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Valspar in Supply Deal with Maersk

Zacks Equity Research

The Valspar Corporation (VAL) and Maersk Container Industry, a business unit of the Maersk Group, have entered into a long-term supply agreement. Valspar will provide its Aquaguard waterborne coating for shipping containers produced by Maersk Container Industry’s (MCI) operations in Dongguan, China.

Valspar Aquaguard is a 100% waterborne coating system which offers better corrosion protection than solvent-based, zinc-rich systems, and creates much smaller carbon footprint in terms of either emissions or energy required.

With the agreement in place, manufacturing of a large share of dry goods containers will shift from solvent borne coatings to Valspar Aquaguard waterborne coating. MCI plans to commence production with Valspar Aquaguard in 2014 and aims at switching to waterborne coatings completely.

MCI remains optimistic about working with Valspar and believes that it will build more sustainable containers and help customers become more eco-friendly using Valspar’s waterborne coating system. Valspar, on the other hand, stays committed to offering its over 60 years of waterborne coatings expertise as a cost-effective, sustainable solution.

Valspar released its fourth-quarter fiscal 2013 (ended Oct 25, 2013) results recently. The company exceeded earnings expectations, but hefty restructuring costs dented its bottom line in the quarter. Valspar raked in earnings, barring restructuring and acquisition charges, of 97 cents per share for the quarter, beating the Zacks Consensus Estimate by 6 cents and surpassing the year-ago quarter earnings of 86 cents.

Profit, as reported, fell 14% year over year to $63.5 million or 72 cents a share from $73.8 million or 79 cents a year ago, hurt by charges.

Revenues went up 8% year over year to $1,108 million in the reported quarter with gains from Paints and Coatings divisions. It beat the Zacks Consensus Estimate of $1,084 million. Sales were driven by strength in the U.S. consumer paint, coil and wood product lines, aided by the Inver acquisition.

Valspar, which is among the leading paints companies along with Akzo Nobel NV (AKZOY), PPG Industries Inc (PPG) and The Sherwin-Williams Company (SHW), expects accelerated revenues and earnings gains in fiscal 2014 through new business wins, contributions of acquisitions, a stable domestic market and efforts to improve productivity.  

Valspar currently holds a Zacks Rank #3 (Hold).

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