Cooper Penetrates Further in Brazil

Cooper Power Systems, a division of Cooper Industries plc (CBE - Analyst Report), will be expanding in Brazil through a planned investment of $25 million. The company will build a production facility outside Sao Paulo in Porto Feliz. The new LEED Platinum-certified building complements Cooper Industries’ present operations in Itu and Sorocaba.

Brazil provides good investment prospects for Cooper Industries due to strong economic growth, continuous infrastructure investment, and impending major international sports events. Cooper Power Systems will broaden the existing switchgear operations in the region, and start the production of power factor correction capacitors, voltage regulators, Power System Automation Solutions, line installation, and protective devices. These products and solution will serve the Mercosur and several countries in Latin America.

The expansion will expand the presence of Cooper Power Systems in Brazil. It will also provide the other divisions of the company, like Cooper Crouse-Hinds, Cooper Lighting, Cooper B-Line, Cooper Wiring Devices and Cooper Safety, an operating platform.

Cooper’s strong balance sheet supports internal growth projects and helps the company to capitalize on an improving acquisition pipeline. Though the company’s investment in new product development and global initiatives have moderated margin, Cooper believes that it would result in continued future growth opportunities. Further, the company expects to benefit in 2011 from its pricing actions taken during the first quarter, offsetting commodity cost pressures.

However, demand for electrical products follows general economic conditions and is usually sensitive to activity in the commercial and residential construction and renovation markets, industrial production levels, electronic component production and spending by utilities for replacements, expansions and efficiency improvements. Further, price increases or significant shortages of raw materials and components could adversely affect operating costs and the competitive position of its products. Major competitors of Cooper are ABB Ltd. (ABB - Snapshot Report), General Electric Co. (GE - Analyst Report) and Stanley Black & Decker Inc. (SWK - Analyst Report).

Cooper Industries Ltd. was incorporated under the laws of Bermuda on May 22, 2001, and became the successor-registrant to Cooper Industries Inc. on May 22, 2002. Cooper recently announced that reorganization activities have been completed and the company is incorporated in Ireland. The transaction was completed on September 8, 2009, following the receipt of the required approval from the Supreme Court of Bermuda.

We currently maintain our Neutral rating on Cooper, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

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