a company with the capacity and scale of SBD could be a benefit as MTD works to add electric power to more of its products. Mr Moll said, right now, he's seeing this in smaller products, like hedge trimmers, but he knows the time will come when the market moves toward putting electric power in larger products like lawn mowers and snow throwers.
Those are platforms that SBD doesn't have, and they are opportunities for us to change the fuel source to leverage the skills of both companies.

The deal with MTD is expected to close early next year and must be approved by regulators.
Boral Timber could make renewable diesel

The Australian Renewable Energy Agency (ARENA), on behalf of the Federal Government, has announced up to $500,000 in funding to Boral Timber to investigate the feasibility of building a "second-generation" biofuels refinery using the waste sawmill residues from the Boral Timber Hardwood Sawmill at Herons Creek, near Port Macquarie (NSW).

If the $1.2 million study is successful, the proposed biorefinery, which would cost an estimated $50 million to build, could convert up to 50,000 tonnes of waste sawmill residue produced each year into transport-grade renewable diesel and bitumen.

The sawmill residue - which includes sawdust, remnant woodchips, shavings and offcuts - is currently used for lower value uses such as landscaping and boiler fuel.

The study will consider a mechanical catalytic conversion technology, developed by Spanish-based Global Ecofuel Solutions SL, combined with the potential biorefinery at Herons Creek. It will be the first time the process would be used in a production scale facility.

ARENA CEO Ivor Frischknecht said the project further shows that big businesses are increasingly moving towards renewable energy solutions. He said:
The transport sector is a significant user of energy in Australia, with liquid fuels a key long term energy source for heavy-vehicle road and air transport since they cannot readily be electrified. Bioenergy comprises a growing proportion of Australia's energy mix, and this new technology could see residue from the production process be used to reduce Boral's reliance on diesel and bitumen derived from fossil fuels.
If this ground-breaking technology is successful, we hope to see a transition to similar biorefineries by other companies which have a waste stream in forestry or agriculture.

Boral executive general manager (Building Products) Wayne Manners said that if the feasibility study was successful, the transport-grade renewable diesel produced at the potential new biorefinery could eventually account for up to 15% of Boral's annual diesel needs.

Boral is one of the largest consumers of bitumen and has one of the largest truck fleets in Australia, using approximately 100 million litres of diesel each year.
Infrastructure boost

Boral recently posted a record annual profit, as a result of earnings from a new division in the US and an infrastructure boom that is offsetting Australia's cooling home market.

In the first full year since it bought US-based fly-ash maker Headwaters, net profit to June 30 rose 38% to $473 million, slightly ahead of analyst expectations. Total revenue rose by a third to $5.9 billion.

In Australia, Boral posted double-digit gains in revenue for concrete and asphalt, its biggest earners because of major roadmaking projects along the east coast.

The result underscored how the company's exposure across the building sector, from renovation supplies like roofing to pouring concrete at freeways, has insulated it from a downturn in home construction. Boral chief executive officer, Mike Kane, said:
Volumes from commercial, infrastructure and major projects activity, and margin improvements are expected to more than offset the impacts of a moderating residential construction sector.

Single-family homebuilding in the United States hit its highest level in a decade during the financial year, and while it has slowed a little, Boral expects renovations to drive continued demand for its products.

The a recent weakening of the Australian housing market some economists warning of heightened risks of a downturn. But a road and railway building boom, driven by state government asset sales, is driving steady demand for concrete.

Boral expects growth from all its businesses in 2019, with strong housing starts and benign weather expected to lift core earnings in North America by at least 20% and margin improvements expected in Australia.
Bosch van-sharing business with hardware stores

Bosch is launching an electric van-sharing service in partnership with DIY chain toom, a subsidiary of German retail group Rewe. With 370 stores, toom is a significant player in the home improvement industry in Germany.

From December 2018, it will take just a few clicks or taps via an app for customers at five selected toom hardware stores to directly book an electric van on site, and take items such as stone slabs, timber and outdoor furniture home with them.

The van-sharing service will initially be tested in Germany, at stores located in Berlin, Frankfurt, Leipzig, Troisdorf, and Freiburg. Wolfgang Vogt, toom's managing director for finance and personnel, said:
As a company committed to sustainability, we are always eager to constantly improve our contribution to environmental protection. We're therefore very pleased that we can now offer our customers an eco-friendly way of taking their purchases home.

At these stores, charge spots are already in place for the small electric vans, which are provided by StreetScooter. Vans can be returned to the same station that the shopper picked them up from. Bosch supplies the powertrain components for these vehicles. Users will pay a flat hourly rate that includes mileage and battery recharging in a completely digital process.

Bosch is already well versed in the sharing services business, as demonstrated by Coup, its rental service for electric scooters. Since its launch in 2016, Coup has constantly expanded, and now has a fleet of 3,500 scooters in Berlin, Paris, and Madrid.

In its Coup and van-sharing schemes, Bosch has opted exclusively for electrically powered vehicles. Dr. Rainer Kallenbach, president of the Connected Mobility Solutions division at Bosch, said:
Bosch is growing with digital services for urban mobility. A service for sharing electric vans has huge potential for growth. Fully electric driving is ideal for urban mobility - whether that means downtown delivery traffic or individual mobility in major cities.

Bosch believes that shared electric vans have scope for application outside the hardware retail sector. If the new sharing service proves popular, Bosch plans to expand it to furniture stores, supermarkets, and electronics stores.

Home improvement giant IKEA said recently that it plans to introduce home delivery by electric vehicles in Europe, US and China.
James Hardie confirms succession

Jack Truong, president of international operations at James Hardie, has been chosen to succeed Louis Gries as chief executive. Dr Truong, who currently heads the firm's Asia Pacific fibre cement business and the Europe building products unit, will become global president and chief operating officer for a six-month transition period as Mr Gries winds down his 13-year span in charge of the building materials supplier.

Dr Truong's appointment as chief executive will become effective toward the end of the firm's 2019 fiscal year, at which time Gries will leave the board, the firm said in a statement.

A former chief executive of Electrolux North America, Dr Truong has held his current role since April last year. Chairman Michael Hammes said:
Jack offers the ideal combination of commercial expertise, operational excellence, and leadership in order to continue to grow the business and maintain the industry-leading performance, across multiple geographies, established by Louis over a long period.

Mr Gries, who has been at James Hardie since 1991 and became CEO in 2005, said the establishment of a compensation fund for asbestos victims in 2007 was a highlight of his tenure.

The fund was established after the original fund James Hardie established for those suffering from exposure to asbestos in its products was found to be underfunded by more than $1 billion, attracting court action by ASIC.
Profit jump

James Hardie said its first-quarter profit grew 29% on a stronger US dollar and demand from US house buyers, and flagged further growth in its 2019 earnings.

Adjusted operating profit was USD79.9 million for the three months to June 30, up from USD61.7 million a year ago. Operating profit excludes one-off items like the company's compensation payments to people claiming asbestos-related illness.

The company said it expects adjusted net operating profit to be between USD300 million and USD340 million in fiscal 2019, compared to USD291 million in fiscal 2018.

The company makes most of its revenue in the United States, and benefited from a surge in new US home sales in April and May, although housing sales cooled in June.

The company's North America Fiber Cement segment achieved a 10% rise in sales, and benefited from increased sale prices. It said it expects earnings from the segment to be at the top end of its 20 to 25% growth range in 2019.

James Hardie's unadjusted net profit for the quarter rose 58% to USD90.6 million. The company attributed the jump chiefly to its closing of the Fermacell acquisition, which was incorporated into its first quarter results.
Hillman gains glove company

Hardware solutions supplier, Hillman Group has entered into a definitive agreement to acquire Big Time Products, a provider of personal protection and work gear products. Hillman president and CEO, Greg Gluchowski, said:
With the addition of Big Time, Hillman will expand its portfolio of product solutions for both DIY and pro customers...

The acquisition will enable Hillman to expand into adjacent categories with Big Time's products in the hardware, automotive, garden, and cleaning industries that include work gloves, household gloves, knee pads, tool rigs and aprons, and job site storage. Big Time's products are sold under its portfolio of brands such as Firm Grip, AWP, McGuire-Nicholas, Grease Monkey, and Gorilla Grip.

The transaction is subject to customary closing conditions and receipt of required regulatory approvals.
Klein Tools expands into safety category

US tool maker, Klein Tools has acquired Ergodyne, a manufacturer of safety work gear.

Founded in 1983, Ergodyne spent the last three decades developing products that Make the Workplace A Betterplace[tm]. What started with one product has grown into a line of Tenacious Work Gear designed to provide protection, promote prevention and manage the elements for workers on jobsites.

Tom Votel, president of Ergodyne, said the timing was right for the consolidation - a healthy US economy and a desire to grow the business compelled the agreement.

Klein Tools is family-owned and was established in 1857. Co-president, Tom Klein Jr, said:
Ergodyne and Klein Tools have much in common, including our commitment to innovation, safety, our customers and our reputations for producing high-quality products. We believe that our combined resources and expertise will enable us to grow more quickly together than we could have separately...

Together, Klein and Ergodyne plan to expand their brands and leverage their combined expertise, years of experience and industry know-how to accelerate innovation in the safety products space.

Ergodyne is a subsidiary of Tenacious Holdings Inc. Its current lineup includes ProFlex(r) Hand Protection, ProFlex(r)Knee Pads, ProFlex(r)Supports, Skullerz(r) Head Protection, Skullerz Eye Protection, Trex[tm] Footwear Accessories, Chill-Its(r) Cooling Products, N-Ferno(r) Warming Products, GloWear(r) Hi-Vis Apparel, Squids(r) Lanyards, Arsenal(r) Gear and Tool Storage and SHAX(r) Portable Work Shelters.

To read more in Supplier Update, download the latest issue by clicking on the following link:
Supplier Update - HI News Vol. 4 No.7
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