PPG Industries Inc. reported first-quarter net income of $30 million, including a one-time charge of $85 million related to a change in U.S. tax law, compared to a loss of $111 million for the first quarter of 2009. Sales for the quarter rose 12%, to $3.1 billion, from the year-earlier period.
Sales and earnings for the company’s Performance Coatings, Industrial Coatings, and Architectural Coatings segments posted gains, led by the Industrial Coatings segment’s 39% increase in sales.
The one-time first-quarter charge of $85 million was the result of a change in tax law related to recently enacted health-care legislation, the company said. Adjusted for one-time charges, net income for the first quarter was $117 million, compared to adjusted net income of $32 million for the first quarter of 2009. The reported loss of $111 million for the first quarter of 2009 included a significant charge for business restructuring.
The company said the first-quarter results reflected “moderate demand improvement throughout the quarter in several global end-use markets”; lower structural costs as a result of restructuring; significant improvement in year-over-year Industrial Coatings sales and earnings; and record results in the Asia/Pacific region on 25% volume growth. The company also said its Optical and Specialty Materials segments turned in record results on double-digit-percent volume growth.
“Throughout the first quarter, we continued to experience a moderate recovery in several of the global end-use markets we serve,” said Charles E. Bunch, chairman and CEO. “This recovery, combined with lower costs resulting from our restructuring initiatives and other cost-reduction actions, positively impacted our financial results in comparison with what were very low earnings levels last year.”
Coatings segment results
First-quarter sales for the company’s Performance Coatings segment rose $37 million, or 4%, from the first quarter of 2009, while earnings increased 43%, to $127 million. Sales increased as a result of higher selling prices and favorable currency translations, although volumes declined slightly, with lower volumes in North America and Europe offsetting growth in Asia/Pacific and Latin America, the company said.
Industrial Coatings segment sales rose $249 million, or 39%, due to volume growth that exceeded 30%, with higher year-over-year volumes in all businesses and regions. Currency translations also contributed to the sales increase. Industrial Coatings segment earnings for the quarter were $101 million, a swing from a loss of $16 million for the first quarter of 2009, due to improved sales volumes and the effects of cost-reduction initiatives and restructuring actions, the company said.
First-quarter sales for the Architectural Coatings—Europe, Middle East and Africa (EMEA) segment rose 7%, to $436 million, due primarily to stronger foreign currencies. Segment earnings increased $8 million, to $11 million, due to lower costs.
Bunch said the strong results of the Industrial Coatings segment “benefited from improving global automotive builds and gains in several general industrial applications.” Also contributing to the results, he said, were the company’s expansion investments in recent years in emerging regions, such as Asia/Pacific. “This region, in addition to our Optical and Specialty Materials segment, posted record-setting results and continues to drive growth for the corporation,” Bunch said. He added that several of PPG’s businesses experienced weather-related sales softness early in the quarter, but rebounded strongly.
Bunch added that “all of the hard work and difficult steps we took over the past 18 months, throughout the recession, to position the company for economic recovery are now beginning to yield measurable benefits.”
Looking ahead to the rest of the year, Bunch said he was “encouraged that we are now entering what has historically been PPG’s best quarter with a very low cost position and growing momentum.” He said several businesses that have been slower to recover, such as Commodity Chemicals, are beginning to exhibit signs of improvement that, combined with continued cost-reduction and execution focus, give the company a solid basis for continued earnings recovery.