DuluxGroup expects to increase profits this year thanks to home owners who tend to repaint their houses, even in tough times.
The paint-maker has shrugged off difficult conditions to improve its full year profit by more than 50 per cent, and managed to maintain margins despite increased competition.
Shares in the company gained 2.2 per cent to a four-month high after it said underlying profit after tax in fiscal 2012 would be higher than the $77.6 million recorded in fiscal 2011.
Chief executive Patrick Houlihan said the home improvement sector tended to be relatively resilient and home owners tended to repaint their homes every five years irrespective of economic conditions.
“We’re well positioned to continue to invest for the future,” Mr Houlihan told AAP.
He said it had been a challenging year with a soft retail market. That had been made harder for DuluxGroup because the company’s main paint factory in Brisbane was flooded.
“To have held our margins, to have grown our share slightly, I’m really delighted,” Mr Houlihan said.
However, the forecast profit increase was subject to economic conditions and improving consumer sentiment, he said.
Dulux shares rose six cents, or 2.2 per cent, to close at $2.75, the highest since July 7.
The Melbourne-based company said it would focus on driving consumer innovation and generating sustainable growth opportunities, by growing existing businesses and through takeovers.
While Mr Houlihan was unable to give specific guidance, he said the company had a “natural hedge,” with 55 per cent of its products sold through retailers and 45 per cent sold through trade outlets.
Only 10 per cent of revenue was exposed to the weak home construction market.
Increased competition among home improvement retailers, through the advent of Masters stores and Metcash’s majority stake in Mitre Ten had not affected margins, Mr Houlihan said.
“Our margins have been very resilient,” he said.
Dulux reported a net profit of $93.2 million for the 12 months to September, up 52 per cent from $61.3 million a year earlier.
Included in the result was a one-off tax consolidation adjustment of $12.5 million and a $3.1 million benefit from insurance income related to the flooding of DuluxGroup’s Brisbane manufacturing plant.
Without one-off benefits, the underlying profit increased 8.5 per cent to $77.6 million.
Dulux would focus on growing its market position in Australia and New Zealand.
However, weak market conditions were expected to continue in New Zealand for the remainder of calendar 2011 with some improvement expected in early 2012.
Offshore, market conditions were expected to improve moderately in 2012 following signs of improvement in China in the last quarter of 2011.
