Fuller faithful to strategy

H.B. Fuller Co. told financial analysts that the slow market for new-home construction and languishing auto sales in North America are leading to lower-than-expected sales.
However, the company“s n…

H.B. Fuller Co. told financial analysts that the slow market for new-home construction and languishing auto sales in North America are leading to lower-than-expected sales. However, the company“s new CEO is optimistic, and he told analysts 17 January 2007 that Fuller, a maker of adhesives, IG sealants and specialty chemicals, is on track. “I want to reinforce we have the right strategy”, said Michele Volpi, who succeeded Al Stroucken as CEO on 1 December 2006. “I“m optimistic as I look at the year ahead. The company increased profit in 2006 by increasing prices and withdrawing some of its less-profitable lines. Former CEO Stroucken had adopted those strategies to position the company in more-profitable specialty chemical lines and away from commodity materials. But Fuller still gets about 70% of its revenue from various glue products. “Pricing and raw materials allowed us to separate ourselves from others in profits”, Mr. Volpi told analysts in a conference call. “When we walk away from low-margin (business), the impact is immediate. It takes longer to force business into more-profitable areas”. He said that the majority of the company“s key accounts stayed with Fuller as it raised prices and that new accounts were added. The firm is looking at fiscal 2007 full-year earnings of USD 1.58 to USD 1.68 per share. Wall Street analysts are projecting USD 1.63 per share. “We are convinced we“re pursuing the appropriate long-term strategy”, Mr. Volpi said. Nevertheless, year-on-year comparable sales were down 1.5%, he said. The North American market “has created a challenging environment as of late. Sales are below plan. This is disappointing for us”. The company“s 4Q earnings, released 16 January 2007, were strengthened by the sale of Fuller“s powder coatings unit. Earnings were USD 75.7 million, or USD 1.25 per share, up from USD 23.3 million, or USD 0.40 per share, in the same period of 2005. The sale of the powder coatings division provided the company with a USD 68.9 million gain during the quarter, or USD 0.83 per share. The 4Q results also included a charge of USD 12.3 million, or USD 0.12 per share, for the separation agreement granted to Mr. Stroucken, who left to become CEO of glass-container maker Owens-Illinois Inc.. Asked about any additional planned divestitures and specifically Fuller“s auto-related segment, Mr. Volpi said the company “has always been clear that auto is non-core to our portfolio, but we have been able to manage that business very well”. Fuller makes windshield sealers and other adhesive products used on cars. On a global basis, he said, the auto division is “much better off” than it was a year ago.