Valspar priorities price hikes on poorer Q3

12 August 2008 05:12  [Source: ICIS news]

HOUSTON (ICIS news)--US paints producer Valspar anticipated a difficult third quarter, but with raw material costs forecasted to increase by 9-14%, the company said on Monday, raising prices is clearly a priority.

 

“What is uncertain; however, is how much raw materials inflation will move through the supply chain next year. But it's clear we have to move our prices, and we'll continue to try to do that," chairman and CEO William Mansfield said during a conference call.

 

"As you would expect, we have seen a lag between raw material increases and the impact of our price increases," he added.

 

Valspar reported third-quarter net profits of $47m (€31.5m), down 19% year on year on rising raw material costs and weaker sales.

 

Facing a weak US economy with a troubled housing market, Mansfield said the company initially expected raw material costs to rise by 5-8% in 2008. Costs, however, are already at the high end of that and will increase by year's end.

 

Although the company said its US architectural coatings business was performing "relatively well," its wood coatings segment and resins and gel coatings businesses are more pressured by the economic slowdown.

 

In China, its Huarun Paints Holding Company is thriving, Mansfield said, reporting sales in the high double digits and above-average margins. He dismissed concerns that a predicted slowdown in China's economy after the Beijing Olympics would threaten that business.

 

"Our sense is that a lot of that has to do with infrastructure investments that have been made over the last several years," he said.

 

"Our Huarun business is selling architectural coatings to Chinese consumers, and it's also selling wood coatings to Chinese furniture manufacturers to supply the domestic Chinese market”, he added.

 

Mansfield said he expected that business to maintain a compounded annual growth rate of 15% over the next five years.

 

($1 = € 0.67)

 

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By: Larry Terry
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