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PPG’s Earnings Streak Continues in Q2

Friday, July 18, 2014

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PPG Industries says a strong European market, coupled with healthy results in all major markets, helped the coatings giant secure a second quarter sales gain and "all-time" record quarterly profits from continued operations.

Second quarter sales were up 5 percent, or $199 million, year-over-year, totaling $4.1 billion and quarterly adjusted net income from continuing operations was $398 million, PPG announced Thursday (July 17).

In Europe, earnings jumped by 28 percent, the company said.

PPG Q2 results
Photos: PPG Industries

Second quarter sales saw a 5 percent increase and adjusted earnings per share from continuing operations was up 24 percent in the quarter, PPG said.

"In the quarter, we continued to deliver growth across most of our businesses in comparison with strengthening prior-year results," said Charles E. Bunch, PPG chairman and CEO.

"We achieved consistent volume growth and improved year-over-year earnings in each major region."

Q2 Highlights

Highlights from the second quarter included:

  • Net sales of $4.1 billion, up 5 percent year-over-year;
     
  • Quarterly record adjusted earnings per diluted share from continuing operations of $2.83, up 24 percent over the previous year;
     
  • Record earnings in each major region; and
     
  • Cash and short-term investments totaling $2.9 billion at the end of the quarter.

"The benefits of our new business portfolio are measureable, as our adjusted earnings per share from continuing operations increased 24 percent this quarter, with an average quarterly increase the past six quarters of more than 30 percent," Bunch noted.

The company has been on a hot streak, previously reporting record first-quarter net sales for 2014, plus a record fourth quarter 2013 and one of the most successful years in its history.

Industrial's Solid Growth

The Industrial Coatings segment saw a 7 percent gain in net sales for the quarter, increasing by $95 million for a total of $1.5 billion. This increase was attributed to volume growth of 7 percent, with volume improvement in all regions.

Segments earnings were $257 million, up 18 percent, or $39 million, as a result of higher volumes and manufacturing cost improvements.

Automotive OEM coatings delivered higher volumes in all regions, growing in aggregate by high single-digit percentages. The industrial coatings and specialty coatings and materials businesses saw solid volume growth, "reflecting increased strength in certain end-use markets and emerging countries such as China and India," PPG said. Sales in packaging coatings were weaker because of lower European volume.

PPG Industries

The Performance Coatings segment saw a 4 percent increase in net sales, and the Industrial Coatings segment's net sales jumped up by 7 percent year-over-year.

"We realized the highest growth in automotive OEM and various general industrial and specialty coatings end-use markets, as we continue to benefit from solid end-use market demand supplemented by customer adoption of new PPG technologies," Bunch said.

Performance Earnings Up

 

Performance Coatings segment net sales were up $84 million, or 4 percent, over the previous year's second quarter. Sales, which totaled $2.3 billion, benefited from volume, price, currency translation and acquisition-related gains.

Segment earnings were up $49 million, or 15 percent, reaching $373 million.

Sales growth was achieved in all major regions, except Latin America, specifically Brazil. North American architectural coatings sales saw modest growth, with results differing by distribution channel, according to PPG. EMEA (Europe, Middle East and Africa) architectural coatings sales volumes were up by a low single-digit percentage.

Sales in protective and marine coatings were down slightly as protective coatings volume growth was offset by weaker sales in the marine new-builds market. PPG called the marine decline "slight in comparison with recent periods."

The Glass segment also saw an increase in net sales, sales volume, and earnings, PPG reported. Net sales were up 7 percent, or $20 million, reaching $289 million for the quarter. Volume increased by 5 percent, and segment earnings were $11 million, up $3 million over last year.

Europe Leads Regional

Leading performance improvement was Europe, with 28 percent growth in earnings.

In the U.S. and Canada, growth was "modest" early in the quarter, but accelerated in June, Bunch said. Earnings in the region grew 12 percent, with continued improvement throughout most end-use markets.

Charles E. Bunch

"We achieved consistent volume growth and improved year-over-year earnings in each major region," said Charles E. Bunch, PPG chairman and CEO.

Earnings in emerging regions advanced 14 percent, and PPG benefited from growth rates for automotive OEM and other industrial-related products in China and India, Bunch explained.

"Strategically, we continue to complete significant actions focused on expanding our global coatings presence," Bunch said.

Excited About Acquisitions

"We closed several small acquisitions this year, and most noteworthy, we reached agreement to acquire Comex—one of the highest-quality coatings businesses in the world," Bunch said. "We are excited about the value this transaction brings to PPG."

PPG announced June 30 that it would buy Consorcio Comex, a Mexico-based architectural and industrial coatings company, for $2.3 billion.

PPG has been beefing up its presence south of the border throughout 2014. In June, the company completed a previously announced acquisition of Canal Supplies Inc.

During the first quarter, PPG also acquired Hi-Temp Coatings Technology.

   

Tagged categories: Architectural coatings; Earnings reports; Marine Coatings; Market; Paint and Coating Sales; PPG

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