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HB Fuller Q3 Earnings, Revenue Miss Estimate

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Adhesives and specialty chemicals maker HB Fuller Co. (FUL) said Monday after the markets closed that its third quarter profit fell 46% from last year, when results were boosted by a significant one-time gain related to the settlement of a lawsuit. The company's quarterly earnings per share also came in below analysts' expectations as did its quarterly revenue. At the same time, the company revised down its fiscal year 2010 revenue outlook.

The St. Paul, Minnesota-based company reported net income for the third quarter of $19.0 million or $0.38 per share, compared to $35.4 million or $0.72 per share for the year-ago quarter.

The year-ago quarter results included an after-tax gain related to the settlement of a lawsuit filed against the former owners of the Roanoke Companies Group of $11.8 million or $0.24 per share. Excluding the gain, adjusted net income for the year-ago quarter would have been $23.7 million or $0.48 per share.

On average, 7 analysts polled by Thomson Reuters expected the company to earn $0.44 per share for the third quarter. Analysts' estimates typically exclude special items.

Gross margin for the quarter fell to 28.4% from 31.8% a year earlier.

Net revenue for the third quarter rose 7.4% to $338.57 million from $315.33 million in the same quarter last year, as increased volume, higher average selling prices and acquisitions offset unfavorable foreign currency translation. Four analysts had a consensus revenue estimate of $348.50 million for the third quarter.

Michele Volpi, H.B. Fuller president and chief executive officer, said, "We faced many challenges in the third quarter -- most notably rising raw material costs and raw material shortages -- and achieved mixed results. While we were successful in sourcing sufficient material to satisfy customer orders, our material costs escalated more than our prices and profit margins did not meet our expectations."

Additionally, Volpi said end-market demand contracted significantly in the company's North America region at the beginning of the quarter. As a results, the company did not achieve its volume expectations in the region.

For the third quarter, the company's North America revenue grew by 5.2% year-over-year to $146.6 million, with adhesives up 6.2% and construction products up 1.9%.

In Europe, India, Middle East, Africa, revenue increased 3.4% to $97.3 million, with strong growth across all geographies and market segments.

Latin America revenue rose 8.2% to $53.7 million, with adhesives up 13.1% and paints up 2.2%. Asia Pacific revenue surged 27.2% to $41.0 million, boosted mainly by the company's recent acquisition of Revertex Finewaters in Malaysia.

Looking forward, the company said it now expects fiscal 2010 net revenue to be $1.356 billion to $1.361 billion, an increase of about 10% from fiscal 2009. Previously, the company expected fiscal 2010 net revenue to grow between 10% and 12%. Analysts currently expect the company to post revenue of $1.37 billion for the fiscal year 2010.

The company said it expects fourth quarter revenue of $360 million to $365 million. Analysts currently expect the company to post revenue of $362.04 million for the fourth quarter.

"We expect financial performance to improve in the fourth quarter relative to the third quarter and we will continue to press forward to achieve our long term objectives for profitable growth," said Volpi.

HB Fuller shares, which have traded in a range of $18.47 to $24.66 over the past year, closed Monday's regular trading session at $21.00, up 50 cents or 2.44%, but lost $1.50 or 7.14% in after hours trading.

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