DuluxGroup shrugged off the impact of floods, a sluggish building industry and weak retailing to report a solid 13% rise in underlying net profit for the September 30 year to $77.6 million.
The result excludes a one-off tax consolidation adjustment of $12.5 million and a $3.1 million benefit from insurance income related to the flooding of DuluxGroup’s Brisbane manufacturing plant earlier this year, which boosted net profit 52% to $93.24 million.
The one-off items clearly had nothing to do with the day to day operations of the group as the 9.1% rise in earnings before interest and tax (EBIT) to $134.7 million shows.
The group found the going tough, especially from January onwards when the floods shut its big Rocklea paint plant for several weeks, forcing it to re-jig supply lines and stocks.
Sales revenue was up 3.4% at $996.4 million, but the company estimated the Brisbane floods cost it around 2% in sales.
A final dividend of 7.5ca share (3c a share in 2010, when the company was spun off from Orica Ltd) was struck, taking the full year dividend to 15.0c a share, or a 70% payout ratio on net profit before one-off items.
DuluxGroup shares were up more than 7% at $2.89, a rise on 19c, but they retreated in the afternoon to finish up 9c, or 3.4% at $2.78.
DuluxGroup Managing Director and CEO Patrick Houlihan said in the statement yesterday that the "result was particularly pleasing, given mixed market conditions, rising input costs and the added challenge of the company’s main Australian paint factory being completely shutdown for two months and not fully operational for six months due to damage from the Queensland flood".
"To deliver an 8.5% increase in profits, despite some significant headwinds this year, reflects the resilience of our strategy," said Mr Houlihan.
"We have continued to invest in DuluxGroup’s premium branded products and services that are targeted at the home renovations and improvement segment, rather than more cyclical new housing.
"During the year we saw increased investment by our retail customers in the home improvement segment, catering to demand associated with high levels of home ownership in our core markets. We support our brand investment with a strong focus on customer service and industry leading supply chain performance, and it has proved an enduring formula for earnings growth.
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“Overall, this year’s result was reinforced by sound financial discipline which saw resilience in earnings margins, despite rising input costs.
"Trade working capital was also effectively managed, despite the need to build higher than normal stock levels to recover from the Queensland flood impact."
The company said its biggest business, the Australian Paints division, "achieved a record result with sales up 4.3% and underlying earnings up 11.4% to $102.4 million.
"Sales growth was achieved despite flood related lost sales. This is estimated at 3% in lost sales for Paints Australia, which equates to 2% of overall DuluxGroup sales.
“To deliver such strong earnings growth, given the impact of the floods, is particularly pleasing and reflects effective risk mitigation and disaster recovery. Importantly, we have not lost any market share, and both our retail and trade businesses finished the year with strong momentum.
"This could not have been achieved without the strong support of our retail and trade customers and we thank them for that,” said Mr Houlihan in the statement.
Subject to the state of the economy, DuluxGroup expects underlying net profit to be higher in fiscal 2012.
Mr Houlihan said the company would focus on building its capabilities to grow its market position in Australia and New Zealand.
"We will seek growth, both organically and through bolt-on acquisitions, in adjacent product categories in these core markets.
"We will also look to build upon our strengthened platform in targeted segments of high-growth markets in Asia, in a measured way, for the longer term.
"Subject to economic conditions, we expect 2012 DuluxGroup underlying net profit after tax to be higher than that reported in 2011 ($77.6 million)," he said.
