Valspar VAL saw its profits rise in second-quarter fiscal 2015 (ended May 1, 2015) on gains from its cost-savings and productivity initiatives and new business wins in its coatings business. But its sales fell on a double-digit decline in the paint business.
Valspar, which is one of the prominent paint makers along with Akzo Nobel AKZOY, PPG Industries PPG and Sherwin-Williams SHW, posted profit of $90.3 million or $1.09 per share in the reported quarter, a 5% rise from roughly $86 million or 99 cents reported a year ago.
Barring restructuring charges, earnings were $1.11 per share in the second quarter, up from $1.07 per share logged a year ago. It narrowly beat the Zacks Consensus Estimate of $1.10.
Revenues fell roughly 7% year over year to $1,079.3 million in the reported quarter, hurt by lower demand for paint products in North America and unfavorable currency swings that reduced sales by roughly $55 million. Sales missed the Zacks Consensus Estimate of $1,105 million.
Valspar backed its earnings guidance for the full year and also said that it is buying Quest Specialty Chemicals’ performance coatings businesses. The Minneapolis-based company’s shares sagged 2.7% to close at $83.59 yesterday.
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Segment Highlights
Sales from Valspar’s larger Coatings division inched down 1% year over year to $615 million in the quarter. Net sales in local currency rose 5% while volumes increased 3%. Volumes rose significantly in the general industrial and the coil product lines, but decreased modestly in the packaging and wood product lines.
Revenues from the Paints segment slid 15% to $403 million. Both net sales and volumes declined 12% in local currency. Lower volumes in North America more offset gains across Europe, Asia and Australia. The decline in North America was partly due to product line adjustment at a major customer.
Financials
Valspar ended the quarter with cash and cash equivalents of $146.3 million, up roughly 26% year over year. Long-term debt rose around 24% year over year to $1,350 million.
Valspar bought back 1.1 million shares worth $92.5 million during the reported quarter.
Acquisition of Quest Specialty Chemicals Assets
Valspar has agreed to buy the performance coatings businesses of Quest Specialty Chemicals for an undisclosed price. The assets to be acquired include products catering the automotive refinish and industrial markets. The acquisition will reinforce Valspar's presence in the attractive automotive refinish end-market. The transaction, which is subject to customary closing conditions, is expected to consummate in the company’s fiscal third quarter.
Guidance
Valspar reiterated its fiscal 2015 adjusted earnings per share guidance of $4.45 to $4.65. The company, however, revised its sales guidance for the year based on its updated estimate of currency translation impact. It now sees sales to fall in the low single-digits year over year versus its prior forecast of roughly flat sales. Excluding the anticipated currency impact, sales for fiscal 2015 are expected to rise by low single-digits.
Valspar is a Zacks Rank #3 (Hold) stock.
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