A Message from the CEO

Fellow Shareholder:

Against a backdrop of North American electrical industry growth of 5%,  Hammond Power Solutions Inc.’ (“HPS”) sales increase of 19% demonstrates our ability to deliver gains in key customer sales and market segments.  Our financial performance as well delivered a significant increase over 2016.  We are very proud of this impressive turnaround, which we attribute in part to the dedication and hard work of our employees, as well as the broad diversification of our geographical coverage, markets, channels and products.

At the same time, we are beginning to see an alignment of macro external factors that are and will continue to benefit HPS for the foreseeable future.  For the first time in five years, we are seeing broad-based global economic growth.  This, in turn, is increasing not only commodity consumption but commodity prices as well, which benefits a number of important niche markets for HPS.

A stronger global economy will also help to increase United States (“U.S”) export orders for our key Original Equipment Manufacturers (“OEM”) customers.  As economic growth continues, we should also see more companies willing to invest in new equipment and facilities to expand their production capacities after five lean years.  A prolonged economic recovery should encourage governments to invest in a variety of infrastructure projects, which have been delayed for years.

The North American electrical industry has come through a very challenging number of years, which has made most companies very cautious, however as this economic recovery, which started almost a year ago continues, and now is being assisted by broad global growth, we and many other companies are beginning to feel more confident and positive about the next 12-18 months.

Despite the improving economic picture we are continuing to manage our business tightly in order to improve our profitability.  This focus has supported the improvement of our Quarter 3, 2017 gross margins over the same quarter in 2016.  These efforts will continue going forward as we look for methods to contain spending rates across the Company, as well as improve operational efficiencies in all of our plants.

As the year comes to a close, we are expecting a pick-up in momentum from the last quarter.  Our third quarter is always more subdued than other quarters during the year due to the effects of prolonged European-wide holiday shutdowns as well as the monsoon season in India.  Our U.S. business also softened in the quarter due in part to the broad-based economic impact of two severe hurricanes which battered Texas and the southern U.S.

Overall, these are the most robust market and economic conditions that HPS has experienced since 2012 and we are aggressively taking full advantage of these opportunities.

Willam Hammond signature

 

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