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Quest Buy Buoys Valspar in Q2

Wednesday, May 25, 2016

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Last year’s acquisition of Quest Specialty Coatings gave Valspar’s auto refinish line a boost in the second quarter of 2016, helping to offset lagging sales in other divisions.

The company, which is preparing for a proposed acquisition by The Sherwin-Williams Company, saw double-digit decreases in its general industrial line, but still boasted increases in earnings per share.


According to Valspar’s second-quarter earnings report, issued Tuesday (May 24), net sales for the company as a whole were down 2 percent from prior-year numbers, at $1.06 billion.

Adjusted Earnings Before Interest and Tax (EBIT) were up about 2 percent, however. Adjusted earnings per share also increased about 10 percent, to $1.22.

Paints Division

Valspar’s paints segment saw a 6 percent decrease in sales volume, though net sales increased about 1 percent, to $407 million. (That includes a 2 percent negative impact from the effects of foreign currency translation, the company says.)

Valspar automotive refinish
Photos: Valspar

Volume growth from the Quest acquisition (which involves the auto refinish line) was buffeted by lower sales by volume in the home improvement channel.

Paints overall saw declining sales in North America, Asia and Australia, though the North American numbers were offset by volume growth from last year’s acquisition of Quest Specialty Coatings. While North American sales and volume both reported single-digit growth for the quarter, Valspar says volume growth from the acquisition (which involves the auto refinish line) was buffeted by lower sales by volume in the home improvement channel.

Overall, acquisitions contributed 6 percent growth to the volume numbers, and 11 percent to total sales.

The paints segment reported an adjusted EBIT of $52 million, an increase of 12 percent, which Valspar attributes largely to the effect of the Quest acquisition. The company also cites “benefits from productivity initiatives and cost/price.”

Coatings Division

On the coatings side of Valspar’s business, the company reports a 2 percent growth in volume, which it attributes to growth in its coil, wood and packaging product lines. The coil and wood lines reported double-digit volume increases and single-digit sales increases; packaging saw volume growth in the low single digits with sales remaining flat.

The general industrial line saw a double-digit decrease in both volume and sales, according to the report.

Net sales for coatings decreased by 4 percent, though, to $587 million, including a 4 percent drop attributable to foreign currency translation.

Gary Hendrickson

"The previously announced combination of Sherwin-Williams and Valspar will create significant value for our customers, employees and other stakeholders," Valspar CEO Gary Hendrickson said.

“Our results in the second quarter were highlighted by new business wins, growth in adjusted EBIT in both Paints and Coatings and 10 percent growth in adjusted EPS," said Valspar Chairman and CEO Gary E. Hendrickson.

Upcoming Acquisition

Valspar is preparing for a proposed deal, announced in March, that would have Sherwin-Williams (Cleveland) acquiring the company for more than $11 billion. Should the deal go through, Sherwin-Williams would pay $113 per share to purchase the company.

“The previously announced combination of Sherwin-Williams and Valspar will create significant value for our customers, employees and other stakeholders," Hendrickson said. "We are confident this transaction will accelerate many of the operating initiatives already underway at Valspar. We look forward to positioning Valspar to enter its next phase of growth and to continue to work closely with Sherwin-Williams to obtain the necessary approvals to seamlessly close this transaction."

Citing the proposed acquisition, Valspar announced that it would be suspending financial and earnings guidance for fiscal year 2016, and would not be holding a conference call to discuss quarterly earnings. The company notes that its investor relations team is available to answer questions.

Valspar, the fifth-largest coatings manufacturer in North America, employs more than 11,000 people in more than 25 countries. Its product lines include paints and stains, packaging coatings, auto refinish, OEC coatings, and coil and extrusion coatings.


Tagged categories: Asia Pacific; Coatings manufacturers; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Gary Hendrickson; Latin America; North America; Program/Project Management; Sherwin-Williams; Valspar

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