US WR Grace plans 25-30% spending increase on growing demand

10 February 2011 23:07  [Source: ICIS news]

HOUSTON (ICIS)--WR Grace is planning to raise capital expenditures in 2011 by 25-30% based on modest increases in demand, the US-based catalysts and building materials maker said on Thursday.

The hike would raise the company’s expenditures to $140m-150m (€102m-110m), said WR Grace chief executive Fred Festa.

Speaking on a fourth-quarter earnings conference call, Festa cited growth in construction spending in emerging markets as one of the leading factors in the company’s optimism.

The construction products business is WR Grace's largest by sales at $223.8m, with fourth-quarter volumes rising 13% year on year in emerging markets.

For the Asia-Pacific region, fourth-quarter construction sales of $44.8m were 25% higher year on year.

However, optimism was tempered by lagging results in the developed economies, particularly Europe.

European fourth-quarter construction sales tumbled 16.8% as the construction industry was hit by bad winter weather, WR Grace said.

“With the fourth quarter and January and all the weather events, I’m not sure yet,” Festa said. “That’s what we’ve forecasted - [European construction] flat to potentially down this year.”

Meanwhile, North American construction sales were up 7.2% year on year.

Festa said that despite the sales growth in North America, the company would “remain cautious” until it sees “more pronounced trends in the overall market”.

On the whole, 2011 construction sales will likely be flat to up 2% for North America and Europe combined, Grace said.

However, Festa cited “early signs of stronger growth” in those markets and said new product development had Grace “well positioned for the eventual turnaround”.

In the meantime, investment would be concentrated particularly in emerging regions such as Asia Pacific, the company said. That region's demand growth should continue to be robust, Festa added.

WR Grace said earnings could be affected by higher costs for petroleum-derived raw materials, but that they could be partly offset by higher pricing and lower operating costs.

WR Grace’s stock rose 73 cents, or 2%, to close at $36.79/share on Thursday at the New York Stock Exchange.

($1 = €0.73)

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By: Ben DuBose
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