Recession caused by coronavirus hits Graco, Pentair hard in Q2

Both Graco and Pentair reported second-quarter sales were down more than 10% and net income down more than 25%, indicative of the recession caused by the coronavirus pandemic.

Both reported that conditions improved in June, but also said the rest of the year will continue to be bumpy.

Pump and spray equipment maker Graco, which supplies factories and paint stores and contractors, reported sales of $366.9 million for April, May and June, down 14% from the same period a year ago. Net income was down 67% to $28.8 million, or 17 cents a share.

Patrick McHale, Graco's chief executive, said despite the short-term dip — which was better than predicted by Wall Street analysts — the company will continue to invest in new products and growth initiatives.

That way, he told analysts in a conference call, the Minneapolis-based company will be ready when the economy emerges from the recession.

"We used a similar approach during the 2008-2009 crisis and our investors were subsequently rewarded and we look to repeat this again," McHale said.

Still, he said, Graco will need to be agile because the "timing and shape" of an economic recovery remains uncertain.

So far, the company has been able to navigate both the economic and health conditions caused by the pandemic to keep its major factories and distribution centers fully operational.

"High-risk employees remained at home, and we've dealt with the positive COVID-19 cases that we have experienced at various facilities without disruption," McHale said. "By reducing our use of temporary labor in certain factories and flexing our workforce to areas of greater need, we've largely been able to survive the quarter without resorting to layoffs or pay reductions."

The industrial business continues to be troublesome for Graco, with automotive and the oil and gas sectors weak worldwide.

But its contractor business, which includes residential sales in paint stores, has rebounded since April, first with home and small-scale paint sprayers and other products. The professional, larger products had a smaller uptick in sales.

McHale wonders if "work-from-home" has made homeowners concentrate on more DIY projects.

"There's lots of paint sprayers being sold right now. And if you took a look at our mix [it] tends towards the smaller units at the present time rather than the large units that we might sell to say a municipality or something like that," McHale said.

Whatever the motivation, more first-time buyers are choosing paint sprayers for spruce-ups.

Graco shares were up 4.2% to $54.46 Thursday.

The home market also lifted Pentair's overall results.

Results for the water treatment company, based in the United Kingdom but run out of Golden Valley, were dragged down by its industrial segment. Residential-pool treatment, the company said, picked up in May and more so in June.

Sales for the quarter were down 11% to $713.3 million. Net income was down 37% to $72.1 million, or 43 cents a share.

"Our industrial businesses have been negatively impacted by a pause in capital spending globally, and our commercial businesses have also been negatively impacted by delays from customers," said CEO John Stauch.

The majority of the company's sales are now in the residential-pool and water-quality market, and revenue in that area was down 8% for the quarter. Stauch said about 30 to 40% of in-ground pools now have variable speed pumps, but new regulations that take effect in a year will lead to more homeowners installing them — opening up an already healthy market.

Pentair shares were little changed Thursday, closing at $42.44.

Catherine Roberts • 612-673-4292