Zep expects "slow recovery" to economy

"Sales to industrial manufacturers are improving and [to] institutional customers," Mark R. Bachmann, Zep's chief financial officer, told The Atlanta Journal-Constitution. "Things do need to be maintained, but what we've seen is people will try to cut corners and preserve if they’re really, really struggling."

In a tight economy where companies have cut staff, fewer employees going to the washroom means fewer orders for cleaning agents. So Zep, which reported its fiscal third quarter earnings this week, is watching employment trends carefully.

"We would expect a slow recovery until unemployment decreases," Bachmann said. "It's still stubbornly high and quite frankly, we're getting inconsistent reports from consumer confidence and housing starts. Until those improve and there's greater confidence, I think progress will be slow."

Zep has countered the trend by growing its sales force by about three percent in the last two quarters, following cuts in 2008 of its non-sales staff.

That increase helps explain why sales in the most recent quarter rose 24 percent to $153 million. That boost also was helped by Amrep Inc., which it acquired in January for $64.4 million.

Amrep specializes in chemical formulations targeted for the automotive, fleet vehicle maintenance and motorcycle segments. Zep is targeting similar firms to expand its distribution channel.

Despite the sales increase, profits dipped 3.2 percent to $5.23 million, or 23 cents per share, compared with $5.4 million, or 25 cents per share, in last year's comparable quarter.

Zep's expenses rose, too, climbing 12 percent $64.5 million.