Paints and adhesives supplier DuluxGroup says its recent acquisition of small UK-based paints business Craig & Rose gives it a foothold in the UK and could open the way for expansion into Europe.
Managing director Patrick Houlihan says Craig & Rose is very small, with annual sales of under $10 million.
But it provides Dulux with manufacturing capacity, chemists, research and development capability and, most importantly, paint formulas that are European-compliant.
“It’s sort of a beach-head and a foothold,” Mr Houlihan said on Tuesday.
“It gives us infrastructure now to launch our Selleys (adhesives and sealants) products into the UK and possibly into Europe.
“And, it lets us contemplate things like taking our Porter’s range of products (Porter’s Paints), which we acquired in Australia last year, potentially into the UK and Europe as well.”
Dulux announced the acquisition of Craig & Rose, the oldest independent paint company in the UK, in August.
Dulux on Tuesday reported a 15.6 per cent lift in annual profit to $130.4 million.
Excluding one-off items from the 2015 financial year, profit for the 12 months to September 30 rose 4.6 per cent.
The company expects demand for home renovations to keep driving profit growth.
Home renovations account for about 65 per cent of DuluxGroup’s revenue.
In Australia, Dulux’s primary market is about 10 million existing homes, of which more than 70 per cent are over 20 years old.
Mr Houlihan said approvals in the new housing market – new housing generates about 15 per cent of group revenue – had peaked, but because of the lag between approvals and completions, demand for paints, adhesives and other home care products is expected to remain strong.
Subject to economic conditions and excluding non-recurring items, Dulux expects net profit in 2017 to be higher that 2016’s.
Mr Houlihan said the company does not expect any material impact in 2017 from the closure of the Masters “big box” hardware stores.
He said that in fiscal 2016, underlying earnings had been solid despite some short-term market headwinds.
Those headwinds included the closure of the Masters and the exit of Dulux brands from Mitre 10 in New Zealand; a fall in demand from the Australian engineering construction market; and economic weakness in Papua New Guinea.
The Dulux, Selleys and Yates businesses, which generate two-thirds of Dulux’s revenue, grew earnings by 6.2 per cent.
But earnings from the group’s garage doors and openers business fell by 5.8 per cent, reflecting one-off costs and market weakness in the second half.
Shares in DuluxGroup were six cents lower at $6.28 at 1208 AEDT.
DULUXGROUP SAYS PROFIT SOLID DESPITE HEADWINDS
* Annual net profit up 15.6pct to $130.4m
* Revenue up 1.7pct to $1.72bn