Companies look abroad to boost sales
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Long Island's public companies have turned increasingly to foreign markets to boost sales since the recession, expanding heavily in Asia and Europe as the U.S. economy has struggled to recover.
A Newsday analysis finds corporations based in Nassau and Suffolk that report overseas sales have grown their foreign revenue by an average of 37 percent since the downturn began in 2007, with the biggest gains in Germany, the United Kingdom and China. Some of the Island's fastest growing public companies nearly doubled, or even quadrupled, their foreign sales in the last five years. Average domestic sales, meanwhile, grew by just 24 percent.
Those overseas expansions by businesses including Voxx International Corp., Henry Schein Inc. and The Hain Celestial Group Inc. have lifted Long Island's global economic profile and, in some cases, enabled local corporations to thrive during the deepest recession since World War II.
"When the domestic economy falls, companies look for opportunities elsewhere," said Amit Khandelwal, a Columbia University professor of business finance and economics.
The increasing globalization of local companies mirrors a national trend. America's largest corporations have long depended heavily on overseas markets, deriving roughly 47 percent of their 2012 sales outside the United States, according to Standard & Poor's. But small and mid-size companies like those based here have relied more on domestic revenue.
Since the recession, however, smaller companies have pushed increasingly overseas. In 2007, corporations in the S&P SmallCap 600 index earned 27 percent of their sales outside of the United States. By 2012 that figure had climbed to 30 percent.
During the same period, Long Island companies increased their proportion of foreign revenue from 39 percent to 41 percent.
"The small and mid-size companies are playing catch-up," said Howard Silverblatt, a senior analyst for S&P.
Reaching new customers
Newsday's analysis is based on data collected by Standard & Poor's Capital IQ from federal filings by Long Island's 53 companies traded on major stock exchanges. It doesn't account for all later revisions.
While the filings offer a clear overview, painting a detailed picture of every company's overseas sales is difficult. The U.S. Securities and Exchange Commission does not require companies to separately report foreign sales. Only about half of Long Island's public companies indicated whether they had overseas revenue for each of the last five years.
Others listed country-by-country breakdowns. And some report sales only by continent.
The chief reason companies expand overseas is to reach new customers and increase sales. Operating in a variety of markets, however, can also insulate companies when one region falls into recession.
Voxx, a Hauppauge company that makes car stereos and other electronics, decided to broaden its overseas customer base after selling its cellphone unit in 2004.
"We wanted to mitigate against the shocks of being in any one particular market," Voxx president and chief executive Patrick Lavelle said.
So Voxx turned to Western Europe, buying four electronics companies in the United Kingdom and Germany between 2007 and 2012. The acquisitions helped triple Voxx's foreign sales over the five-year period, boosting the company's revenue as the U.S. economy sagged.
During the most recent fiscal year, Voxx reported $260.1 million in foreign revenue, accounting for 31 percent of the company's overall sales. Five years earlier, overseas sales made up just 15 percent of Voxx's revenue.
While most companies cross borders for new customers, some do it for old ones.
Take Broadridge Financial Solutions Inc. of Lake Success. The company -- which manages investor communications and processes securities transactions -- has increased its foreign sales 35 percent since 2007, to $305.7 million. Much of that growth came as the banks Broadridge serves expanded overseas, establishing foreign subsidiaries that became its customers.
"When you have international clients, you grow where they are growing," Broadridge chief financial officer Dan Sheldon said.
When in Rome . . .
Trade agreements and technology have made it easier to expand overseas, but challenges remain.
Labor laws, accounting rules and packaging regulations vary from country to country. In Canada, for instance, food ingredients must be printed in English and French. Most of Europe's countries share a currency, the euro, but each has a distinct culture, with differences in everything from etiquette at business lunches to color schemes of product catalogs.
"What works in one country doesn't necessarily work in another one," said Steven Paladino, chief financial officer at Henry Schein, a distributor of dental, medical and veterinary products.
Henry Schein operates in more than 25 countries, and it rarely pushes into new markets alone. The Melville-based distributor prefers to acquire companies with established roots, equipping itself with a staff already familiar with the intricacies of the local market.
The company, Long Island's largest in terms of annual revenue, with $8.9 billion, has increased its foreign revenue by 71 percent since 2007, in part by buying companies in Australia, Canada, Ireland, the Netherlands and Belgium.
Foreign sales can be cyclical. As the U.S. economy recovers, some companies that expanded overseas during the recession may scale back to refocus on domestic sales, said Mauro F. Guillén, a professor of international management at the University of Pennsylvania's Wharton School.
Some companies have already seen their foreign sales gains backslide.
Veeco Instruments Inc. increased its overseas revenue threefold between 2007 and 2011, to $878.8 million. The company makes manufacturing equipment for LED lighting. Its skyrocketing sales were primarily in China, where government subsidies caused LED manufacturers to build aggressively.
Then the Chinese market for LED equipment grew saturated, and Veeco's sales began sagging at the end of 2011. It's unclear how far sales slipped during 2012 because the company has yet to release its full-year results, pending an ongoing accounting review.
Despite ups and downs, economists and corporate leaders say the advantages of foreign markets are clear.
"There is a big world outside America," said Irwin Simon, chief executive of Hain Celestial, a natural food company whose foreign sales have more than doubled since 2007, to $386.6 million. "You've got to build a global brand."