PPG Industries Inc. reported solid gains in sales and earnings in the second quarter compared to 2009, as stronger demand drove volume growth both regionally and by end-use market, the company said. Strong industrial demand in all regions offset continued weakness in construction activity in North America and Europe.
Sales for the quarter rose 11%, to $3.5 billion, from the same period a year earlier, while net income of $272 million marked a sharp increase from $146 million in 2009. Net income results include aftertax charges of 1 cent per share in 2010 and 2 cents per share in 2009 to reflect the net increase in the current value of the company’s obligation under its proposed asbestos settlement, which is pending court proceedings.
For the first half of the year, sales were $6.6 billion, compared to $5.9 billion for the first half of 2009. Net income for the six-month period was $302 million, compared to $35 million for the same period a year earlier.
“PPG’s strong results this quarter benefited largely from a 10% increase in volumes,” said Charles E. Bunch, PPG chairman and CEO. “The breadth of geographies and end-use markets that we serve is enabling us to leverage continuing positive momentum in global industrial demand. The performance of our portfolio is being elevated by this higher industrial activity and strong demand across the Asia/Pacific and Latin America regions. This is more than offsetting weak construction markets in North America and Europe.”
Bunch said earnings were aided by an improved sales mix from some top-performing businesses, such as aerospace, auto-refinish and the Optical and Specialty Materials segment. He added that Commodity Chemicals segment earnings have rebounded significantly compared to the first quarter, and that the company’s Glass segment benefited from substantially improved performance in the fiber glass business.
Bunch noted that the sales and earnings gains were recorded despite demand levels “that are more than 10% below 2008 pre-recession levels,” an indicator that the company’s global portfolio and restructuring actions “have positioned PPG to capitalize on what we anticipate to be a continued, gradual, global economic recovery.” He said the company is “beginning to utilize our strong balance sheet to accelerate growth, and in fact are in the process of reviewing several potential small to mid-size acquisitions.”
Bunch also said PPG had repurchased 1.6 million shares of stock during the quarter and that the company has more than 4.5 million shares remaining under its existing share repurchase authorizations.
Performance Coatings segment sales in the second quarter were $1.1 billion, a gain of $45 million, or 4%, from the prior-year period, with the results attributed to higher selling prices and favorable currency translations. Volumes were flat, with modest declines in the North American architectural-coatings business, offset by solid expansion in automotive-refinish and aerospace, along with continued growth in the Asia/Pacific region. Segment earnings rose $32 million, or 20%, to a new quarterly record of $190 million as a result of the improved business mix, higher selling prices, and lower costs, which were partially offset by higher raw-material costs.
For the first half, Performance Coatings sales were $2.1 billion, compared to $1.9 billion in 2009. Segment income was $317 million, compared to $247 million in 2009.
Industrial Coatings segment sales for the quarter rose $198 million, or 27%, to $939 million, due to volume growth of more than 25%, including higher year-over-year volumes in all businesses and in all regions. Segment earnings for the quarter were $112 million, an $84 million increase from the prior year’s second quarter. The improvements were the result of increased volumes and reduced costs from restructuring initiatives.
For the first half, Industrial Coatings segment sales were $1.8 billion, up from $1.4 billion in 2009. Segment income was $213 million, compared to $12 million the previous year.
Sales for the Architectural Coatings—Europe, Middle East and Africa (EMEA) segment decreased $27 million, or 5%, due primarily to mid-single-digit percentage volume declines. The negative impact of currency translations was offset by pricing gains and the impact of several small acquisitions. Segment earnings declined $5 million, to $50 million, with about half of the decline associated with currency translations.
For the first half, EMEA segment sales were unchanged compared to 2009, at $936 million. Segment income rose slightly, from $58 million in 2009 to $61 million in 2010.
Strong sales and earnings increases were also reported for the company’s other segments—Optical and Specialty Materials, Commodity Chemicals, and Glass.