Hammond Power Solutions | Annual Report 2010

At HPS we believe our people are
the real source of our competitive
advantage. To successfully execute
our strategic initiatives we are
dependent on their talent, skills
and their passion. Their commitment
and determination are the power
behind our success.
William G. Hammond
Chairman of the Board &
Chief Executive Officer
22%
Return on net assets
$18M
Net cash position
Fellow Shareholders,
We are only two years removed from the worst global financial collapse
since the Great Depression. The world economy and many of its markets
have yet to fully recover from the recession and fears that gripped us
collectively. But there is hope and there is growth for companies that have
the vision and capabilities to take advantage of them and we believe that
Hammond Power Solutions Inc. (“HPS”) is one of those companies.
Over the last four years, HPS has been implementing a strategy of
growth through market and channel diversification. These strategies not
only propelled our sales and profits while the economy expanded, they
also limited their decline in the worst recession seen in more than 60 years.
Although not reflected in our financial performance, which was also
affected by the rising Canadian dollar, we held or increased our share of
key strategic markets over the last two very tough and highly competitive
years. Our dominance in certain sectors, as well as strengthening commodities,
benefitted from renewed growth in Asia, which enhanced our financial
results when other North American sectors were still struggling.
The worst appears to be over and most, though not all, markets we
serve are coming to life. We are seeing increased activity levels across
North America and a renewal of confidence that bodes well for the next
two years. We expect that our larger footprint in the distributor channel
and the product line expansions, either in place or under development,
will accelerate our growth rate even more.
We have also been working on a number of activities to control and
reduce our costs in these competitive times; expanding the production of
products in more cost competitive plants in Mexico, more aggressive
sourcing of materials and components from China, and the improvement
of processes to increase productivity.
We are continuing with our efforts to enlarge our business footprint
outside of Canada and the United States through acquisition, partnerships
and commercial relationships in Mexico, Europe, and Asia. This strategy
will not only give HPS access to markets that are quickly expanding, it
provides geographical diversification which will lessen our dependence
on the North American economy. We believe that such diversification is
prudent given the current state of the housing and commercial construction
markets in the United States, as well as the potential impact of decisions
that will have to be made at some point to deal with the enormous levels
of government debt.
Finally, at HPS we believe our people are the real source of our
competitive advantage. To successfully execute our strategic initiatives we
are dependent on their talent, skills and their passion. Their commitment
and determination are the power behind our success. U
8 Letter to shareholders
Hammond Power Solutions | Annual Report 9