Valspar Corp. (VAL) revealed a 38% improvement in profit to $65 million or 61 cents per share for the fiscal third quarter. The world’s sixth largest paint and coatings manufacturer also topped the Zacks Consensus Estimate of 53 cents per share. Net income in the corresponding quarter a year ago was $47 million or 44 cents per share.
 
Valspar believes its restructuring actions, which improved the efficiency of operations, were the driving factors behind the earnings growth.
 
However, sales during quarter scaled down 17% to $794.6 million on a year over year basis. Valspar seems to be continuously affected by the slowdown in the industrial and architectural coatings markets, which is a result of the housing slump.
 
Valspar anticipates the difficult sales environment to continue through 2009, particularly in the coil, general industrial and wood product lines, which account for about 40% of its revenues. In the remaining 60% of its revenues, the company expects a slight improvement as customers complete their inventory adjustments, resulting in new business flow.
 
Customer concentration is another concern for Valspar. The company’s top 10 customers account for nearly 35% of sales. The five largest customers in the paints segment account for nearly 66% of sales.
 
Nevertheless, fueled by the strong earnings performance in the quarter, Valspar raised its adjusted net income per share estimate for fiscal 2009 to the range of $1.67 to $1.72 from the previously stated $1.55 to $1.65.
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