Paint company DuluxGroup has edged up interim dividend by half a cent to 11.5 cents a share for the six months to March 31, but investors gave that and a small lift in earnings the thumbs down yesterday.
The paint giant reported a 28.7% jump in net profit to $63.7 million on a 1.7% rise in revenue to $851.1 million. But after stripping out last year’s restructuring costs (which were mostly taken in the first half half) underlying profit was up just 3.7%.
The shares fell nearly 3% to $6.22 as investors looked through the figures and saw little sign of strong second half growth. “Overall this has been a solid first half result. Our businesses have responded well to variable market conditions and effectively managed the anticipated ‘wash through’ of destocking in some of our retail customer channels,” Dulux CEO Patrick Houlihan said in a statement.
“Our Paints & Coatings ANZ business delivered strong profitable growth and is on track to reverse the first half impact of the exit from Mitre 10 in New Zealand by the full year. Selleys maintained sales and record earnings, notwithstanding the sales impact of destocking in Woolworths’ hardware channels, and Yates grew earnings in soft markets.
"The Lincoln Sentry and B&D Garage Doors & Openers businesses both have strong sales momentum going into the second half, and Parchem cost and margin improvement initiatives are on track to at least offset continued weakness in infrastructure markets. “We highlighted there would be challenges in this first half, and the business has stood up well and delivered sound results. DuluxGroup is well placed going into the second half for continued profit growth.
"Our overall view of the market remains largely unchanged from commentary at our December 2015 AGM. Our key market of 10 million existing homes in Australia (which represents approximately two thirds of DuluxGroup revenue) is expected to continue providing resilient, profitable growth.
“Subject to economic conditions, and excluding non-recurring items, we expect that 2016 net profit after tax will be higher than the 2015 equivalent of $124.7 million,” he said.
Earnings before interest and tax (EBIT) rose 4.5% to $98.3 million, on the prior year excluding non-recurring items. Dulux said its Paints & Coatings business in Australia and New Zealand business grew sales by 2.3% to $452.5 million and EBIT by 5.0% to $82.6 million.
"A strong performance from the Australian business, which contributes about 90% of this segment’s EBIT, was partially offset by decline in the New Zealand business.
"In Australia, revenue was up 4% and market share increased. Decline in New Zealand was due to the exit from Mitre 10 in late 2015, and is in line with guidance provided at the 2015 full year and AGM. Full year 2016 EBIT in New Zealand is expected to be flat overall on the 2015 full year,“ the company said.
The Consumer and Construction Products which comprises the Selleys and Parchem businesses in Australia and New Zealand, saw a 6.6% slide in earnings before interest and tax to $12.3 million on sales that fell by 5.2%.
"Parchem construction products continued to be challenged by weak markets, particularly in resources infrastructure. As stated at the 2015 AGM, ongoing focus on structural changes, cost reduction and margin improvement initiatives has the business positioned for a stronger second half. Selleys EBIT was in line with record first half earnings delivered in 2015, on sales that were flat due to destocking in Woolworths’ hardware channels,” the company said.
The B&D Garage Doors and Openers business grew sales by 7%, while earnings before interest and tax was flat at $5.5 million on the prior year. "The business is well positioned for improvement in the seasonally stronger second half, with good revenue momentum, lower costs, a relaunched brand and new premium products,” directors said. Contributions grew from Dulux’s Cabinet and Architectural Hardware and ’Other businesses’ segment.
“We’ve also made good progres on key strategic growth initiatives. We have invested in a wide range of organic growth projects across our businesses, supplemented by M&A activity such as the Yates acquisition of Munns lawn care. We have also achieved targeted design and construction milestones for the new paint factory in Melbourne. The new distribution centre in New South Wales is on track for opening later this year,” Dulux said.
