Valspar Q2 pre-tax income falls 1% year-on-year

12 May 2008 22:15  [Source: ICIS news]

HOUSTON (ICIS news)--US paints and coatings producer Valspar's second-quarter pre-tax income dropped by nearly 1% from the same period last year, the company said on Monday.

Valspar, based in Minneapolis, Minnesota, reported earnings of $61.8m (€40.2m), compared with $62.4m in first-quarter 2007.

Although sales of $836.4m reflected a 3.5% increase over first-quarter 2007 numbers, sales effectively declined by 2.6% after adjustments for currency and recent acquisitions, chief financial officer Lori Walker said during an earnings conference call.

Compared with the first quarter of 2008, however, second-quarter sales outpaced the previous quarter's sales by 9.3%. And diluted net income for the second quarter rose to 38 cents/share from 35 cents/share in first-quarter 2007.

Overall, the "good performance" stemmed from new business and tight cost controls, despite rising raw materials prices and continued weakness in the US housing sector, Walker said.

Like its upstream raw materials providers, Valspar reported that overseas demand was shoring up market weakness in North America. The company's international sales made up 40% of its business, said chairman and CEO William Mansfield.

Raw materials costs rose by 5-8% during the quarter, he said. That was higher than the 3-5% growth rate forecast by the company during the previous quarter.

In an effort to hold costs down, he said, the company trimmed staff by 6.5% during the past six months, cut capital expenditures by more than 10% during the quarter and continued to reduce operating costs.

Performance varied among the company's individual markets, Mansfield said.

Architectural coatings sales were down by 8%, but Valspar's numbers were tracking a bit ahead of its competitors, he said. Paint sales were down by 4.4% and its resins, colourants, gel coatings and wood products segments were also all down, but only by about 1% each.

Pricing initiatives helped to improve the Q2 results, but getting a price hike is "not easy anywhere. But our customers have some understanding of the pressures we're under".

($1 = €0.65)

By: Larry Terry
1 713 525 2653

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