Lincoln’s Asia-Pacific Welding segment
In fiscal 2015, Lincoln Electric’s (LECO) Asia-Pacific Welding segment contributed approximately 7% to its total revenue and 2% to its consolidated operating profit.
The Asia-Pacific Welding segment includes welding operations in China and Australia. The arc welding and cutting industry in these markets is competitive and has a moderate concentration rate.
Net sales declined by 23% in 2015 over 2014. This can be largely attributed to ongoing strategic repositioning in the market. There was a 20% impact from the decline in volumes. The impact from pricing and foreign exchange was marginal at 1% and 4%, respectively.
Asia-Pacific Welding’s EBIT margin increased robustly in 2015 as compared to 2014. This is due to lower raw material costs and operational efficiency.
Demand scenario in Asia-Pacific welding segment
Asia-Pacific is the largest market for welding and cutting equipment. Within it, China and India are the key future markets. High growth is expected from these markets due to high industrial growth rate, as well as a high growth rate in the construction and automotive industries in these regions.
There has been slow growth of the shipbuilding, aerospace, and defense industries. This will pose a challenge to the growth of the welding and cutting equipment markets.
Lincoln’s peer comparison
For Timken (TMK), the Asia-Pacific region contributed 23% to its total revenues in 2015. The contribution for Illinois Tools Works (ITW) from the Asia-Pacific region was at 20% while that for Stanley Black & Decker (SWK) stood at 18%.
For LECO, the Asia-Pacific Welding segment contributed 7% to its total revenues in 2015. Robust order inflows from the Asian regions could give an impetus to LECO revenues. LECO accounts for 2.2% of the Robo-Stox Global Robotics and Automation Index ETF (ROBO). LECO is also part of the SPDR S&P Dividend ETF (SDY).