Dulux see underlying numbers strengthening

With the residential housing market picking up throughout 2013, demand for core Dulux products were expected to see solid gains.

The reported FY13 underlying net profit numbers really do show the demand for housing materials are improving, with a final print of $94.1 versus the company’s guidance of $89 million.

The board also announced it will release a full dividend of 9.5 cents; taking the full year dividend to 17.5 cents for a final payout ratio of 70%, which should please retail investors.

Total sales rose 39% to $1.484 billion as sales across the heritage brand soared, up 5.5%, with final earnings for the division coming in at $135 million, up 7.9%. The Australia paints divisions added 9.2% from a year earlier to see earnings in Australia hitting $110.4 million.

However, the Alesco brand remains patchy as earnings remain elusive. The garage doors and openers business acquired in January saw a modest fall – down 2.2% to $17.4 million – offset by the Parchem business rising 6.5%. This saw the total Alesco division rise slightly; up 3.7% to $31.2 million. However I should put this in context; the Alesco brand only makes up 18% of total EBIT, which is why the market will focus squarely on the Heritage division.

Dulux is a good gauge of the underlying residential housing market; home improvements tend to increase when house prices are rising and demand for homes is also on the up. The company expects (subject to economic conditions) FY14 to better the results seen in FY13, meaning the underlying net profit of $94.1 million will be the baseline for the current fiscal year and I would expect underlying NPAT to touch $100 million.


DLX tends to follow its Bollinger band very closely, it never clearly breaks away by more than 2 standard deviations from the 20-day moving average. The stock is currently sliding up the top band; illustrating it is still in a rising formation.

However at $5.40 the stock looks like hitting an inflection point and would break out of the upper band. I believe the band will hold and would therefore see the stock returning to the 20-day line and possibly below this. DLX could be a short-term short trade. The FY results were solid, however any news that Australian housing is stalling or is under some pressure will see the share pull back to or just under the 20-day moving average price.

Dulux share price

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