Shocking to see oil do this: Generac Holdings CEO
Now, as russian troops continue to flow in to ukraine, we have to look at what’s going on with the build-up of the crisis. That has really just happened in the last 36 hours. U.S firm generac is saying that sales of its home standby generators in both russia and ukraine, those sales have dramatically increased generator use natural gas to power up homes and businesses. So clearly, this is now a major issue.
We have right now generac holdings chairman and ceo aaron, yatfell, first aaron. Thank you for joining us. You’Ve got teams on the ground, uh number one. How are they doing? Are they safe and number two?
What are your sales looking like at this point in ukraine? Yeah thanks liz for having us on yeah. Obviously, it’s a fluid situation there and and uh we’re uh watching for information to come through. We’Re talking to our teams actively want to make sure that obviously they’re safe um. So it’s a lot of concern.
Obviously grave concern about the current situation as far as the impact on the business there um, you know we have in europe a business, that’s about 10 of our our overall company, and so it’s a it’s a nice piece of business. For us we have seen interest in generators in general um for that region of the world, russia and the ukraine um. You know it’s just it tends to go with uh with the territory. I guess you know when you have this type of conflict or power security issues. Uh people get very concerned about uh power quality and it actually is spilling over even here into the us, with the concern about potential cyber attacks on on the grid.
Okay, that i’m really interested in discussing at the moment the grid is vulnerable. Is it not? It is i mean it’s a the grid is a patchwork of a network of of power. Uh and it’s it’s. You know there are a lot of different uh protocols and software systems and players that are involved in operating the grid and so because of the decentralized nature of it uh, you know the vulnerabilities and the gaps from one system to the next uh can vary wildly And, and that does create a situation where uh, you know that a ml factor could uh could do something to take at least a part of the grid down, if not larger regions.
You are in an awkward position because you also have um an office outside of moscow. Are you concerned that sanctions may hamper your ability to do business there, or are you ready to just pull out yeah? Our russian business is, has always been. You know it’s an interesting business um the russians do buy generators, of course, and we do sell them to them. Uh and sanctions could harm that we’re not exactly sure at this stage and everything’s.
So so new we’re just processing all the information we can get our hands on um. It would probably likely be a situation where we’d be unable to continue business there, but it you know it’s it’s a small market for us in total, but it uh. You know it’s still one that we probably would struggle to continue with well we’re looking at price hikes, obviously of natural gas, although they’ve moderated just a bit over the past couple of hours. What about your price hikes? Have you had to implement higher prices due to the supply chain issues for materials, and do you see what’s happening now affecting the pricing of your generators in the near future yeah?
Well, obviously, the supply chain challenges are well documented right and the commodity costs have increased dramatically. We’Re seeing energy costs continue to rise, and obviously energy is a major input in some of the materials we use, particularly aluminum, copper, refining, steel production, and so, as those energy inputs go up, so go the cost of those materials and pricing as well. We’Ve instituted price increases over the last 12 months on average between 10 to 12 percent across almost all of our products. Uh and costs continue to rise. Logistics costs as well have been uh.
You know again well documented, but uh continuing to rise, so we’re going to keep an eye on it and if we have to put another round of pricing into the market, uh we’ll react accordingly. I know you have some generators that run on diesel and other kinds of fuels. Where do you see those prices going as we watch brent crude, going up above 104 a barrel earlier today? That’S a a eight-year high yeah. It was shocking to see that um, it’s been, as you say since 2014, since we saw any kind of numbers like that on on crude oil, and that is again, you know in terms of diesel fuel itself in our products, because our products are primarily used in An emergency duty type of situation, the input cost around the fuel is maybe not as sensitive as perhaps the input costs like steel and copper and aluminum, but nonetheless it’s something we have to account for and something that our customers.
Of course, you know it comes out of their pocketbook when they run these machines. We know you mentioned aluminum aluminum prices are spiking, not to mention palladium gold, platinum. All of these prices had reached uh multi-year highs earlier today and uh. Some of that is a flight to quality, but, as we know, palladium is used to make catalytic converters convert what other metals do you see using in your your generators that you’re concerned about, as the prices go higher yeah again aluminum is. It is definitely one that we watch very closely alongside steel, and then you go over to our clean energy products.
Our battery storage products and you’ve got the battery ingredients themselves. You know cobalt and lithium, and some of the other chemistries that go there and those. Of course, all of those prices are up across the board. The broad spectrum of commodity prices has, in particular around metals, as you say, has gone up. We use a lot of catalytic converters, of course, in our machines also so we’re seeing those costs rise, and you know the inflationary environment is, is, i think we can all debate at this point or at least cease the debate around whether it’s transitory or more structural.
I think you know a lot of the the inflationary things that we’ve seen around labor and materials costs. Uh certainly appear to be more structural in nature and longer term, and i think, are going to be with us for some time.