US HB Fuller Stock Jumps 9% As Sales Prices To Outpace Inflation | The Salesmark

US HB Fuller Stock Jumps 9% As Sales Prices To Outpace Inflation

US HB Fuller Stock Jumps 9% As Sales Prices To Outpace Inflation

Shares of HB Fuller rose by more than 9% on Thursday as the US adhesives producer expects its price increases will outpace inflation, allowing it to increase margins and expand earnings by double-digit rates in 2022.

The jump in the company’s stock followed the release of HB Fuller’s third-quarter results on Wednesday after the markets closed. Third-quarter gross profit rose, although net income fell because of a large increase in tax expenses.

The company reported a 5% increase in adjusted earnings before interest, tax, depreciation, and amortization (EBITDA).

HB Fuller narrowed its adjusted EBITDA guidance for 2021 to $460m-470m from $455m-475m. The guidance represents an increase of 13-16% from fiscal 2020.

It expects its raw material costs to rise by 15% in 2021.

HB Fuller’s performance followed profit warnings from paints and coatings producers Sherwin-Williams, PPG, and Axalta Coating Systems. They cited higher raw material costs among other issues.

Although HB Fuller is also downstream from commodity petrochemicals, its raw materials differ from paint producers.

As an adhesives producer, HB Fuller’s raw materials include tackifying resins, polymers, synthetic rubber, plasticizers, and vinyl acetate monomer (VAM).

KEEPING UP WITH INFLATION

During an earnings conference call on Thursday, CEO Jim Owens highlighted the steps that HB Fuller took to keep up with rapid inflation and disruptions to supply chains.

On 30 August, the company announced a plan to impose an 11% surcharge on all of its products globally.

This and other actions should generate more than $400m in pricing revenue on an annualized basis, Owens said.

After declining in the third quarter, gross margins should rise sharply in the fourth quarter, Owens said. He also expects higher EBITDA. The increases should continue in 2022.

The company’s cash flow is sufficient to allow it to pay down debt while expanding capacity, he said. HB Fuller could acquire more businesses, although Owens said these would not be large deals.

Owens considers the greater emphasis on sustainability as an opportunity for the company and one of the reasons why sales volumes should continue rising.

During the third quarter, HB Fuller won projects in solar panels, electric vehicles (EVs), sustainable food packaging, and consumer electronics.

Earlier this year, HB Fuller and Covestro announced a partnership to develop adhesives with a better climate profile for use in woodworking, composites, textiles, and automobiles.

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