Lackluster international demand for Valspar Corp.’s paints, stains and industrial coatings gave way to a disappointing fiscal first quarter and forced officials to revise their forecast for the year.
“As the quarter played out, our new business targets were achieved, but market weakness in China, Australia, and parts of Europe was worse than we expected and as a result we missed our revenue target,” CEO Gary Hendrickson told analysts during a conference call early Tuesday.
China paint sales were thwarted as cautious distributors wrestled with a slowing economy. Meanwhile, Valspar continues to revamp its struggling retail operation in Australia, which has suffered from a home construction slump.
Chief Financial Officer Lori Walker also said Valspar’s coatings division experienced weakness in its general industrial product line as customers used up existing inventories and weathered a weak shipping container market. The company’s can coating and general packaging business also saw weaker demand.
Valspar’s stock fell $4.99 to close at $61.94 a share Tuesday.
Noting that “weak demand in certain international markets is expected to continue,” Hendrickson lowered the company’s forecast for full year 2013 to $3.60 to $3.80 a share. The prior forecast called for earnings of $3.65 to $3.85 a share.
Net income for the quarter slipped 1.5 percent to $55 million, or 60 cents a share, down from 62 cents a year earlier.
On average, analysts expected about 67 cents a share and $922 million in revenue for the quarter. Despite an influx of new coatings business and “strong results” across North America, first-quarter sales only reached $875.2 million, down from $886 million.