Strong growth in new and industrial coatings helped propel the Valspar Corp. to a 22.5% overall sales increase in the third quarter, although net income dipped slightly from a year ago.
|Pipeclad 2000 Fusion-Bonded Epoxy is part of Valspar’s growing pipeline coatings family.|
“Our Industrial business is doing really well in terms of new business,” president and CEO Gary E. Hendrickson said in a conference call Monday (Aug. 15), after the third-quarter report was released.
Hendrickson said coatings segment growth—from $484.2 million in Q3 of 2010 to $560.7 million in Q3 of 2011—was being driven by “particularly strong” growth in new industrial products.
“We have made significant inroads in markets for pipe coatings and coatings for shipping container, which are new segments for us, and we continue to gain share,” he said.
The company’s industrial portfolio also includes protective coatings as well as coatings for off-road equipment, transportation and more.
For the first three quarters of 2011, coatings sales totaled $1.5 billion, up from $1.3 billion in the same period last year.
Overall, sales for the third quarter (ending July 29) were $1.07 billion, up 22.5% from $873.9 million for the same quarter of 2010, the company reported.
Net income was $67.4 million, down from $75.1 million for the prior-year period, although adjusted net income per share rose 14.3%, to 80 cents. The per-share net-income figures exclude charges related to restructuring actions in Q3 of 2010 and 2011 and a gain on the sale of assets during the 2010 quarter.
"We were pleased with our improved sales and earnings performance for the quarter," said Hendrickson. "Double-digit top-line growth resulting from acquisitions, pricing and market share gains helped to mitigate the impact of higher raw material costs and a challenging demand environment.”
Valspar expects raw material costs to increase 20% this year, Hendrickson said, “so we still have work to do, but we are in the process of working with our suppliers and our customers to address cost price and remain confident that we’ll restore our operating margins in 2012.”
For the company’s Paint segment, third-quarter sales were $441.5 million compared to $484.2 million a year earlier. Segment EBIT for the quarter was $42.1 million, up from $38.6 million a year earlier.
Through the first three quarters of the year, Paint segment sales were $1.195 billion, compared to $860.6 million a year earlier. Segment EBIT for the nine-month period was $100.6 million, down from $118.6 million for the prior-year period.
Coatings segment sales for the quarter, adjusted for currency and acquisitions, increased 8.7%. Paint segment sales increased 5.1%. Adjusting for the loss of the Wal-Mart business, paint segment sales increased 9.1%. Sales in the “Other” category were flat.
‘We Made Progress’
“Our overall core growth was up 6.7%, driven by high single-digit price increases, which offset a low single-digit decline in volume,” said Chief Financial Officer Lori Walker.
“Excluding the lost Wal-Mart business, volume was down about 1% in both our Coatings and Paint segments. Currency was positive 3.9%, and acquisitions added another 11.9% for total growth of 22.5% in the quarter.”
Added Hendrickson: “We made progress in restoring our operating margin by continuing to raise our selling prices and improving our productivity. Our ongoing investments in our brands and technology delivered new business in the quarter and position us well for the future.”
For the company’s fiscal year as a whole, Valspar is projecting earnings per share in the range of $2.47 to $2.57. Adjusted earnings per share for the company’s fiscal year 2010 ended Oct. 29 were $2.23.