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Growth isn't as easy as it looks

BY JAMES BERNSTEIN | james.bernstein@newsday.com

It is not hard to see why Stanley Bergman, chief executive of Henry Schein Inc. of Melville, smiles a lot these days. Sales at the dental and medical equipment distributor were up 11.2 percent last year, and profits rose 17.2 percent.

The company, Long Island's third largest, has been public for more than a decade and has grown in each of those years.

Bergman expects growth again this year.

"We are comfortable that the growth we have had can be maintained," he said.

While Henry Schein and many other large and small Long Island companies had a robust year, some analysts and economists say there are obstacles to such hyper-growth in 2007.

Higher gas prices, increasing foreign competition, a slowing housing market, climbing interest rates and an economy that some see as already running out of steam, might make it harder for companies on the Island and across the country to maintain the sturdy sales and profits growth of the recent past.

"We've already got a flat to slowing economy," said Pearl Kamer, an economist for the Long Island Association, the region's largest business and civic organization. "If things work out poorly, with increasingly higher gas prices and other problems, we could become more recession-prone. If the nation becomes more recession-prone, we will, too."

But at the moment, top executives at many of Long Island's Top 75 publicly traded companies are positively giddy about the recent success of their businesses.

Sales at the largest 75 companies rose 17.1 percent in 2007, although profits were down 11.8 percent. But the profit number is skewed by two of the largest companies: CA Inc., the Islandia-based software company, and Cablevision Systems Corp. of Bethpage. Excluding CA and Cablevision, sales at the other top 20 companies were up 19.2 percent in 2007, and profits rose 27.8 percent.

At CA, sales last year were an anemic 3.4 percent, and profits dropped 55.1 percent, as the company continued to work its way back from a $2.1-billion accounting scandal that rocked senior management, sending chief executive Sanjay Kumar and others to prison for securities fraud. At Cablevision, the largest provider of cable television services in the metropolitan area, sales grew 14.6 percent, and the company swung from an $89.3-million profit to a loss of $126.5 million.

Besides Henry Schein, Cablevision and CA, the other Long Island companies among the top five in revenue are No. 1 Arrow Electronics Inc., the Melville-based components distributor, and Systemax Inc., the Port Washington-based computer manufacturer.

Henry Schein's Bergman says he sees 18 percent to 20 percent revenue growth in the year ahead.

"Our growth is driven by the baby boomers," Bergman said. "They are among the most affluent and educated generation ever. They realize good health is going to allow them to live healthy lives and live longer." Henry Schein's customers are dentists, doctors and veterinarians.

Part of Henry Schein's growth strategy depends on making early contact with students at dental schools and helping them to plan to run a business.

Eric Krasnoff, chief executive of East Hills-based Pall Corp., a manufacturer of high-tech systems that filter impurities out of everything from blood to beer, said that with 65 percent of sales now coming from overseas operations, the company, ranked No.7 on Long Island, is more open to the ups and downs of geopolitics.

But, he said, "you're spreading your risk across the globe. We have to be where our customers are." A weaker dollar, Krasnoff said, makes the United States a more attractive place for manufacturing. But he added, "A weak economy hurts everybody in the U.S."

Even higher oil prices, Krasnoff said, can be a benefit to Pall, which makes systems that filter impurities out of such alternative fuel sources as ethanol.

Overall, Krasnoff sees growth in Asia, where Pall already has three manufacturing plants and 500 employees.

"It's been an incredible growth spurt there," he said.

Arrow Electronics is looking to Asia and other parts of the world for its future growth, said chief executive William Mitchell.