H.B. Fuller Q2 Profit Drops - Update

(RTTNews) - Paint and adhesive maker H.B. Fuller Co. (FUL), Wednesday reported a drop in profit for the second quarter, as lower gross margins offset a 5 percent growth in revenues. Earnings for the quarter came in line with analysts' expectations, but revenues fell short.

St. Paul, Minnesota-based HB Fuller's second-quarter profit dropped to $20.5 million or $0.40 per share from $25.9 million or $0.51 per share last year.

Nonetheless, adjusted earnings for the quarter rose to $0.78 per share from last year's $0.67 per share. On average, seven analysts polled by Thomson Reuters expected earnings of $0.78 per share for the quarter. Analysts' estimates typically exclude special items.

H.B. Fuller's revenues grew 4.8 percent to $544.03 million from $519.02 million a year ago. Analysts estimated revenues of $545.18 million for the quarter.

Organic revenue grew by 4.5 percent year-over-year.

Higher volume and foreign currency translation positively impacted revenue growth by 4.8 and 0.3 percentage points. Lower average selling prices negatively impacted revenue growth by 0.3 percentage points.

Gross margin, or percentage of revenues left after subtracting production costs, dropped 200 basis points to 26.2 percent, due largely to excess costs related to business integration project in Europe and North America, a temporary spike in raw material costs and margin compression on certain products.

Looking forward to full year 2014, the company lowered its earnings guidance to a range of $2.80 to $2.95 per share, from its prior outlook of $3.00 to $3.15 per share. Analysts currently expect earnings of $3.07 per share for 2014.

Separately, HB Fuller said it has agreed to buy 95 percent equity of Tonsan Adhesive Inc. for 1.4 billion yuan or about $230 million in cash. The deal is expected to close in the fourth quarter of this year.

China-based Tonsan offers silicone, epoxy, anaerobic and cyanoacrylate technologies that will facilitate H.B. Fuller's global entry into this important segment. Tonsan's current annual revenue is about $100 million.

FUL closed Wednesday's trading at $50.25, up $0.16 or 0.32%, on the NYSE. The stock, however, dropped $0.86 or 1.71% in after-hours trade.