Belden Inc. has raised the price of its products in a bid to offset rising raw material costs, but the electronics cable manufacturer for the communications market still can't meet its revenue and profit forecast.
Last week, Belden announced it would post a first-quarter 2003 loss ranging from 5 cents to 10 cents per share instead of the profit of 3 cents per share it had been expecting. Revenue for the three-month period will be approximately $195 million, down 8% from $211.1 million in the year-ago quarter and $199.1 million in the fourth quarter of 2002.
Belden's problem stems from the same difficulties facing other electronics companies that have preannounced lower-than-anticipated first-quarter results. Belden said the uncertain global economic and political climate is forcing companies to push out high-tech equipment upgrades even further than they originally planned.
"The higher level of uncertainty in the economy and world events appear to be causing our markets to become indecisive," said C. Baker Cunningham, chairman, president, and chief executive of the St. Louis company, in a statement. "Planned projects, including routine replacements and upgrades of systems, seem to be on hold until some of the outstanding issues become clearer."
Cunningham said Belden's situation is further complicated by an intense inventory reduction being carried out by distributors, many of which are now focused on lowering their interest expense and are therefore reluctant to spend available cash on building component stocks.
"We find that distributors in our electronics markets have reduced their inventory from year's end, depressing our results further," Cunningham said.
Analysts said Belden typically experiences a weak January but that sales often strengthen by the beginning of March. Last week's announcement indicates the seasonal January weakness has continued into March with no signs of stronger demand in sight, according to Jeffrey Beach, an analyst at Stifel, Nicolaus & Co. Inc., St. Louis.
"Projects and routine maintenance have apparently been put on hold and Belden is also experiencing inventory reductions in its distribution channels," Beach said. "Due to these developments, we believe the anticipated upturn in demand for networking cables may not happen until midyear or later."
Despite the poor market conditions, Belden said it has increased prices over the last several months in an effort to recoup its higher raw material procurement costs.
Suppliers to Belden of petroleum-based products have repeatedly raised prices following the recent spike in crude oil costs because of concern about the possible disruptive effects of the Middle East war. Cunningham said Belden is passing on the higher costs to customers, helping to keep its average selling prices stable.