Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Analyst for Jeffrey J. Zekauskas – J. P. Morgan Securities, Inc.
Analyst for Jeffrey J. Zekauskas – J. P. Morgan Securities, Inc.
Can you talk about some of the volume pressure on the industrial side whether this is maintenance related? Business I know is slow but is it related to new construction, just where the weakness came from?
Frank C. Sullivan
The weakness in our industrial businesses is really in two areas, construction related products are slowing down or declining in some cases and to the extent that some of our businesses are involved in OEM, those revenues have also declined. The areas of remaining strength in our industrial segment businesses really relate to our performance coatings companies that are serving power generation and involved in more international markets.
That strength is continuing as we sit here. We do not have a real strong outlook beyond the comments I made.
Analyst for Jeffrey J. Zekauskas – J. P. Morgan Securities, Inc.
Secondly, on raw materials, what you said is there’s been a $2 million inventory revaluation that mainly impacted the consumer business. Now that is sort of like in the numbers, for the next two quarters would you expect the gross margins to improve if costs stay where they are currently
Frank C. Sullivan
Yes, as you can see related to raw material costs improvement beginning to show up in our industrial businesses and we would expect to continue to see that improvement. By the end of the year you will also see the improvement in our consumer businesses but the extraordinary place that we found ourselves this fall with peak raw material prices hitting us at the beginning of the quarter as a result of $140 plus oil in May and June and the response to principal raw material suppliers and the challenges that we have in our consumer businesses in passing on price was then reversed at the end of the quarter by the first significant benefits of dropped raw material costs.
That is what drove – probably the first time I’ve ever seen anything like it, which was a severe negative PPV versus our standards at the beginning of the quarter and raw material cost drops in certain areas so quickly that we ended up having a hit to earnings on an inventory revaluation. The good news of that is we will see in the coming quarters improvement in our raw material costs because there is a different pricing environment today than there was just three or four months ago.
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