Zep Inc. (ZEP), a producer of cleaning and maintenance solutions, Monday reported a decrease in earnings for the first fiscal quarter of 2012, hurt by lower sales. Earnings, however, met analysts' estimates.
Net income declined to $3.5 million or $0.16 per share from $4.9 million or $0.22 per share last year. The prior-year quarter's results included a $0.05 per share charge in connection with acquisition and restructuring activities.
On average, three analysts polled by Thomson Reuters expected the company to earn $0.16 per share in the quarter. Analysts' estimates typically exclude one-time items.
Net sales for the quarter declined 2.5 percent to $153.4 million from last year's $157.4 million.
The company noted that automotive aftermarket, food processing and industrial maintenance and repair operations end-markets saw a growth in sales. This growth however was offset by decline in sales in the other markets like government, vehicle wash and home improvement retail.
Organic sales volume declined 2.8 percent compared to last year.
John Morgan, chief executive officer of Zep Inc., said, "Whereas results in the first quarter reflect a challenging operating environment, I was encouraged to see that gross profit margins have begun to improve sequentially during the quarter as expected."
Adjusted gross profit, as a percentage of sales, declined 260 basis points to 47.5 percent from last year primarily due to inflation in cost of raw materials which offset the company's ability to increase selling prices.
Looking forward, Morgan said, "We remain confident that results in the second half of fiscal 2012 will improve as a result of better margins and the improved results from the impact of key initiatives."
Friday, Zep shares closed at $14.28 on the New York Stock Exchange.
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