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PPG Overcomes 'Uneven' Q3

Friday, October 17, 2014

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PPG Industries closed the books on its third quarter in the plus column, despite ups and downs in its global architectural coatings business.

Aerospace, automotive and industrial coatings growth helped fill the gaps in the quarter, giving the world's largest paint and coatings company an increase in earnings, sales and net income for the period.

“Results remained uneven across major regions,” said Charles E. Bunch, PPG chairman and chief executive officer in announcing the third-quarter earnings report Thursday (Oct. 16).

PPGIndustrial
Photos: PPG Industries Inc.

Protective and marine coatings sales increased, helped by improvement in marine new-build.

Worldwide, the company saw moderate gains in North America; mixed results in Europe; and accelerating sales in Asia and Latin America.

Key Indicators

For the third quarter, the Pittsburgh-based company reported:

  • Net sales of $3.94 billion, up four percent over the prior-year period;
  • Reported net income of $377 milion ($2.70 per diluted share);
  • Adjusted net income of $394 million ($2.82 per diluted share);
  • A record 22 percent year-over-year increase in adjusted earnings per diluted share; and
  • Record earnings in every major region.

Bunch called the overall sales increase "consistent with the prior quarter."

"Our sales performance was driven by continued gains in aerospace, automotive OEM coatings and automotive refinish, where our growth this quarter matched or exceeded recent quarters," he added.

The earnings figure, a third-quarter record, came from "higher sales, an improved business mix, our ongoing disciplined cost focus, and attainment of further acquisition-related synergies,” Bunch said.

PPGIndustrial

Earnings growth was strongest in Europe, with a 17 percent improvement despite the region's "uneven" economic performance. The other major regions saw 10 percent increases in earnings.

The company reported these segment results.

Performance Coatings Segment

The segment includes protective and marine coatings, architectural coatings, automotive refinish and aerospace.

Segment net sales for the quarter were $2.26 billion, up three percent over the prior-year period, built on volume, price and acquisition-related gains and a small currency translation benefit. Segment earnings increased by six percent, to $345 million.

Sales grew in all regions, with the largest-percentage gains in North America and Asia. Automotive refinish and aerospace led the sales growth, with percentage increases in the "mid-single" digits, PPG said. North American architectural sales showed less growth and EMEA architectural sales were flat overall.

CharlesEBunch PPGAutomotive

PPG Chairman and CEO Charles E. Bunch called the third quarter uneven, but automotive OEM and refinish delivered.

Architectural coatings demand varied by country with "very solid improvement in the U.K. and Eastern Europe, tempered by flat or weaker trends in Western Europe," the company reported.

Protective and marine coatings sales showed overall improvement, spurred by protective coatings growth and slightly higher marine new-build demand.

Industrial Coatings Segment

The segment includes automotive original equipment manufacturer (OEM) coatings, industrial and packaging coatings, and specialty coatings and materials.

Segment net sales for the quarter were $1.4 billion, a seven percent increase year-over-year. Volumes also grew seven percent. Segment earnings increase 17 percent, to $240 million, year-over-year.

Automotive OEM coatings grew by high-single-digit percentages, with similar growth in all major regions, exceeding the global industry growth rate of about 3.5 percent. Sales in industrial coatings and specialty coatings and materials increased at least by mid-single-digit percentages, with higher growth rates in Asia.

PPGArchitectural

Architectural coating sales grew modestly in North America and were flat overall in EMEA. PPG is looking forward to closing its purchase of Comex, to grow its architectural business in Latin America.

Packaging coatings sales weakened, due to lower European volumes.

Glass Segment

Segment net sales inched up two percent for the quarter year-over-year, to $283 million. Volumes were flat, and unfavorable currency translations took an additional toll. Segment earnings increased by $12 million, to $33 million.

The company reported "solid growth" in flat glass volumes, but declines in fiberglass volumes.

Looking Ahead

PPG said it expected its pending $2.3 billion acquisition of Comex to close in the fourth quarter as its "very active acquisition pipeline" continues.

Bunch's outlook, however, was measured.

"[W]e are just now beginning to benefit from an initial recovery in several long-cycle industries, including North American commercial construction and marine new-build, which had previously detracted from our overall growth," Bunch said.

"The fourth quarter is historically our slowest quarter seasonally, and we anticipate normal seasonal trends will occur in our businesses this year."

“Results remained uneven across major regions,”

   

Tagged categories: Architectural coatings; Automotive coatings; Comex; Earnings reports; Marine Coatings; Market; OEM (Original Equipment Manufacturers); Paint and Coating Sales; PPG

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