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Valspar Corp. notched a 25.3% overall increase in sales for the first quarter, but performance in the coatings segment carried “concern, uncertainty and hopefulness” for the company’s CEO.
The company’s coatings segment came “under the most pressure last year,” Chairman and CEO William L. Mansfield said in a conference call to discuss the first-quarter statement, released Monday (Feb. 14).
The company’s coatings segment sales declined 0.8% for the quarter, adjusted for currency, compared with the same quarter of the previous year, said Lori Walker, CFO and Senior Vice President. New business in Valspar’s industrial product lines helped to mitigate continued weakness in the U.S. industrial market, she said.
Mansfield downplayed the numbers. “I really can't tell you that we've been disappointed,” he said. “I would categorize it on an overall basis as concern, uncertainty and hopefulness. Now, there are some areas that are a little better than that, but -- and this -- these comments would apply primarily -- as I'm thinking about -- primarily to our Coatings segment.”
Overall Results: ‘About What We Expected’
Despite flat sales in the United States, Mansfield said, “We had a good quarter, and we were especially pleased with the improved volumes we delivered in our Paint segment and in our business in Asia.”
First-quarter results “were about what we expected,” he added.
First-quarter sales totaled $842.4 million, a 25.3% increase from the first quarter of 2010. First-quarter adjusted net income per share increased to $0.39 in 2011 from $0.36 in 2010. First-quarter adjusted net income per share in 2011 excludes $0.05 per share in charges related to the acquisition of Australian paint manufacturer Wattyl Ltd., which was completed in September.
First-quarter adjusted net income per share in 2010 excludes a $0.02 per-share charge related to restructuring actions. Net income for the first quarter was $33.4 million in 2011 and $33.9 million in 2010, and first-quarter reported earnings per share were $0.34 for both years.
"Our Australian paints acquisition and the continued success of our pricing and new business efforts drove our double-digit top line growth,” Mansfield said. “Looking ahead, we remain focused on addressing continuing upward pressure on raw material costs through pricing and productivity. We continue to expect fiscal year 2011 adjusted net income per share in the range of $2.45 to $2.65.”
Paint and Coatings
Paint segment sales increased 7.8%, reflecting volume growth in the company’s global architectural and automotive refinish product lines, Walker said. Sales and other declined 11.5% due to continued weakness in U.S. coatings markets.
Coatings segment earnings before income and tax (EBIT) margin was 11.6%, an increase from 8.6% in the first quarter of 2009, Walker said. Paint segment EBIT margin was 12.5%, up from 7.6% in 2009.
“Looking at our performance by segment, in Paints, we did have good growth in both our architectural and automotive refinish product lines,” said Mansfield. “In Coatings, our coil product line had strong sales growth, primarily due to share gains.”
Mansfield said the company’s global architectural product line “had a very strong quarter, and we are seeing demand improve at the retail level in both the U.S. and China. In North America, we continued to perform better than the market.” The automotive refinish product line “also performed well,” he added.
On the other hand, he said, “we really haven't seen a recovery in our wood coatings and general industrial type businesses. And we probably would have expected that we would have seen some sort of recovery materializing in those businesses by this point in time.”
Mansfield’s total compensation for the year ended Oct. 30 was $4,544,181, according to the Minneapolis Star Tribune.
Valspar, founded in 1806, manufactures paints and coatings for the consumer market, packaging coatings, wood coatings, industrial coatings, automotive coatings and refinishing systems, and coating intermediates.
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