Better margins a Q4 priority - HB Fuller

24 September 2008 20:45  [Source: ICIS news]

HOUSTON (ICIS news)--US chemical maker HB Fuller, whose third-quarter profits shrank sharply due to higher raw materials costs, will focus on higher margins during the fourth quarter and beyond, the company said on Wednesday.

 

"The key metric that has impacted our performance so far this year is gross margin," president and CEO Michele Volpi said during a conference call.

 

"We have suffered a significant loss in sequential margins in the first three quarters of the year," he said. "But based on our current view of raw material costs and our pricing actions, we expect our gross margin (now 25%) to be higher in the fourth quarter."

 

The Minneapolis, Minnesota-based company produces adhesives, sealants, coatings and other specialty chemicals.

 

Further, Volpi predicted the new quarter would also bring the company's first positive fourth-quarter "organic" growth since 2006, driven largely by new business and its plan to pursue price initiatives aggressively.

 

Full-year raw materials costs, he said, are estimated to be up by 16-18%, which would amount to $75m in additional costs for the company this year or more than half of the company's operating income in 2007, Volpi said.

 

"We are recovering our margins in the fourth quarter, but we are doing it as judiciously as possible," he said. "We expect the cost versus price relationship to be more manageable going forward."

 

Regionally, North American volumes were lost due to weakness in the construction sector, but the company's adhesives and specialty chemicals business helped the company maintain or gain some market share, Volpi said.

 

Revenue growth in Europe was down in the third quarter by 7.1% year-over-year and was beginning to track economic weakness in the US, Volpi said.

 

In Latin America, third-quarter sales were strong, with revenue growth of 6.7% over the same period last year. And the Asia-Pacific region experienced year-over-year double-digit growth of more than 17% in the third-quarter.

 

($1 = €0.68)

 

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By: Larry Terry
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