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Valspar Second Quarter Earnings Report

by Summer Nettles
May 14, 2013

Valspar Corp. stock rose 5 percent Tuesday, despite a flat and disappointing earnings report due to industrial sales losses, as the company voiced optimism about prospects for foreign growth.

Valspar, a Minneapolis-based maker of paint and industrial coatings, reported net income in its second quarter ended April 26 of $76.9 million, or 84 cents per diluted share, compared with $76.5 million, or 80 cents per diluted share, in the year-earlier period. Analysts estimated 88 cents.

Sales were unchanged at $1.03 billion, but North American sales increased by 3 percent to $438 million. Additionally, volumes sold globally increased by 7 percent.

The company has substantial operations in the Chicago area. “In January Valspar purchased Ace hardware’s paint manufacturing assets, one of which is located on the south side of Chicago,” Mark Goldman, vice president of corporate communications, said in an interview. “The entire consumer business is located in Rosemont, Ill., and employs approximately 400 to 500 people in the area.”

Gary Hendrickson, Valspar’s CEO, said in a conference call Tuesday, “in North America Consumer Paints, excluding the new Ace business, volume grew low teens, driven by the deployment of new retail programs designed to grow market share as the U.S. housing market continues to recover. We were particularly pleased these gains came despite continued uneven global demand and market weakness in some product lines and international markets.”

Hendrickson said that three segments, "off-road, pipe coatings and container coatings, represent 80 percent, almost 80 percent of the decline that we saw on volumes in our general industrial business.”

James L. Muehlbauer, executive vice president, chief financial and administrative officer, said in response to a question, “the container business has been terrible in terms of the numbers of containers that are being built. We are probably at 10 percent or 20 percent of what the peak would be. It's a relatively small part of a pretty stable company, but it is cyclical and right now. It is at the bottom of the cycle.”


Goldman pointed to company plans to grow globally. “In 2006 Valspar purchased an Australian paint brand called Wattyl and has chosen to restructure that business. They also teamed up with an (Australian) retailer called Masters which is a joint venture partnership with Lowe's. Seventy-five percent of Masters paint products are Valspar under the Wattyl brand and Masters expansion plans call for more 30 stores.”

The stock closed Tuesday at $71.46, up $3.60.