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Emerson sees potential in Keystone pipeline

Wednesday, Feb 05, 2014

After years of growing around the globe, Emerson is doing pretty well close to home these days. And if the Keystone XL oil pipeline gets built, CEO David Farr expects that will continue.

The Ferguson-based manufacturer, which among other things makes components for oil and gas producers and refineries, reported on Tuesday that sales were up 1 percent in the fiscal first quarter to $5.6 billion. Profits were up 2 percent to $462 million, or 65 cents a share, for the quarter ended Dec. 31.

Despite Wall Street worries about emerging markets, Emerson saw strong sales growth in the developing world, especially in China and the Middle East. But sales in North America also grew 3 percent in the quarter, and Farr said he expects more of the same as the year goes on.

“We see U.S. trends improving, and we expect pretty good growth in the U.S. this year versus last year,” he told analysts on a conference call, according to a transcript.

That should continue, he said, especially if the Canada-to-Texas pipeline known as Keystone XL finally gets built after clearing a key regulatory hurdle last week. The supply of cheap energy, he said, should translate into additional manufacturing investment.

“People talk about how there’s only 50 new jobs because of the pipeline, but that doesn’t take into consideration that if you build the pipeline and have this steady stream of oil coming, manufacturing and downstream production will happen too,” he said. “You’ve got to build those factories, and operate those factories. Those are pretty good jobs, and those are the ones that will come down the road. That will be more in the 2015-2016 time range. It’ll be very positive.”

The 1,179-mile oil pipeline would travel through the heart of the U.S., carrying oil extracted from tar sands in western Canada to a hub in Nebraska, where it would connect with existing pipelines to carry crude oil to refineries in Texas.

The project cleared an important hurdle last week as the U.S. State Department raised no major environmental objections to its construction. Members of Congress from both parties have urged the Obama administration to approve its construction, but environmental groups continue to voice concern.

Even without the pipeline, Farr said, Emerson is seeing strong growth from its North American energy customers lately. And the abnormally cold winter across much of the U.S., he joked at the start of the call, is doing nothing to hurt business.

“A nice cold winter,” he said. “Good for the oil and gas industry.”