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Gloss is Off in Valspar’s 1st Quarter

Wednesday, February 13, 2013

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International markets flattened coatings and dinged paint sales in Valspar's first quarter of 2013, prompting the Minneapolis manufacturer to reduce its full-year guidance.

Net sales and net income per share both declined, while gross profit was essentially flat for the quarter ended Jan. 25, Valspar reported Tuesday (Feb. 12)

"Although we made substantial progress this quarter on a number of key initiatives, international markets were weaker than anticipated," Gary E. Hendrickson, chairman and chief executive officer of the world's sixth-largest paint and coatings company, said in a statement.

The report followed a flat fourth quarter, but profitable year, for Valspar.

Sales, Net Income Dip

Overall first-quarter sales totaled $875.2 million, compared to $885.6 million in the first quarter of 2012, according to Valspar's first-quarter balance sheet. First-quarter net income per share was $0.60 in 2013, dipping from adjusted net income per share of $0.62 in 2012, which excluded a $0.04 per share restructuring charge.

Valspar high-performance coatings
Photos: Valspar

There was no joy in Minneapolis, as Valspar adjusted its full-year guidance for 2013. The company's portfolio includes high-performance architectural coatings.

Net income for the first quarter of 2013 was $55.0 million, declining from $55.8 million from the prior-year period. Reported earnings per share for Q1 of 2012 were $0.58.

Hendrickson cited "weak demand in certain international markets" for the quarter's thready pulse—a situation that is "expected to continue," he added.

"[T]hus, we are adjusting our full-year guidance to $3.60 to $3.80 to reflect these market conditions," he said.

Sales Segment Data

Valspar's portfolio includes:

  • Industrial OEM coatings;
  • Coatings and inks for rigid packaging;
  • Paints, varnishes and stains, primarily for the do-it-yourself market;
  • Coatings for refinishing vehicles;
  • High-performance floor coatings;
  • Resins and colorants for internal use and for other paint and coatings.

The paint business was hit hardest in the first quarter, with sales declining from $339.5 million in the same period of 2012 to $329.0 million in 2013, according to key data released by Valspar.

Valspar protective coatings

Coatings sales and earnings held their own, but Valspar's paint sales declined in the first quarter.

Coatings sales improved slightly, from $494.6 million in Q1 of 2012 to $497.6 million in the same period of 2013.

Sales in the "Other" category declined to $48.5 million in the first quarter of 2013 from $51.4 million in the year-ago period.

Both reported and adjusted gross profit as a percentage of net sales were 33.6 percent. In the first quarter of 2012, the reported percentage was 33.1, while the adjusted figure was 33.5 percent.

Earnings Pinched

Adjusted Earnings Before Taxes and Interest (EBIT) followed the sales trends, with the coatings segment inching from $74.2 million in Q1 of 2012 to $74.3 million in 2013.

On the paint side, adjusted EBIT declined from $27.3 million in the first quarter of 2012 to $22.5 million this year.

Valspar's stock declined 7.14 percent Tuesday morning, following the release of the report.


Tagged categories: Architectural coatings; Earnings reports; OEM (Original Equipment Manufacturers); Paint and Coating Sales; Valspar; Wood coatings

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