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Sales Increase, Profits Dip in Valspar Q1

Thursday, March 9, 2017

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Successes in the the coil and wood coatings and consumer paints product lines are behind Valspar’s 2.5 percent net sales increase to $907.6 million, according to the company’s first-quarter earnings report, issued Wednesday (March 8).

The company did take an expenditure hit, however, regarding its pending acquisition by The Sherwin-Williams Company, which was slated for completion at the end the first quarter but remains in the closing process.

Overview

According to the report, while net sales were up compared to the same period in 2016 (including a negative impact of 1.9 percent from foreign currency exchange, the company says), gross profits declined from 36 percent to 34.2 percent and net income decreased from 5.9 percent to 4.5 percent.

The company says that despite the solid outcome from the consumer paints product lines, those increases were likely offset by lower sales in its automotive refinish product line.

Charles & Hudson, CC-BY-SA 2.0, via Flickr

Valspar’s paint segment saw a net sales increase of 0.1 percent, from $291 million to $291.3 million.

The company also suffered from an increase in operating expenses compared to the first quarter in 2016. Those expenses increased $11 million, or 4.9 percent, primarily due to costs related to the proposed merger with Sherwin-Williams. Charges related to the merger were $8.7 million in the first quarter, Valspar said.

About 49 percent of the company’s net sales were generated overseas.

Segments

Valspar’s paint segment saw a net sales increase of 0.1 percent, from $291 million to $291.3 million (including a negative impact of 1.3 percent from foreign currency exchange, the company says). Excluding foreign currency exchange, the increase was driven primarily by North America, partially offset by lower sales in the consumer paints product line in China, global automotive refinish product line and consumer paints product line in Australia.

Valspar Corp.

On the coatings side, net sales for the first quarter increased 4.0 percent from $543.6 million to $565.2 million.

The first quarter also brought restructuring for the paints segment, which was a continuation of fiscal year 2016 initiatives to improve the global cost structure. Those initiatives included consolidating three sites in the automotive refinish product lines as a result of the Quest acquisition of 2015. Those restructuring activities resulted in pre-tax charges of $1.9 million or $0.02 per diluted share after taxes.

On the coatings side, net sales for the first quarter increased 4.0 percent from $543.6 million to $565.2 million (including a negative impact of 2.2 pecent from foreign currency exchange).

Sherwin-Williams Merger

Valspar and Sherwin-Williams announced the $11.3 billion merger in March 2016 and had expected it to close by the end of the first quarter this year.

In June 2016, Valspar stockholders voted to adopt the merger agreement at a special meeting of stockholders held for that purpose. Completion of the merger remains subject to certain closing conditions, including the expiration or termination of the applicable waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act and the receipt of regulatory approvals in certain other jurisdictions, the company says.

In late January, when Sherwin-Williams announced its 2016 fourth quarter numbers, the company said it expected the deal to close within 90 days, which would mean by late April. Sherwin-Williams announced at that time that it was planning divestitures that would be necessary in order to clear regulatory hurdles.

   

Tagged categories: Business matters; Coating Business; Earnings reports; Finance; Paint; Sherwin-Williams; Valspar

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