Executives at Menomonee Falls-based Enerpac Tool Group are expecting to see continued challenges and disruptions in their supply chains, but they are yet to see signs of a slowdown in business.
A maker and distributor of hydraulic and mechanical tools used in industrial, maintenance, infrastructure, oil and gas, alternative energy and other markets, the company reported this week it is seeing strong demand and order rates at greater than pre-COVID levels.
For its fiscal third quarter, Enerpac reported net sales of $151.9 million, up 6.1% from the same time last year. Core sales were up by 10% year-over-year, but the company said the strength of the U.S. dollar reduced sales by 4%.
“Demand was really strong, honestly, throughout Q3,” Paul Sternlieb, chief executive officer of Enerpac, told analysts. “We did not see any tail-off in activity and actually it's remained solid in the first four weeks of our fourth quarter here, so no signs to date or indications of any slowdown that we can see at an overall macro level.”
Sternlieb acknowledged individual accounts or certain countries may be seeing shifts, but across the entire business the company has not seen any significant drop in demand.
What Enerpac has seen are continued supply chain challenges. Anthony Colucci, chief financial officer at Enerpac, said around $2 million of the company’s inventory has been held up at ports in Shanghai, China following the lifting of lockdowns related to COVID-19.
Colucci said the inventory should clear the ports in 30 to 60 days, but cautioned the issues in China could have a ripple effect around the world.
“As the congestion at Shanghai ports frees up, we anticipate that this will result in additional congestion at our U.S. and European ports,” Colucci said.
He noted the company had also pulled forward some purchase orders in anticipation of a potential strike by workers at West Coast ports in the U.S.
A contract covering more than 22,000 workers at West Coast ports is set to expire late Friday, although the union and employer group have said they are not planning any work stoppages or lockouts, according to Reuters.
Still, Enerpac is among companies rerouting some products through ports in Vancouver.
The ongoing war in Ukraine is also complicating things for Enerpac as Colucci noted logistics, processing and raw material costs are all increasing because of higher energy and oil prices.
“Given the fluidity in prices, we are seeing some quotes from suppliers that are only valid for 24 hours,” Colucci said.
Sternlieb acknowledged the company has continued to face supply chain and logistics challenges like many other industrial businesses.
“Certainly the Russia-Ukraine conflict has created some incremental concerns. And frankly, I think we expect to see that for the foreseeable future, more than likely through this calendar year,” he said.