Valspar sees profit margins shrink - JP Morgan

12 August 2008 14:31  [Source: ICIS news]

TORONTO (ICIS news)--Valspar’s fiscal third-quarter results released on Monday were marked by lower than expected operating profits and margins even though sales were higher than expected, JP Morgan said on Tuesday.

 

Higher costs for the US paint producer's key raw materials - pigments, binders, solvents and additives - led to a year-on-year gross margin reduction from 31.2% to 29% for the three months ended 25 July, the bank said.

 

The quarter’s operating profits fell 14.3% to $88.4m (€59.3m) as operating margin slipped from 11.5% to 9.2%, reflecting the gross margin decrease.

 

JP Morgan expected Valspar to raise its average annual selling prices by 2.0%-2.5% in 2008, which would only partially offset raw material cost inflation, it said.

 

Meanwhile, Valspar’s consolidated fiscal third-quarter sales grew 7.2% to $958m, mainly on higher prices and a better sales mix, acquisition benefits and favourable currency effects, JP Morgan said.

 

Overall reported third-quarter profit from operations was 50 cents on an earnings per share (EPS) basis, down from 57 cents in the year-ago period and below JP Morgan’s estimate of 52 cents, the analysts said.

 

($1 = €0.67)

 

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By: Stefan Baumgarten
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