Valspar Misses Expectations as Paint Volumes Slide

By Lisa Beilfuss 

Valspar Corp., in the midst of a merger with rival Sherwin-Williams Co., said earnings in its latest quarter fell amid restructuring costs and lower paint sales.

The Minneapolis paint maker in March agreed to the $9.3 billion cash deal, a price tag that represented a 35% premium and that gives Sherwin-Williams a more access to do-it-yourself painters who tend to buy supplies at retailers such as Lowe's Cos. and Ace hardware stores, places where Valspar is particularly strong. Valspar also sells industrial coatings and last year acquired Quest Specialty Chemicals, Inc., which specializes in automotive refinishes.

In its second quarter, Valspar said merger-related costs totaled $18 million. The Sherwin-Williams deal is still on track to close by the end of next year's March quarter, the company said Tuesday.

In addition to merger costs, lower paint volumes dragged down first-quarter earnings. Total volume slipped 1% as a 6% decline in paint volume offset a 2% increase in the larger coatings segment.

Over all for the quarter, Valspar reported a profit of $80 million, or 99 cents a share, down from $90.3 million, or $1.09 a share, a year earlier. Excluding merger and restructuring costs, among other items, earnings per share rose to $1.22 from $1.11.

Sales fell 2.1% to $1.06 billion. Analysts projected $1.26 in per-share profit on $1.12 billion in revenue, according to Thomson Reuters.

Because of the pending merger, Valspar said Tuesday that it had withdrawn its guidance for the year. Analysts have been looking for $4.85 in adjusted earnings per share for the fiscal year ending in October.

Shares in the company, up 29% this year through Monday's close, were inactive during premarket trading.

Write to Lisa Beilfuss at [e-mail]

(END) Dow Jones Newswires

May 24, 2016 09:09 ET (13:09 GMT)

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