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WD-40 Company Acquires Brazilian Distributor for $6.9M

CHEMICALS: Office May Serve as a Gateway to Latin America

SAN DIEGO – WD-40 Company (Nasdaq: WDFC) – the maker of the water-displacing, lubricating Multi-Use Product in the yellow and blue cans – is also making a seven-figure investment in Brazil.

The company said early this month (March 4) that is acquiring its Brazilian marketing distributor, Theron Marketing Ltda., for $6.9 million in cash. WD-40 Company took over distribution immediately.

WD-40 Company CEO Steve Brass characterized the move as part of the company’s first “Must-Win Battle,” which is to lead geographic expansion of WD-40 Multi-Use Product.

Steve Brass
CEO
WD-40 Company

WD-40 is targeting expansion in several regions. China is by far the largest opportunity followed by India, Japan, Indonesia, Saudi Arabia and Egypt.

‘Shortened Learning Curve’

“This acquisition will enable us to drive faster topline growth, a smoother market transition, and a shortened learning curve compared to building a direct market from the ground up,” Brass said in a prepared statement.

“WDFC has tripled its sales in Mexico since it went direct in 2020, and we think Brazil could follow that playbook – it has a similar magnitude of sales opportunity and level of market development,” wrote Linda Bolton Weiser, an analyst with D.A. Davidson, in a March 5 research note.

Fewer than 10 employees will join the company, which has its headquarters in Scripps Ranch.

In the long term, WD-40 Company plans to use Brazil as a hub for other distribution in South America, Weiser said in the note.

Theron was founded in 1997 and its only business has been the distribution and sales of WD-40 products. M12 Participações Empresariais S.A. was the seller in the stock-for-cash transaction. The seller will continue to provide logistics services.

WD-40 Company’s signature product is available in more than 176 countries and territories worldwide.

The company estimates the long-term global growth opportunity for WD-40 Multi-Use Product is greater than $1 billion.

‘Solid First Quarter Performance’

The business last reported its financial results on Jan. 9.

In the first quarter of fiscal 2024, which ended Nov. 30, the business reported net income of $17.5 million or $1.28 per diluted share on net sales of $140.4 million.

Analysts had expected earnings of $1.05 per share. Shares of WDFC settled at $235.85 at closing time on Jan. 9. Minutes later it was revealed that earnings were 23 cents better than analysts’ expectations. Shares opened the following day at $256.90 and closed at $271.72, up 15% for the day.

Year over year, first quarter net income grew 25% while net sales grew 12%. In the same quarter one year ago, the company reported net income of slightly less than $14 million or $1.02 per diluted share on net sales of $124.9 million.

Foreign exchange created favorable conditions for WD-40 Company during the recently ended quarter. On a constant currency basis, net sales grew 9%, versus 12% with no adjustment.

“Overall, we are incredibly pleased with our solid first quarter performance and it provides us confidence that we will achieve our 2024 financial goals,” Brass said in a statement.

In February, the company reiterated its guidance of net sales growth between 6% and 12%, with net sales between $570 million and $600 million (both on a constant currency basis). Net income was expected to be $65 million to $70 million.

Shares of WD-40 Company closed March 11 at $250.61. Over the last 52 weeks, shares have traded in a range of $163.82 and $278.78.

Four ‘Must Win Battles’ Include Online Engagement

In addition to Leading Geographic Expansion, WD-40 Company has given its employees three other “Must-Win Battles” to think about. The second of these is to Accelerate Premiumization (notably with WD-40 Smart Straw and EZ-Reach products) which will contribute to revenue growth and gross margin expansion.

The third is to Drive Growth in WD-40 Specialist products. The fourth is to Turbocharge Digital Commerce, increasing brand awareness and engagement online. The latter is expected help the previous three battles.

The company reiterated it is working to de-emphasize its home care and cleaning brands – these include Lava soap, X-14 mildew stain remover and 2000 Flushes toilet cleaning products – and focus on maintenance products, which carry higher margins.

The homecare and cleaning brands are available in niche segments and markets and provided only 6% of net sales in fiscal 2023. By contrast, WD-40 Multi-Use Product provided 81% of net sales and WD-40 specialist provided the remaining 13%.

WD-40 Company
FOUNDED: 1953 as Rocket Chemical Company
CEO: Steve Brass
HEADQUARTERS: Scripps Ranch
BUSINESS: Specialty chemicals and household products
REVENUE: $537.3 million in fiscal 2023
EMPLOYEES: 613
STOCK: WDFC (Nasdaq)
WEBSITE: wd40company.com
CONTACT: 619-275-1400
NOTABLE: WD-40 marketing people have cataloged more than 2,000 uses for its Multi-Use Product

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