SOURCE: Rothman Research

Rothman Research

March 22, 2010 09:00 ET

Conglomerates Face the Brunt

JOHANNESBURG, SOUTH AFRICA--(Marketwire - March 22, 2010) -   - - Unlike the generally prevailing notions, the diversified companies or conglomerates are facing major brunt this time around. They have their fundamental business model to thank for this. Explained in simple terms, conglomerates so called cushion - diversification over more than one sector - backfired on them, causing them to be on the receiving end as the economic crisis hit the markets across all sectors. Making matters worse is the fact that economic recovery is going an inch at a time, and multi-nationals which have been accustomed to fast-driven tracks cannot cope with the snail-pace. "The league of diversified companies is currently undergoing stiff competition in most of their regional markets owing to the combined impact of losses and/or fall in profits in their individual business units. At this junction in time, it's certainly quite clear that companies, which are less diversified, are less open to risk. This applies equally for the material as well as financial side of their operations," commented Jack Benassi, senior analyst at

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Moreover, the present trend also specifies that companies with lesser exposure to consumer spending-based revenue are better placed than those whose top-line is actually driven by general consumer spending behavior. The reason for this is the significant fluctuation in consumers' income and extreme spending patterns. Severity of the situation can also be gauged from the fact that some of these companies have recently witnessed their ratings going down, one of which is Textron Inc. (NYSE: TXT). However, there are still anomalies like the like of 3M Co. (NYSE: MMM) and General Electrics that are still denying the odds.

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Pushed up by the increasing sales of H1N1 protection masks, 3M has shown good results in the fourth quarter on 2009-10. This segment alone brought in $80 million in Q3 for the company.

Motivated by its good performance, the conglomerate is now looking forward to both organic and inorganic growth. As of now, it has big expansion plans. A part of this is being supported by its ideas for acquisitions.

It has already entered into an agreement with ANEST IWATA. As per it, the company will merge the 3M Paint Preparation System (PPS) with itself. This involves the SUPERNOVA WS-400 / LS-400 spray guns. Besides this, 3M is also looking for means to spread itself in China.

It also has plans for the Indian and Brazilian markets. As of now, the company is trying to tap the health care, water infrastructure and renewable-energy domain. 3M is also establishing a new facility in Bangalore. Sign up today at to access the full report on this company.

Textron Inc. saw a major decline in its key financial areas of revenue and profit generation. Pulled down by lower than expected sales volume and low-price situation in the market, has caused the fall.

Low-selling coupled with high administrative costs has even negated its manpower restructuring efforts taken by the company to reduce its costs. Order cancellations and pre-existent aircraft stock has also increased the company's expenses. However, it expects that its cost-cutting initiatives and a favorable foreign exchange scenario will help it out.

Nevertheless, what works in its favor is the fact that it has strong liquidity position and a large chunk of cash reserve. This will be used in improvement is its manufacturing business and it is expected that the impact will trickle down soon. Register now at to view the full report on this company.

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