H.B. Fuller Company has reported financial results for the second quarter ended 28 May 2011.
net revenue increased 13% year-over-year;
gross profit margin improved 10 basis p…
H.B. Fuller Company has reported financial results for the second quarter ended 28 May 2011. Highlights included: net revenue increased 13% year-over-year; gross profit margin improved 10 basis points sequentially despite persistent raw material price inflation; selling, general, and administrative (SG&A) expense reduced to 19.7 as a per cent of net revenue, the lowest level since 2008; completed the acquisition of the Liquamelt adhesive business, which provides another advanced technology platform to address customer needs. Net income for the second quarter of 2011 was USD 25.1 million, or USD 0.50 per diluted share, versus USD 11.0 million, or USD 0.22 per diluted share, in last year“s second quarter. Net income for the second quarter of 2010 included exit costs and non-cash impairment charges associated with the exit of the company“s polysulfide insulating glass sealant product line in Europe totalling USD 8.4 million after-tax. After adjusting for these charges, second quarter 2010 net income was USD 19.5 million, or USD 0.39(1) per diluted share. Diluted earnings per share in the second quarter of 2011 increased 28% compared to the adjusted results of the prior year. Net revenue for the second quarter of 2011 was USD 393.7 million, up 13.2% versus the second quarter of 2010. Higher average selling prices, higher volume, favourable foreign currency translation and acquisitions positively impacted net revenue growth by 8.2, 0.3, 3.0 and 1.7 percentage points, respectively. Organic revenue grew by 8.5% year-over-year. On a sequential basis, net revenue increased approximately 16% relative to the first quarter of 2011, driven by normal seasonal patterns and incremental price increases. Gross profit margin was down 50 basis points versus the second quarter of 2010, due to the cumulative effect of escalating raw material costs over the past year. Gross profit margin improved by 10 basis points versus the previous quarter as a combination of price increases and product reformulation more than offset raw material cost inflation. Relative to the prior year, SG&A expense was higher by 3.1%, but down 190 basis points as a percentage of net revenue. At the end of the second quarter of 2011, the company had cash totalling USD 138 million and total debt of USD 240 million. This compares to first quarter levels of USD 122 million and USD 239 million, respectively. Sequentially, net debt was down approximately USD 15 million. Cash flow from operations was USD 32 million in the second quarter. Capital expenditures for the second quarter were USD 7.9 million. Net income for the first half of 2011 was USD 39.5 million, or USD 0.79 per diluted share, versus USD 30.0 million, or USD 0.60 per diluted share, in the first half of last year. Net income for the first half of 2010 included after-tax exit costs and non-cash impairment charges associated with the exiting of the company“s polysulfide insulating glass sealant product line in Europe. After adjusting for these charges, first half 2010 net income was USD 38.4 million, or USD 0.77 per diluted share. Net revenue for the first half of 2011 was USD 733.3 million, up 11.5% versus the first half of 2010. Higher average selling prices, higher volume, favourable foreign currency translation and acquisitions positively impacted net revenue growth by 7.8, 0.9, 1.1 and 1.7 percentage points, respectively. Organic sales increased by 8.7% year-over-year in the first half of 2011. Our performance this quarter demonstrates our ability to execute with rigor and speed, said Jim Owens, H. B. Fuller president and chief executive officer. In the face of continued raw material inflation, we performed well against our three key objectives for this year -net revenue grew by double digits both year-over-year and sequentially, gross margin expanded sequentially and SG&A reached its lowest percentage of net revenue since 2008. We are certainly pleased with these results and, although economic improvement remains uncertain, we believe the momentum we have built points to a better year than we originally planned, and we are increasing our EPS guidance by USD 0.10. The following highlights the company“s expectations for several key metrics in its 2011 financial outlook: net revenue 13% to 15% higher in 2011 relative to 2010, up from previous guidance of 10% to 12%; earnings per diluted share of between USD 1.85 and USD 1.95, up from previous guidance of between USD 1.75 and USD 1.85; capital expenditures approximately USD 40 million; the company“s effective tax rate, excluding discrete items, is expected to be 31%, down from previous guidance of 32%. For nearly 125 years, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives, sealants and other speciality chemical products. With fiscal 2010 net revenue of USD 1.36 billion, H.B. Fuller serves customers in packaging, hygiene, paper converting, general assembly, woodworking, construction, and consumer businesses.