Equipment manufacturer Graco Inc. released its fourth-quarter and full-year financial results for 2023 in January, reporting record quarter and annual operating earnings.
According to the release, for the quarter, net sales increased 3% in the Americas and 5% in EMEA, while decreasing 5% in Asia Pacific. Changes in currency translation rates reportedly raised worldwide sales by $6 million for the quarter and decreased worldwide sales by $2 million for the year to date.
Graco 2023 Q4 Results
The gross profit margin rate for the quarter was reportedly 4 percentage points higher than the same period last year due to realized pricing. Operating earnings expressed as a percentage of sales for the quarter also increased 6% to $29 million.
Net sales reportedly increased 2% from the same period last year to $566.6 million in 2023. Sales also increased 1% in the Americas and increased by 5% in the EMEA. Additionally, there was a decrease of 4% in Asia Pacific.
"Graco reported record fourth quarter and annual sales and operating earnings with sales growth in all segments for the quarter," said Mark Sheahan, Graco's President and CEO.
"The Industrial and Process segments achieved record annual sales and operating earnings while Contractor achieved record operating earnings for the year despite a challenging environment. The Contractor segment saw fourth quarter sales growth driven by new product introductions and continued strength in both the protective coatings and spray foam product categories. I am proud of the work our teams have done and want to thank our employees, customers and vendors for another great year."
Graco stated in its release that operating expenses for the quarter and year to date increased 8% to $10 million from the comparable period last year, including around $3 million (3 percentage points) of increases in sales and earnings-based expenses.
Other non-operating expenses for the quarter and year included a non-cash pension settlement loss of $42 million in connection with the transfer of certain pension obligations to an insurance company. Partially offsetting the pension settlement loss were reportedly increases in interest income of about $4 million for the quarter and $11 million for the year.
The effective income tax rate was reportedly 14% for the quarter and 17% for the year. Adjusted to exclude certain non-recurring items, the adjusted effective income tax rate was 19% for the quarter and year.
Segment Results
In the Contractor segment, sales increased 2% to $238.8 million for the quarter and decreased 1% to $985.7 for the year. Favorable response to new product offerings was reportedly offset for the quarter and year by slower economic activity in worldwide construction markets.
The operating margin rate for this segment improved 4 percentage points for both the quarter and year. Lower product costs and realized pricing combined to drive the operating margin rate higher for the quarter. Realized pricing drove most of the improvement in the operating margin rate for the year.
For the Industrial segment, sales increased 1% to $192 million for the quarter and 2% to $662.8 million for the year as continued end market strength in the Americas was reportedly offset by lower finishing system sales in EMEA and Asia Pacific.
The operating margin rate for this segment was flat for the quarter and was lowered by 1 percentage point for the year as realized pricing and lower product costs were affected by unfavorable changes in currency translation rates and higher operating expenses.
In the Process segment, sales increased 4% to $135.9 million for the quarter and increased 11% to $547.1 million for the year.
The operating margin rate for this segment increased 3 percentage points for the quarter, primarily due to realized pricing and lower product costs. Expense leverage drove an additional 2 percentage point increase in the operating margin rate for the year.
“As we head into a new year, the business is performing well, and demand levels generally remain steady in an uncertain macroeconomic environment,” said Sheahan.
"We are initiating full-year 2024 revenue guidance of low single-digits on an organic, constant currency basis as we will continue to focus on our core strategies of new product development, expanding distribution, entering new markets and targeting strategic acquisitions to drive shareholder value.”
