Annual 2006 Performance
Paints comparable sales were 6% ahead for the quarter, with strong growth for the Decorative business in Asia, Europe, and Latin America and good growth for Packaging Coatings offsetting weaker trading for Decorative North America. Overall, volumes were ahead of last year. Gross margin percentages were below the fourth quarter last year primarily due to changes in regional mix and with higher costs below gross margin, trading profit was 14% lower than the fourth quarter last year.
For the full year, comparable sales grew by 5%. Sales growth was particularly strong for Decorative Asia. In addition, Decorative UK & Ireland, Decorative Latin America and Packaging Coatings all delivered good growth. Overall, gross margin percentages were lower, notably due to weakness in North America, but trading profit was 2% ahead of 2005 on a comparable basis. Trading margin of 10.6% was slightly lower than in 2005 (11.0%).
Sales for Decorative UK & Republic of Ireland were 7% ahead of the fourth quarter last year primarily due to good volume growth, particularly in the UK Retail business. Gross margin percentages were below last year due mainly to weaker product mix and higher raw material costs, but trading profit was ahead. For the full year, sales were 7% ahead of 2005 with trading profit also ahead.
Decorative Continental Europe sales were 1% lower than last year with continued weakness in France and Germany offsetting good growth in many of the developing markets in Eastern Europe. Gross margin percentages were ahead of last year due to improved average selling prices and stronger mix, which offset higher raw material costs. However costs below gross profit were higher and as a result, trading profit was below last year.
Sales for Decorative North America were 4% lower than the quarter last year led by ongoing weakness in the US housing market. Sales in both the US Retail and US Trade businesses were lower than the previous year. Higher raw material costs and weaker product mix offset the impact of higher selling prices and gross margin percentages were below last year. Consequently, trading profit was sharply down in the quarter. For the full year sales were 1% ahead, but with lower gross margin percentages, trading profit for the year was markedly lower than 2005.
Decorative Asia had another good quarter, with sales growth of 19% primarily due to volume growth, notably in China and India. Gross margin percentages were lower due to pressure on selling prices and weaker product mix but despite this and higher publicity costs, trading profit for the quarter was strongly ahead of last year. For the full year, sales growth was 16% and trading profit was well ahead of 2005.
Decorative Latin America delivered sales growth of 13% for the quarter, with higher volumes in all countries and increased selling prices in Argentina and Uruguay. Gross margin percentages were higher than last year, but with higher promotional spend in the quarter, trading profit was slightly lower. For the full year, sales grew by 8% and trading profit was significantly ahead of 2005.
Sales for Packaging Coatings for the quarter grew by 9% with growth in all regions. Gross margin percentages were lower due primarily to higher raw material costs but trading profit was ahead of the same period last year. Full year sales growth was 8% and trading profit was substantially ahead.
