22 July 2010 22:12 [Source: ICIS news]
HOUSTON (ICIS news)--Malaise in the US housing market will continue at least into the third quarter as customers who are skittish about the economy further limit discretionary spending, US paints and coatings producer Sherwin-Williams said on Thursday.
Despite higher year-over-year net income in its second quarter, the company cited the unstable economy, foreclosure rates and weaker new-home statistics among factors exerting negative pressure on the coatings market.
A strong April for the coatings industry gave way to a weaker May and June, as housing numbers declined after the federal government’s first-time home-buyer credit expired, CEO Christopher Connor said during an earnings conference call.
“Clearly there is more pain to come in the housing market, and we have not called the bottom yet,” he said.
Connor did not say when the market floor might be reached, but the company forecast that its third-quarter consolidated net sales would increase by mid-to-high single-digit percentages, and that price increases would be pursued.
The company revised its full-year earnings guidance downward, however, to a range of $4.12-4.52/share. That compares with its earlier full-year guidance of $4.20-4.60/share.
Even so, Connor noted that demand was stronger than it was a year ago. He attributed some of the relative vitality in the residential repaints market to customers who decided to improve their existing homes, rather than purchase new ones.
The do-it-yourself (DIY) market also helped bolster the company’s second-quarter earnings, Connor said. But the shift back to the contractor market would likely outpace the DIY segment after the residential paints market begins to pick up, he noted.
Connor acknowledged upstream supply problems from acrylics and titanium dioxide (TiO2) producers during the quarter, but said those issues were getting resolved.
“The monomer chain is better, and our suppliers are catching up,” Connor said.
However, catching up in the midst of the painting season is difficult, “so margin pressure will continue”, he said.
($1 = €0.78)
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