DuluxGroup boosted by Bunnings’ UK foray

Dulux_Building_exteriorPaint supplier and retailer DuluxGroup has lifted full-year profit 9.6 per cent to $142.9 million and expects to deliver an even better result in the year ahead.

Sales revenue jumped four per cent to $1.8 billion for the year to September 30, helped by strong growth in the Australia-New Zealand business which contributed the bulk of earnings.

A one-off $3.1 million tax provision write back also added to the positive result, the company said on Wednesday.

Managing director Patrick Houlihan said growth in the company’s well established divisions had allowed Dulux to invest in important future growth initiatives in offshore markets.

Dulux launched its premium Craig & Rose paints products and Selleys range into Bunnings and Homebase stores throughout the UK and Ireland during the year.

“Our Dulux business has once again delivered a first rate result, which … supports strategic investment to further grow our businesses both locally and offshore,” Houlihan said.

He said the company’s growing earnings base presents “multiple streams” for future growth.

Dulux said its new paint factory in Merrifield is schedule to begin commercial production in the first half of the 218 financial year and will support the company for “decades to come”.

The paint supplier expects its Australia-New Zealand business to remain resilient in the year ahead with its core markets – home renovation, housing construction and commercial markets – forecast to provide solid growth in 2018.

“Subject to economic conditions, and excluding non-recurring items, we expect that 2018 net profit after tax will be higher than the 2017 equivalent,” Houlihan said.

Meanwhile DuluxGroup may consider pulling out of its joint-venture business in China as its paints brand struggles but has flagged higher hopes for Indonesia, with plans to start selling some its Selleys products into the growing market there.

Earnings from DuluxGroup’s “other businesses” segment, which includes the Yates garden care range, PNG, south-east Asia, and China’s DGL Camel paints business fell because of a weaker Camel result.

Houlihan said DuluxGroup’s China business generates about $50 million in revenue, or about three per cent of group revenue.

The China business comprises Camel paints, which is the largest part, and the Selleys range.

Camel and Selleys are profitable in Hong Kong, and Selley’s has prospects for success on mainland China, but the Camel paints business has struggled from lack of scale and lack of brand awareness and delivered a poor result in fiscal 2017.

The Camel paints joint-venture started in 2012.

“We just don’t have the competitive ratio (with Camel),” Mr Houlihan told reporters on Wednesday

“We doing a strategic review of that business at the moment, particularly the coatings (Camel) portion of it.

“As to what that concludes, I won’t pre-empt.”

Houlihan said Indonesia has good prospects.

DuluxGroup is partnering with Avian Paints, one of the largest paint companies in Indonesia, to sell some of the Selleys adhesives and sealants range starting in mid-2018.

Houlihan said the joint-venture with Avian has the potential to ultimately access about 40,000 retail hardware outlets in a large and growing market.

“It’s going to take a few years to build – this won’t be transformative overnight,” Houlihan said.

“Over the short term, it will really be about launching in quite a considered matter, portions of the range, one at a time.”

Shares in DuluxGroup were 20 cents, or 2.6 per cent, higher at $7.74 at 1117 AEDT.

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