Paint maker DuluxGroup says it is satisfied with the progress it is making on its $210 million bid for building products and garage door supplier Alesco.
DuluxGroup also on Wednesday posted a lower annual profit but expects its underlying performance to improve in the year ahead.
DuluxGroup made a hostile takeover bid for Alesco in May, and Alesco accepted the bid in early October.
Once the bid achieves an acceptance of 90 per cent, the Alesco board is expected to declare a special dividend of up to 27 cents per share and DuluxGroup will declare its bid unconditional.
DuluxGroup managing director Patrick Houlihan said acceptances of the DuluxGroup bid were now approaching 80 per cent.
“We are happy with progress on our bid to acquire Alesco,” Mr Houlihan told reporters.
“Our aim is for accepting shareholders to receive payment pre-Christmas,” he said.
Mr Houlihan said DuluxGroup had not yet had any interaction with Alesco on an operational level because it was still working on completing the acquisition.
DuluxGroup on Wednesday reported a net profit in the year to September 30 of $89.5 million, down four per cent from $93.2 million in the prior year.
The result includes one-off items relating to tax benefits, insurance income and the cost of the Alesco bid.
Excluding those items, net profit in the year to September was $79.6 million, up 2.6 per cent from $77.6 million the previous year.
“Subject to economic conditions, and excluding any transaction costs associated with the bid for Alesco, we expect 2013 DuluxGroup net profit after tax for existing business to be higher than like-for-like net profit after tax for 2012, that being $79.6 million,” Mr Houlihan said.
Mr Houlihan described the 2012 result as “very solid”.
He said DuluxGroup has been thoroughly tested in fiscal 2012 by weak market conditions, changing competitor and retail customer landscapes, significant pressure on input costs, and increased operating costs as a consequence of the flooding of DuluxGroup’s factory in the Brisbane suburb of Rocklea.
Nonetheless, sales lifted by 7.2 per cent to $1.07 billion.
DuluxGroup said three percentage points of the sales growth, or about $29 million, was due to the formation of a new business from the merger of DuluxGroup’s China and Hong Kong businesses: DGL Camel International.
DuluxGroup generated more sales in the Australian paint market – Duluxgroup’s biggest business – despite an overall decline in the sector.
But paint sales in New Zealand fell, and the Selleys Yates home improvement and garden care business delivered a disappointing result.
The group’s “offshore and other” businesses lifted their sales by 35.9 per cent.
Mr Houlihan said that in China, DGL Camel had delivered solid results despite significant challenges.
Market conditions in China were expected to remain soft in the near term, but the longer term looked positive.
Morningstar analyst Nathan Zaia described the DuluxGroup result as “right on the money” and “somewhat comforting” given that other building-related stocks were struggling against weak residential building activity.
Shares in DuluxGroup were steady at $3.30 at 1203 AEDT on Wednesday.
