DuluxGroup, last year’s spin off from Orica, was another of the handful of big companies to go against the overall market weakness yesterday.
In Dulux’s case it was the interim profit report and its forecast of a full-year profit of more than $71.5 million, or double first-half profit that did the trick.
(The $71.5 million comparison figure is the fiscal 2010 pro forma net profit before one-off demerger costs.)
The shares rose 4c to $2.77, a gain of more than 1%.
“In the second half we see opportunities to outperform in modestly growing Australian markets, though the New Zealand market remains challenging," CEO Patrick Houlihan said in the statement.
"We do anticipate increased pressure on input costs during the second half, with titanium dioxide and oil-based inputs being key drivers.
“We are well placed strategically and we continue to see good opportunities to grow profitable market share in our core markets by building on our market-leading positions.
We are also seeking logical, close to- the-core, bolt-on acquisitions and we continue to target medium to long term growth in higher growth Asian markets,” said Mr Houlihan.
Net profit rose to $48.74 million for the six months to March 31 from $23.65 million a year earlier, Dulux said in the statement to the ASX.
And after tax profit excluding a one-off tax consolidation adjustment of $9.4 million was $39.3 million.
Revenue increased 59% to $491.2 million, but on a pro-forma basis revenue increased 0.2% and earnings before interest and tax before standalone costs were up 10.5% to $71.8 million.
The interim dividend will be a fully franked 7.5c per share.
Mr Houlihan said the result reinforced the company’s strategic direction, given the challenges presented by natural disasters and subdued conditions in some markets.
"We have continued to invest in our premium brands and capabilities to ensure that we are well positioned for ongoing growth," he said.
"This is reflected in the fact that a number of our businesses have strengthened their strategic leadership positions, benefiting from share growth and favourable range review outcomes from major retail customers during the first half."
The floods that devastated parts of Queensland in January caused the temporary shutdown of Dulux’s main Australian paint factory at Rocklea.
The estimated sales loss as a result of the Rocklea closure would be about 3%, and there would be a modest impact on sales in the second half.
"The estimated sales lost in the half as a result of the loss of production at Rocklea following the Queensland floods is in the order of 3%, mainly impacting the Paints Australia business segment.
"However, from an EBIT perspective, taking into account the adverse profit impact from lost sales and flood related costs and the positive impact from insurance income as well as some deferred operating costs, it is estimated that the net first half impact on the group is not material," the company said yesterday.
The reinstatement of production at Rocklea was progressing to plan, with water-based paint production at pre-flood levels and solvent-based paint production due to recommence in late June or early July.
"The Australian Paints business delivered earnings of $51.4 million, up 4.9% on the prior period," the company said.
"This reflected continued momentum in the trade and texture coatings businesses.
"Sales were slightly down for the half as a result of the flood-driven supply disruption at Rocklea.
"This mostly affected the retail business and, to a lesser extent, the trade and protective coatings businesses.
"The retail market recovered from a weak weather-affected October and November with subsequent months showing good consumer demand.
"Earnings in the New Zealand Paints business were up 11.4% to $7.8 million with sales revenue boosted by increased production to supply shortfalls in Australia as a result of the flooding at Rocklea.
"On a constant currency basis and excluding the Paints Australia support sales, New Zealand domestic EBIT was down 9% on the previous year, reflecting soft market conditions and input cost pressures.
"The New Zealand architectural and decorative paint market business is estimated to have declined by approximately 5% during the first half due to low consumer confidence in the face of increasing costs of living. This is expected to continue during the second half.
"The Selleys Yates business delivered earnings of $12.9 million, up 16.2%. Selleys grew sales revenue, reflecting market share gains, new product launches and positive outcomes from range reviews by major retail customers in Australia.
"The Yates business benefited from improved conditions in the Australian garden care market, driven by the easing of water restrictions, ongoing productivity gains and the absence of the Spring stock overhang which adversely impacted the prior year result.
"DuluxGroup’s Offshore and Other business segment – comprising Dulux Powder and Industrial Coatings Australia and New Zealand, Dulux Papua New Guinea (PNG), and the South East Asian and China businesses (known as DGL International) – achieved earnings of $3.1 million, down 18.4% on the prior year."
