Though earnings dipped from the same period last year, PoolCorp’s second-quarter performance exceeded expectations.
“From the reality in which we’re living, I think our results are very, very positive,” said Manuel Perez de la Mesa, President/CEO of the Covington, La.-based company.
PoolCorp reported a second-quarter net sales of $602.1 million, a 13-percent decline from the $693.0 million of last year’s second quarter. The first six months of 2009 saw net sales of $878.7 million, down 15 percent from $1.031 billion the same period of 2008.
Besides the economy, PoolCorp attributed the dip to the unusually cold, wet weather.
One product category — chemicals — saw sales increase 9 percent compared with the same period last year, although part of that is due to steep price hikes across the sector.
PoolCorp executives expect a slow industry recovery to begin soon. “We’ll hit the low point in 2009,” Perez de la Mesa said.
With many economists predicting that the second half of the year will bring modest improvements in GDP and home values, Perez de la Mesa and Vice President/CFO Mark Joslin said they believe the economy will bottom out this year.
However, Perez de la Mesa sees the key pool states of California, Arizona and Florida continuing to lag. “The Arizona market has still got fairly strong headwinds, so the bottom for Arizona may be closer to a year away,” he said.
And even on a national level, the corporation doesn’t expect new-pool construction to pick up significantly next year. “It won’t get to 2008 levels in 2010,” Perez de la Mesa said. “It may not be until 2011 or 2012 before it gets back to 2008 levels. I see 2007 levels maybe in 2012 to 2014. And then 2006 levels — you’re talking more than five years out.”
Instead, PoolCorp expects the repair, maintenance and retail sides of the industry to recover the fastest. “We believe that replacement product sales will recover first and recover faster, given the lower cost to consumers and the reality that the pools and the equipment can only be patched up for so long before replacement becomes inevitable,” said Perez de la Mesa during PoolCorp’s second-quarter earnings call to investors and analysts.
Where Florida and Southern California may have a tougher time coming out of the economy, sales of repair and maintenance products should rise in those states, Perez de la Mesa said. “They’re the older markets, and the older markets have a lot of pools that need to be maintained,” he said.
The company predicted that its own performance would remain level for the third quarter then increase modestly in the fourth.
The report was especially welcome after an article appeared earlier that week in the financial magazine Barron’s, saying that PoolCorp stock isn’t a wise choice, given the state of the pool market and its slow recovery.
Writer Sandra Ward predicted that the stock could drop from $18 to $10, citing a slow economic recovery and PoolCorp’s $400 million in debt.
“That article was essentially written by somebody who was short in the stock, in an effort to drive the price lower so they could buy back their shares and cover their short,” Perez de la Mesa said. “Some of [the author’s] fundamental premise was false. [She] talked about how many pools were going to be closing down and how maintenance and repair sales were going to be so adversely impacted. Obviously they weren’t. Our chemical sales were up… because people still maintain their pools.
Following the piece, PoolCorp stock dropped 2.8 percent. But after the second-quarter report, it climbed 17 percent from the opening price on the day of the report to the closing price the day after.
In other PoolCorp news, the company has scheduled its third annual National Sales Conference and Tradeshow for Oct. 5 to 7 at the Sheraton Suites Market Center in Dallas. Training sessions are expected to cover sales, sourcing, building materials, chemicals, spas, grills, aboveground pools and marketing tools. A vendor showcase allows professionals to meet with manufacturers and learn about new products. The distributor expects more than 1,000 of its key staff to attend.