Acquisition, economy's rebound boost Graco

  • Article by: DEE DEPASS , Star Tribune
  • Updated: January 28, 2013 - 9:57 PM

Gema Powder Finishing business added $32M in sales.

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Graco assembler Bee Yang worked on a diaphragm pump at the Minneapolis plant earlier this month. Global sales were up 18 percent for the quarter.

Photo: David Joles, Star Tribune

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Graco Inc. cranked out a solid fourth quarter, thanks to a recent acquisition plus an increase in orders from the recovering construction and auto sectors, the company reported Monday.

In April, Graco bought a division of Illinois Tool Works Inc., which vastly expanded its auto paint equipment unit. Illinois Tool's Gema Powder Finishing business added $32 million to Graco's sales for the quarter.

"Performance for Graco was strong, despite ongoing weakness in Europe and Asia," CEO Patrick McHale said in a statement. "Outstanding factory-level execution and the acquisition of the Gema Powder Finishing business contributed significantly to our increased earnings in the fourth quarter."

Minneapolis-based Graco, which makes industrial paint sprayers, pumps and insulation applicators, said global company sales rose nearly 18 percent to hit a record $254 million. Quarterly profit jumped an impressive 39 percent to $42 million, or 68 cents a share, 8 cents better than analysts expected on average.

Results pleased officials, who noted they now expect "growth in every region of the world in 2013." They declined to issue more specific guidance.

While the margins on Gema's powder-paint equipment sales were somewhat lower than other equipment, officials said volume made up for it. The Gema acquisition not only boosted U.S. gains but significantly inflated what would have been lackluster sales in Europe.

Beyond Gema, Graco's equipment sales to contractors rose 13 percent for the quarter, thanks to an uptick in U.S. orders. The company's smallest division, lubrication equipment, saw sales fall 3 percent during the quarter.

Geographically, Graco was particularly strong in the Americas and Europe. Sales fell slightly in Asia.

Graco is still looking for a buyer for the liquid-finishing business it bought in April as part of a division acquisition from Illinois Tools. The U.S. Federal Trade Commission required the liquid-finishing unit to be spun off and sold because of concerns about whether it would reduce competition. Results from that unit were not included in Graco's quarterly results.

Dee DePass • 612-673-7725

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