HB Fuller Q2 earnings fall on taxes, expects costs to keep rising

Al Greenwood

22-Jun-2022

HOUSTON (ICIS)–US-based adhesives producer HB Fuller reported on Wednesday a decline in fiscal Q2 net income because of higher taxes.

Taxes were $23.6m during the company’s fiscal second quarter, which ended on 28 May. That is up from $16.7m reported during the second quarter of 2021.

The following table shows the company’s financial performance.

$ thousands Q2 22 Q2 21 % Change
Net revenue 993,258 827,873 20.0%
Cost of sales 739,737 610,323 21.2%
Gross profit 253,521 217,550 16.5%
Net income 47,203 49,102 -3.9%

Source: HB Fuller

For sales, unfavourable exchange rates dragged down revenues by 3.9%. Acquisitions boosted them by 2%.

Gross profit margins fell because of higher costs for raw materials and freight. These were offset by sales volumes and pricing.

Looking ahead, HB Fuller expects costs for raw materials and delivery will continue to rise as the year progresses. It attributes the rising costs to industrial demand and supply constraints for petrochemicals in the US. For the year, costs should rise by more than 20% versus the exit rate in the fourth quarter.

HB Fuller plans to increase prices by more than $175m in the third quarter. That’s on top of the $330m in annualised price increases that the company adopted in during the first half of the year. Out of those $330m in increases, more than $200m were made in the second quarter.

For comparison, HB Fuller raised prices by $450m during the fiscal year of 2021.

In all, these price increases should more than offset the rise in costs for raw materials and deliveries.

HB Fuller maintained its 2022 guidance of $530m-550m in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA). That represents an increase of 14-18% from the fiscal year of 2021.

Adjusted earnings/share should be $4.10-4.35, up by 18-25% year on year.

The company’s stock fell by 3.16% in afterhours trading.

As an adhesives producer, HB Fuller’s raw materials include tackifying resins, polymers, synthetic rubber, plasticizers and vinyl acetate monomer (VAM).

Because of HB Fuller’s fiscal year, it is usually the first among the major US-based chemical companies to report its earnings.

Thumbnail shows glue, which is made with adhesives. Image by Shutterstock.

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