Overseas Markets Fuel WD-40 Sales


WD-40 Co. on Monday said its net sales for the third quarter, ended May 31, totaled $77.6 million, up 6.2 percent over 2006s third quarter, while net income rose 8.5 percent, compared to the year-earlier period, to $7.6 million.

Earnings per share in the third quarter reached 44 cents, compared to 42 cents during the same quarter a year ago, a 5 percent increase. Cost of goods during the third quarter was 47.5 percent of sales compared to 48.5 percent in the period last year, the San Diego-based company reported.

Third quarter sales of lubricants WD-40 and 3-in-One reached 56.5 million, up 15.9 percent from the year earlier period.

In Europe, the companys total sales were up 23.3 percent from a year earlier. Asia/Pacific region sales for the third quarter were up 17.3 percent from a year ago. Meanwhile, in the Americas, sales declined 2.5 percent from the previous year.

Garry Ridge, WD-40 president and chief executive officer, said the company was pleased with its sales growth in Asia-Pacific and Europe, driven by WD-40s lubricants and household products brands.

We have achieved strong sales increase in Australia, the Asian region and across Europe through a combination of new distribution, expanded distribution and new product growth, Ridge said. While those markets continue to show promise, we are also facing ongoing challenges in our household products business in the U.S.

For its updated guidance for fiscal year 2007, ending Aug. 31, WD-40 said it now expects net sales to grow 7 to 9 percent, to the $307 million to $313 million range, with net income in the range of $29.1 million to $30.2 million. That would achieve earnings per share of $1.70 to $1.75, based on an estimated 17.3 million shares outstanding.

The revised fiscal year outlook reflects the impact of WD-40s move to open a direct operation in China. Results from the first year of direct operations there are expected to reduce net income in 2007 by about $600,000, or 4 cents per share, the company said.

The company said selling, general and administrative expenses were up 10.1 percent in the third quarter, to $20.2 million, compared to the year earlier period.

Our investment in China and infrastructure to support global sourcing and inventory management, along with higher employee-related costs, legal expense and the impact of foreign exchange rates contributed to the rise in our overhead expense, Ridge said. As our sales grow in our developing markets, we expect to pick up operating leverage.

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