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Valspar Q2 Sales Up on Eve of Merger

Thursday, June 1, 2017

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With its acquisition by The Sherwin-Williams Company looming, Valspar Corp. (Minneapolis) issued its second-quarter earnings report Wednesday (May 31), indicating that sales were up more than 3.5 percent in comparison with prior-year numbers.

During the three-month period ending April 28, Valspar reported just under $1.1 billion in net sales, up from just under $1.06 billion during the same period in 2016. Profits, however, were down year-over-year: $375.9 million in Q2 of 2017, versus $401.4 million in Q2 of 2016.

Earnings by Segment

Net sales were up across the company’s three segments in comparison with prior-year numbers.

Pipe coating
Images: Valspar

Sales were up, but EBIT down, in Valspar's Coatings segment, which includes decorative and protective coatings for wood, metal and plastic.

In the Coatings segment, Valspar reported $616.2 million in sales, up 4.9 percent from 2016 numbers. Valspar’s Coatings business comprises industrial coatings—including decorative and protective coatings for wood, metal and plastic—and product packaging coatings.

In the Paints segment, the company saw $418 million in sales on the quarter, an increase of 2.7 percent over the prior year. Paints include consumer paints, stains, varnishes, floor coatings and the like for the do-it-yourself market, and auto refinish paints.

Valspar’s third business segment, “Other/Administrative,” includes specialty polymers and colorants, furniture care and repair products and other products not included in the other two segments. That segment saw sales of $118.6 million in Q2, a 2.2 percent increase over 2016’s second quarter.

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In the Paints segment, the company saw $418 million in sales on the quarter, an increase of 2.7 percent over the prior year. Paints include consumer paints, stains, varnishes, floor coatings and the like for the do-it-yourself market, and auto refinish paints.

Earnings Before Interest and Taxes (EBIT) were down in the Coatings segment in 2017 Q2: The segment’s reported EBIT of $87.4 million is 22.2 percent lower than the same figure a year ago. For Paints, EBIT jumped up 22.4 percent, to $52.3 million. Total EBIT for the company, accounting for administrative spending, was $107.3 million, holding nearly steady with 2016 numbers.

Acquisition Nears Completion

The pending acquisition of Valspar by Sherwin-Williams met with U.S. and Canadian regulatory approvals last week. Sherwin-Williams has said that it expects the deal to close today (June 1), though the companies have until June 21 to seal the deal according to the extended timeline they announced in March. When the transaction is completed, Valspar will be a wholly owned subsidiary of the larger Sherwin-Williams.

Valspar says it incurred about $8.2 million in costs related to the merger deal in the second quarter of this year, which is on par with what it spent in the first quarter.

As part of a regulatory agreement with the Federal Trade Commission in relation to the merger, Sherwin-Williams will divest of Valspar’s North American industrial wood coatings business, selling the unit to Axalta Coating Systems. That sale, which Sherwin-Williams first announced in April, must go through within 10 days of the close of the merger.

Auto Refinish Expansion

Valspar also announced on May 25 that it has increased production capacity at two of its automotive refinish coatings facilities. The Valspar locations in Garland, Texas, and Pittsburgh received upgrades to the tune of $10 million, the company says. The end result has been an increase of production capacity of 200 percent, and an increase in storage of 300 percent.

Valspar announced on May 25 that it has increased production capacity at two of its automotive refinish coatings facilities.

The upgrades came as part of Valspar’s 2015 acquisition of Quest Specialty Chemicals. That deal was touted as doubling the size of Valspar’s auto refinish business.

   

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

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