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Foreign Currency Impacted Lincoln’s Europe Welding Segments Revenue

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About the Europe Welding segment

In fiscal 2015, Lincoln Electric’s (LECO) Europe Welding segment contributed approximately 13% to its total revenue, as well as 8% to its consolidated operating profit.

The Europe Welding segment includes welding operations in Europe, Russia, Africa, and the Middle East. The arc welding and cutting industry is a mature and a cyclical industry in Europe. Higher specifications and technology products drive the European market.

Net sales declined by 21% in 2015 over 2014. This can be largely attributed to a 16% impact from foreign currency. The impact from volume and pricing were marginal at 4% and 0.5%, respectively.

The Europe Welding segment’s EBIT margin declined by 208 basis points to 8.8% in 2015 as compared to 10.9% in 2014. This was due to unfavorable foreign exchange translation.

During 2015, under the Europe Welding segment, Lincoln Electric initiated a head count restructuring rationalization plan. These measures were undertaken to control costs according to the prevailing conditions and operating needs. These charges were largely completed in 2015.

In November 2013, Germany’s Robolution was acquired by LECO. Robolution is a leading provider of robotic arm welding system. The company serves many leading original equipment manufacturers and Tier 1 suppliers.

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Lincoln Electric’s peer comparison

For the Timken Company (TMK), Europe contributed 16% of total revenues in 2015. The contribution for Illinois Tools Works (ITW) from EMEA (Europe, Middle East, and Africa) was at 30%, while that for Stanley Black & Decker (SWK) stood at 26%.

Orders flows from European region are reviving, signaling an encouraging trend. For LECO, the European Welding segment contributed 13% to its total revenues in 2015. With more order flows from Europe, LECO is set to benefit. LECO comprises 2.2% of the Robo-Stox Global Robotics and Automation Index ETF (ROBO). LECO is also part of the iShares S&P 1500 Index ETF (ITOT).

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