Newell Brands announced that it is updating its 2017 normalized earnings per share guidance for the anticipated effects of Hurricane Harvey on its U.S. manufactured resin businesses, including increasing inflationary pressure through the third quarter.
Since Hurricane Harvey’s landfall on August 25, 2017, nearly all of Newell Brands’ resin suppliers with facilities in Texas and Louisiana have declared force majeure, with many facilities shut down for more than a week and some still not operating. The company is working closely with both U.S. and international suppliers to find alternative sources of resin with some early success, albeit at a significantly higher delivered cost than in its plans. As a result, the company has revised its normalized EPS guidance to $2.95 to $3.05 from $3.00 to $3.20. Its outlook for 2017 net sales and core sales remains unchanged.
Despite resin availability challenges and expected higher costs, the company will continue to invest in its strategic capabilities and brands, accepting temporary margin compression versus its 2017 plan, rather than pull back on investment connected to the company’s transformation and long term strategy. These investments are enabled by strong Project Renewal savings and cost synergies that remain on track with its previously communicated plans.
Chief Executive Officer Michael Polk commented, “The tragic events that have unfolded in Texas and Louisiana related to Hurricane Harvey have resulted in a significant disruption to a large part of the U.S. resin manufacturing supply chain. We anticipate resin supply availability issues to result in Newell Brands manufacturing disruptions on some U.S. manufactured resin-based products. We expect these conditions to persist through the fourth quarter of 2017 and resin inflation to now build, rather than contract as previously forecast, through the balance of 2017 and into 2018. Despite the incremental costs related to the hurricane and other unplanned inflationary pressure, we have taken the decision to sustain increased investment in our strategic priorities and brand plans in the second half of 2017 in order to build on our improving share momentum, with the rate of share growth in the U.S. increasing from the first quarter to the second quarter and now into the third.”
Polk continued, “While meaningful, the disruption related to Hurricane Harvey is temporary, and pales in comparison to the devastating impact the storm has had on peoples’ lives in Texas and Louisiana. In partnership with the American Red Cross, Newell Brands is working to provide support and resources to storm-related recovery efforts throughout the region.”
The company’s revised full year 2017 guidance is as follows:
Newell Brands’ major brands include Paper Mate, Sharpie, Dymo, EXPO, Parker, Elmer’s, Coleman, Jostens, Marmot, Rawlings, Oster, Sunbeam, FoodSaver, Mr. Coffee, Rubbermaid Commercial Products, Graco, Baby Jogger®, NUK, Calphalon, Rubbermaid, Contigo, First Alert, Waddington and Yankee Candle.
The Play segment includes Coleman, Campingaz, Marmot, Contigo and Bubba in the Outdoor & Recreation category; Abu Garcia, Berkley, Shakespeare, Penn and Ugly Stik in the Fishing category; and Rawlings in the Team Sports category.