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PPG Reports Record First Quarter 2014 Net Sales from Continuing Operations vs Prior Year

Published on 2014-04-22. Author : SpecialChem

PITTSBURGH -- PPG Industries recently reported record first quarter 2014 net sales from continuing operations of $3.6 billion, up $528 million, or 17 percent, versus the prior year. First quarter 2014 reported net income from continuing operations was $277 million, or $1.97 per diluted share. First quarter 2014 adjusted net income from continuing operations was $279 million, or $1.98 per diluted share, which excludes $2 million, or 1 cent per diluted share, for acquisition-related costs.

First quarter 2013 reported net income and earnings per diluted share from continuing operations were $191 million and $1.29 respectively, and adjusted net income from continuing operations was $207 million, or $1.39 per diluted share, respectively. Nonrecurring after-tax charges were $21 million, or 14 cents per diluted share, for legacy environmental remediation and pension plan settlement costs, and $5 million, or 3 cents per diluted share, for acquisition-related costs. The quarter also included a nonrecurring after-tax benefit of $10 million, or 7 cents per diluted share, for the retroactive impact of U.S. tax law changes enacted in early 2013.

"We achieved year-over-year global volume growth of 5 percent, our highest level in three years," said Charles E. Bunch, PPG chairman and chief executive officer. "Additionally, growth rates accelerated in each region versus recent quarters, including in Europe, where our volumes grew 5 percent as we benefited from the early stages of that region's economic recovery. PPG's growth was also broad-based across many of our businesses, led by automotive OEM coatings and aerospace, where our performance continued to outpace strong global growth in these end-use markets.

"We delivered excellent earnings leverage on the improved demand stemming from the aggressive actions we have taken to significantly reduce our cost structure," Bunch added. "In addition, our cash deployment over the past several years is contributing to our earnings growth, including achievement of targeted cost synergies from our acquisitions. As a result, our adjusted earnings per share from continuing operations improved by more than 40 percent versus the prior-year figure, aided by earnings improvement in each major region. Also for the quarter, we more than fully replaced the earnings from our recently-divested businesses."

Looking ahead, Bunch said, "We anticipate solid global growth to continue, but it will not be uniform across geographies or end-use markets. PPG remains well-positioned with a balanced coatings portfolio, both regionally and by end-use market, providing broad growth opportunities while minimizing the impact of any individual fluctuations. Additionally, we have a stronger cash position, which we intend to deploy in a timely, disciplined manner with a continued focus on earnings-accretive cash uses, including additional acquisitions and share repurchases."

The company reported cash and short-term investments totaling $3.0 billion at quarter-end, including $1.735 billion of gross proceeds received from recent business divestitures. The company also noted that it repurchased $200 million, or 1.1 million shares, of PPG stock during the quarter.

Reportable Segments and Discontinued Operations Classification

On March 31, PPG divested its 51-percent ownership interest in the Transitions Optical joint venture and 100 percent of its sunlens business. The financial results for the divested businesses are reported in discontinued operations. Additionally, as of the first quarter 2014, PPG has adopted a new reportable-segment structure. The three reportable segments and respective businesses for each are as follows:
  • Performance Coatings — aerospace, architectural coatings — Americas and Asia-Pacific, architectural coatings — Europe, Middle East and Africa (EMEA), automotive refinish, and protective and marine coatings
  • Industrial Coatings — automotive OEM (original equipment manufacturer) coatings, industrial coatings, packaging coatings, and specialty coatings and materials
  • Glass — fiber glass and flat glass
First Quarter 2014 Reportable Segment Financial Results
  • Performance Coatings segment net sales for the quarter were $2.0 billion, up $429 million, or 27 percent. Acquired businesses increased sales by 23 percent year-over-year, and segment volume growth added 3 percent, with currency translation and price accounting for the remaining net sales change. Automotive refinish and aerospace increased sales volumes in all major regions, reflecting continued global industry growth. Excluding favorable acquisition impacts, architectural coatings net sales in North America grew modestly versus the prior year, as results were mixed by distribution channel and the region was impacted by inclement weather. Architectural coatings — EMEA volumes were up mid-single-digit percentages due to partial regional demand recovery and favorable weather conditions in the region. Protective coatings volume growth, including acquisition-related revenue synergies, offset weaker marine coatings sales, as marine new-build demand remained negative year-over-year but stable versus recent quarters. Segment earnings of $248 million were up $56 million, or 29 percent, as a result of the increase in organic net sales and earnings contribution from business acquisitions.
  • Industrial Coatings segment net sales for the quarter were $1.4 billion, increasing $89 million, or 7 percent. Volume growth of 7 percent accounted for the net sales change, with all regions delivering higher volumes. Automotive OEM coatings grew by more than 10 percent globally, outpacing a global industry growth rate of about 4 percent, with strong growth in each major region. The industrial coatings and specialty coatings and materials businesses also delivered solid volume growth, led by gains in North America and the Asia Pacific region. Packaging coatings sales were weaker, driven by lower European volume. Total segment earnings for the quarter were $231 million, up $33 million, or 17 percent, as a result of the higher volumes.
  • Glass segment net sales were $266 million for the quarter, up $10 million, or 4 percent, year-over-year. Segment volumes grew 3 percent on continued improvement in global fiber glass demand, partly offset by lower flat glass volumes. Flat glass pricing increased year-over-year. Segment earnings were $4 million, down $1 million versus the prior year primarily due to scheduled maintenance and repair costs of $12 million and higher natural gas costs that were partly offset by improved earnings from the higher net sales.

Discontinued Operations

Net income from discontinued operations includes the historical operating results for PPG's former interest in the Transitions Optical joint venture and its sunlens business for both periods presented, and a net gain on these divestitures of $946 million in the quarter ended March 31, 2014. For the quarter ended March 31, 2013, operating results also include PPG's former commodity chemicals business that was separated on Jan. 28, 2013, and a net gain on that transaction of approximately $2.2 billion. All current- and prior-year figures for the company have been adjusted to conform to the new reportable-segment structure. For further information about the company's historical financial results, see PPG's Annual Report on Form 10-K for the year ended Dec. 31, 2013.

About PPG: Bringing Innovation To The Surface.™

PPG Industries' vision is to continue to be one of the world's leading coatings and specialty materials companies. Through leadership in innovation, sustainability and color, PPG helps customers in industrial, transportation, consumer products, and construction markets and aftermarkets to enhance more surfaces in more ways than does any other company. Founded in 1883, PPG has global headquarters in Pittsburgh and operates in nearly 70 countries around the world. Net sales in 2013 were $15.1 billion. PPG shares are traded on the New York Stock Exchange (symbol: PPG).

Source: PPG

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