H. B. Fuller Co. (FUL) Wednesday reported an increase in first-quarter profit, driven mainly by a double-digit revenue growth and strong gross margins. Both earnings and revenues for the quarter came in ahead of analysts' expectations.
H. B. Fuller's revenue growth was driven mainly by higher average selling prices and volumes, but was partially offset by foreign currency translation. The specialty chemical products maker registered revenue growth in all geographic regions, especially in North America and Asia Pacific, where revenues grew 11.5 and 10.7 percent, respectively.
H.B. Fuller, which mainly focuses on adhesives, sealants, and paints, said net revenues for the first quarter grew 10.5 percent to $375.3 million, above analysts' estimate of $360.25 million.
Gross margin, the percentage of sales after deducting costs of sales, advanced 190 basis points to 30.4 percent as a result of pricing actions over the past year. Selling, general and administrative expenses, as a percent of sales, dropped 10 basis points.
St. Paul, Minnesota-based H. B. Fuller's first quarter net income improved to $15.3 million or $0.30 per share from $14.4 million or $0.29 per share last year. After adjusting for the special charges, earnings for the quarter was $0.44 per share. Analysts polled by Thomson Reuters expected earnings of $0.37 per share for the quarter. Analysts' estimates typically exclude special items.
H.B. Fuller said that on March 5 it completed the previously announced $394 million acquisition of Forbo Group's global industrial adhesives business. The acquisition was completed after the close of first quarter, and will be reported in the second quarter results.
Chief Executive Jim Owens had said, "The acquired Forbo business will fortify our presence in Europe...increase our business in China by about 50 percent, and broadly strengthen our capability in our core markets. In addition, we will enhance our leadership position in North America, gain proprietary technology and become one of a handful of manufacturers capable of producing VAE emulsions."
Looking forward to fiscal year 2012, the company reaffirmed its earnings guidance range of $2.05 to $2.15 per share. Analysts currently estimate earnings of $2.11 per share for the full year.
"We believe our initial synergy estimate (Forbo global industrial adhesives acquisition) of $50 million of annualized pre-tax savings within two years is still valid and we expect the acquired business will generate between $0.05 and $0.15 per share of incremental net income in the 2012 fiscal year, excluding special charges," Owens said.
FUL closed Wednesday's trading on the NYSE at $31.66, up 0.19%, on a volume of 0.5 million shares. In after hours, the stock further gained 1.33%.
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