ST. PAUL, MN - H.B. Fuller Co. has reported financial results for the first quarter that ended Feb. 28, 2009.
Net income for the first quarter of 2009 was $6.1 million, or $0.13 per diluted share, versus $18.2 million, or $0.32 per diluted share, in last year’s first quarter. The 2009 first quarter results included a non-cash “true-up” for the estimated goodwill impairment charge taken in the fourth quarter of 2008 associated with the Specialty Construction Brands business component. On a pre-tax basis, this non-cash charge totaled $0.8 million in the first quarter. On an after-tax basis, the 2009 first quarter impairment charge was $0.5 million, or $0.01 per diluted share. Excluding this non-cash impairment charge, the adjusted first quarter 2009 net income was $6.6 million, or $0.14 per diluted share.
Net revenue for the first quarter of 2009 was $278.6 million, down 13.7 percent versus the first quarter of 2008. Higher average selling prices and a 2008 acquisition in Egypt positively impacted net revenue growth by 5.7 and 0.4 percentage points, respectively. Lower volume and unfavorable foreign currency translation adversely impacted net revenue growth by 14.7 and 5.1 percentage points, respectively. The year-over-year decline in first quarter 2009 net income per share was primarily the result of the sharp contraction in global demand associated with the financial market disruption in late 2008. In addition, gross margin was lower in the first quarter of 2009 reflecting the residual negative impact of raw material cost increases that accelerated through 2008. SG&A expenses were 4 percent lower in the first quarter of 2009 relative to the prior year.
On a sequential basis, raw material costs declined and pricing held steady, leading to a 200 basis point recovery in gross margin. However, volume declined significantly versus the fourth quarter, driven primarily by the current economic conditions, and to a lesser extent by seasonality. SG&A expenses were $62.6 million in the first quarter, about 1 percent lower than the fourth quarter of 2008, reflecting the company’s continued focus on expense management. Overall, the volume deterioration outweighed the benefit from a higher gross margin, resulting in lower net income from the prior quarter.
“All factors considered, we had a respectable first quarter of 2009. While volume was down 15 percent from last year, this result was expected given the difficult end market conditions. On the positive side, raw material costs are coming down, partially restoring our gross margin to an appropriate level. Also, we managed SG&A expenses carefully while at the same time investing in key strategic initiatives – for example, an enhanced, revitalized organization has improved our customer focus and has already brought results with new business landed,” said Michele Volpi, H.B. Fuller President and Chief Executive Officer. “From a seasonal perspective the first quarter, which runs from December through February, is always the most difficult. This year’s first quarter was especially challenging as many of our customers reduced inventory, protracted their year-end shutdowns and initiated short-time work weeks. We are pleased that we managed through this challenging period while at the same time partially restoring gross profit margins and investing according to our strategic plan.”
“We have not issued earnings per share guidance for 2009. However, with one quarter behind us we are able to provide a broad indication of how we see the remainder of this year progressing. We are encouraged by our initial efforts in reducing raw material costs and maintaining pricing discipline and believe this combination should lead to a slightly higher gross margin in the second quarter compared to the first quarter,” commented Volpi. “Regarding revenue development, we expect the challenging end-market conditions to continue for quite some time, but we do anticipate a slight improvement in the second half of the year. As a result, we are planning for net revenue to be down about 10 to 12 percent for the full year 2009 compared to last year.”
