Dulux posts first results since major Nippon takeover announcement

Dulux posts first results since major Nippon takeover announcement

Profits have dipped slightly at DuluxGroup (ASX: DLX) in 1H19, however its outlook on the full year remains rosy ahead of its likely takeover by Japanese giant Nippon Paint.

Dulux posted a net profit after tax (NPAT) of $68.2 million, down 4.1 per cent on the FY18 result of $71.1 million which was positively adjusted to account for the one-off gain from selling its business Glen Waverley last year.

The adjustment also accounted for its exit from China plus a tax provision write-back and other factors which contributed to more than $8 million in one-off gains during FY18.

Revenue was almost flat at $892.9 million, as was the adjusted earnings before interest and tax (EBIT) result of $109.1 million.

Dulux managing director Patrick Houlihan says the company is confident going into the second half supported by solid performance in Australia and New Zealand.

"Our stronger second quarter trading, which has continued into April, gives us confidence about our second half and full year," says Houlihan.

"Dulux ANZ delivered a solid result, given the challenge of comparing to an abnormally higher market volume growth rate in the prior year, as we foreshadowed late last year."

"Subject to economic conditions, an excluding non-recurring items and impacts associated with the Nippon Paint scheme of arrangement, we expect that 2019 NPAT will be higher than the 2018 equivalent of $150.7 million."

This is Dulux's first financial result since it revealed its recommendation that shareholders vote in favour of a $4.2 billion takeover of the company by Nippon Paint.

Nippon's offer to buy the company for a 100 per cent cash consideration of $9.80 per share was made in April.

The offer represents a substantial 27.8 per cent premium to DLX's $7.67 closing price from 16 April and as such the board unanimously backed it.

The day after Nippon made its offer, DLX shares soared by 28 per cent to hit $9.80.

Dulux is confident the acquisition will join two companies with market exposures that complement one another, plus Nippon has assured shareholders that the Dulux name will survive the acquisition.

"Patrick and his team have built DuluxGroup into the pre-eminent provider of housing improvement products in Australia and New Zealand with market-leading and iconic brands operating from world-class manufacturing facilities," said Nippon president Tetsushi Tado last month.

"Nippon intends to maintain the legacy developed by DuluxGroup and facilitate DuluxGroup's existing vision by leveraging resources of the broader Nippon platform."

In the absence of any superior proposal and subject to an independent expert's report which concludes that the scheme is in the best interests of shareholders, the board of Dulux unanimously recommended a vote in favour of the buyout.

DLX shares are currently trading flat at $9.73.

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