HOUSTON (ICIS) – Shares of HB Fuller rose more than 9% on Thursday, as the U.S. adhesive producer expected its price increases to outpace inflation, allowing it to increase margins and d ” increase profits at double-digit rates in 2022.
The jump in company shares followed the exit
of HB Fuller’s third quarter results Wednesday after the market closed. Third quarter gross profit increased, although net profit declined due to a large increase in tax charges.
The company announced a 5% increase in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
HB Fuller reduced his 2021 Adjusted EBITDA forecast to $ 460-470 million, from $ 455 million to $ 475 million. The forecast represents an increase of 13-16% compared to fiscal 2020.
It expects its raw material costs to increase by 15% in 2021.
HB Fuller’s performance follow-up of warnings on results producers of paints and coatings Sherwin-Williams, PPG and Axalta Coating Systems. They cited, among other things, the higher costs of raw materials.
Although HB Fuller is also downstream in basic petrochemicals, its raw materials differ from paint producers.
As a producer of adhesives, HB Fuller’s raw materials include tackifying resins, polymers, synthetic rubber, plasticizers and vinyl acetate monomer (VAM).
MAINTAINING INFLATION
In an earnings conference call Thursday, CEO Jim Owens highlighted the steps HB Fuller is taking to deal with rapid inflation and supply chain disruptions.
August 30, the company announced its intention to impose an 11% surtax on all of its products worldwide.
This action and others are expected to generate more than $ 400 million in pricing revenue on an annualized basis, Owens said.
After declining in the third quarter, gross margins are expected to rise sharply in the fourth quarter, Owens said. He also expects an increase in EBITDA. The increases are expected to continue in 2022.
The company’s cash flow is sufficient to allow it to repay its debt while expansion capacity, he said. HB Fuller may acquire more businesses, although Owens has said they will not be significant deals.
Owens sees the focus on sustainability as an opportunity for the business and one of the reasons sales volumes are expected to continue to grow.
During the third quarter, HB Fuller won projects in solar panels, electric vehicles (EVs), sustainable food packaging and consumer electronics.
Earlier this year, HB Fuller and Covestro
announced a partnership develop adhesives with a better climate profile for use in woodworking, composites, textiles and automobiles.
The thumbnail image shows the wood adhesive. Image by Shutterstock