H.B. Fuller Reports Third-Quarter 2010 Results
ST. PAUL, MN - H.B. Fuller Co. has reported financial results for the third quarter that ended August 28, 2010.
Net income for the third quarter of 2010 was $19.0 million, or $0.38 per diluted share, versus $35.4 million, or $0.72 per diluted share, in last year's third quarter. Net income for the third quarter of 2009 included a significant one-time gain related to the settlement of a lawsuit. Excluding this settlement, net income in last year's third quarter was $0.482 per diluted share.
Net revenue for the third quarter of 2010 was $338.6 million, up 7.4 percent versus the third quarter of 2009. Higher volume, higher average selling prices and acquisitions positively impacted net revenue growth by 6.4, 2.5 and 1.6 percentage points, respectively. Unfavorable foreign currency translation reduced net revenue growth by 3.1 percentage points. Organic sales grew by 8.9 percent year-over-year.
"We faced many challenges in the third quarter, most notably rising raw material costs and raw material shortages, and achieved mixed results. While we were successful in sourcing sufficient material to satisfy customer orders, our material costs escalated more than our prices, and profit margins did not meet our expectations. Additionally, in the North America region, end-market demand contracted significantly at the beginning of the quarter, and consequently, we did not achieve our volume expectations in the region. Amidst these challenges, we successfully maintained the overall growth momentum that is a key component of our strategic transformation," said Michele Volpi, H.B. Fuller President and Chief Executive Officer. "While we are disappointed in our bottom-line performance this quarter, we believe that we have put in place the actions necessary to improve financial performance in the fourth quarter and beyond."
In North America, net revenue grew by 5.2 percent year-over-year with Adhesives up 6.2 percent and Construction Products up 1.9 percent. Nearly all of the growth for the segment was organic. After recording stronger volume growth in the previous quarter, sales momentum slowed significantly, especially in Construction Products, at the start of the third quarter but improved somewhat at the end of the quarter.
In EIMEA (Europe, India, Middle East, Africa), net revenue was up 3.4 percent year-over-year and 15.6 percent on an organic basis. The region posted strong growth across all geographies and market segments, benefiting from improved end-market conditions and significant new business wins with key customers. In Latin America, net revenue grew by 8.2 percent year-over-year with Adhesives up 13.1 percent and Paints up 2.2 percent. Adhesives continued to gain business with new and existing customers, while Paints returned to positive organic growth for the first time since the end of 2008. In Asia Pacific, economic activity remains strong. Net revenue grew by 27.2 percent versus last year's third quarter, and organic growth was 7.6 percent. "As we move into the fourth quarter, we are able to provide more specific guidance for the remainder of the fiscal year. We now expect net revenue for the full year to be up approximately 10 percent from last year, with fourth-quarter net revenue between $360 million and $365 million. We expect financial performance to improve in the fourth quarter relative to the third quarter, and we will continue to press forward to achieve our long-term objectives for profitable growth," said Volpi.
Net income for the third quarter of 2010 was $19.0 million, or $0.38 per diluted share, versus $35.4 million, or $0.72 per diluted share, in last year's third quarter. Net income for the third quarter of 2009 included a significant one-time gain related to the settlement of a lawsuit. Excluding this settlement, net income in last year's third quarter was $0.482 per diluted share.
Net revenue for the third quarter of 2010 was $338.6 million, up 7.4 percent versus the third quarter of 2009. Higher volume, higher average selling prices and acquisitions positively impacted net revenue growth by 6.4, 2.5 and 1.6 percentage points, respectively. Unfavorable foreign currency translation reduced net revenue growth by 3.1 percentage points. Organic sales grew by 8.9 percent year-over-year.
"We faced many challenges in the third quarter, most notably rising raw material costs and raw material shortages, and achieved mixed results. While we were successful in sourcing sufficient material to satisfy customer orders, our material costs escalated more than our prices, and profit margins did not meet our expectations. Additionally, in the North America region, end-market demand contracted significantly at the beginning of the quarter, and consequently, we did not achieve our volume expectations in the region. Amidst these challenges, we successfully maintained the overall growth momentum that is a key component of our strategic transformation," said Michele Volpi, H.B. Fuller President and Chief Executive Officer. "While we are disappointed in our bottom-line performance this quarter, we believe that we have put in place the actions necessary to improve financial performance in the fourth quarter and beyond."
In North America, net revenue grew by 5.2 percent year-over-year with Adhesives up 6.2 percent and Construction Products up 1.9 percent. Nearly all of the growth for the segment was organic. After recording stronger volume growth in the previous quarter, sales momentum slowed significantly, especially in Construction Products, at the start of the third quarter but improved somewhat at the end of the quarter.
In EIMEA (Europe, India, Middle East, Africa), net revenue was up 3.4 percent year-over-year and 15.6 percent on an organic basis. The region posted strong growth across all geographies and market segments, benefiting from improved end-market conditions and significant new business wins with key customers. In Latin America, net revenue grew by 8.2 percent year-over-year with Adhesives up 13.1 percent and Paints up 2.2 percent. Adhesives continued to gain business with new and existing customers, while Paints returned to positive organic growth for the first time since the end of 2008. In Asia Pacific, economic activity remains strong. Net revenue grew by 27.2 percent versus last year's third quarter, and organic growth was 7.6 percent. "As we move into the fourth quarter, we are able to provide more specific guidance for the remainder of the fiscal year. We now expect net revenue for the full year to be up approximately 10 percent from last year, with fourth-quarter net revenue between $360 million and $365 million. We expect financial performance to improve in the fourth quarter relative to the third quarter, and we will continue to press forward to achieve our long-term objectives for profitable growth," said Volpi.
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