Valspar Mixes Up Strong Sales in Fiscal Second-Quarter 2014, Sees Big Opportunities in China, Europe

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading paint and coatings company Valspar Corporation (NYSE:VAL) (Minneapolis, Minnesota) reported solid growth in revenues and profits for the second quarter of the company's 2014 fiscal year, following improved sales mix and volumes, as well as productivity improvements, in both the Paints and Coatings segments. Net income was reported to be $85.96 million, an 11.77% increase from the second quarter of fiscal year 2013.

Net sales stood at $1.13 billion, a 9.6% increase from the same period last year. The company's Coatings segment reported a 12% sales jump, following sharp growth in sales volumes for the packaging and wood coatings businesses. However, the segment's gains were offset partly by harsher-than-expected weather conditions in the U.S., which diminished end market demand and disrupted supply chains for the general industrial and coil coatings businesses.

The Paints segment reported an 8% growth in sales. Volumes grew more than 10% in the U.S. alone, and increased significantly in China and Australia. Chinese sales have improved more than 20% from the first half of 2013, as the segment continues to target the country's affordable housing market.

Capital expenditures were reported to be $29.63 million, compared with $16.16 million in the second quarter of fiscal year 2013.

As part of its North American Chemical Processing Project Database, Industrial Info is tracking progress at 19 operational Valspar facilities. At a paint plant in Garland, Texas, the company is evaluating plans to expand by adding additional lines to increase the production capacity of relatively new products, as well as add tanks and other supporting equipment.

"Last year, we launched a number of initiatives in both the Paint and Coatings segments," said Gary Hendrickson, the chairman and chief executive officer of Valspar, in a conference call. "Strong execution of these initiatives in 2014 is driving our performance. In the second quarter, we completed a number of key milestones against these initiatives, including completing the supply chain integration in Europe for our general industrial product line, which has been enabled by the [June 2013] Inver [Holding S.r.l.] acquisition. This included the consolidation of three manufacturing locations, which will substantially improve the cost structure and create a strong foundation for future growth in the European market."

Valspar executives will continue to increase investments in Valspar Reserve, an interior and exterior paint product line that was launched earlier this year, among other growth initiatives. The company also expects to recapture some of the general industrial and coil coatings business that was lost due to harsh weather in the second quarter.

"As we think about our capital spending in general, we have been investing in growth initiatives in both the Coatings and Paint segments," said Jim Muehlbauer, the executive vice president and chief financial and administrative officer of Valspar, in the conference call. He added that the company is reaching the end of ongoing restructuring activities that it had launched in 2013. "We're happy to deploy capital against those rationalization activities in the supply chain, while at the same time investing in growth in our businesses. So we look forward to spending more capital against high-returning projects."

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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.