U.S. housing market close to bottom: ITW

By Ben Klayman

NEW YORK (Reuters) - The U.S. housing market is nearing its bottom, which would end a run of declines that has hit companies across that sector, the chief executive of diversified manufacturer Illinois Tool Works Inc. (ITW.N: Quote, Profile, Research, Stock Buzz) said on Tuesday.

"If we haven't hit bottom, we're awfully close to it," David Speer said at the Reuters Manufacturing Summit in New York. ITW makes fasteners, food service and welding equipment, counter-top materials and other products.

For more than a year, high prices and interest rates have ground down new residential construction activity, with January housing starts down 14.3 percent.

In fact, the slowdown in the U.S. housing and automotive markets is spreading into other corners of the manufacturing world, Speer said.

"We've seen it rippling across other areas," he said.

"Certainly the building materials areas that are related to construction have slowed," he added. "The metals industry has slowed. We've seen it in some of the durable goods, certainly the white goods area. We've seen a general slowing around most industrial end markets."

Speer's comments came after the U.S. Commerce Department reported new orders for U.S.-made durable goods fell by a much worse-than-expected 7.8 percent in January as a steep drop in civilian airliner orders helped push orders for nondefense goods to their biggest monthly decline on record.

But he was quick to point out that in most cases, the declines represented a slowdown in sales growth -- not an outright decline in sales.

"We've seen negative numbers in our first quarter, but that includes the auto and residential construction numbers in North America," Speer said.

"Those are pretty dramatic examples. Ex those, we're talking about growth rates that are in the 2 to 2.5 percent range, which is a gradual slowing from what was going on. If you look at some of the numbers that occurred in the third quarter of last year, you had some markets that were still operating in the 4.5 to 5 percent growth range. So to come down to a growth range that's in the 2 percent range shows some pretty dramatic compression."

Speer also sees the Glenview, Illinois-based company's welding business in North America rising by 5 percent to 8 percent this year. That is down from growth rates of 15 percent to 20 percent over the last few years.

ITW also could top its expected 2007 acquisition target range of $800 million to $1.2 billion in acquired annual revenue, Speer said. Last year, it closed deals that added $1.7 billion in revenue.

"Could we do more? Could we do as much as we did in 2006?" he said. "There's a likelihood that we could."

ITW has more than 40 deals, representing revenue of more than $1 billion, in its pipeline, Speer said. When deals are in the pipeline that means they are between the letter of interest and closure stages. ITW has already added $300 million in annual revenue through the first six weeks of the year.

"I'm optimistic we'll be able to continue a strong pace," he said, adding the company will likely be more active in such areas as testing and measurement equipment, welding and food equipment.

Speer reiterated ITW results were running in line with its latest forecast for the first quarter. It previously said it expects earnings in the range of 69 cents to 73 cents a share and base revenue growth in the range of 1.2 percent to 3.2 percent.