Boons in Industrial and Performance Coatings helped PPG Industries deliver record fourth-quarter sales and earnings, capping “an excellent year” for the Pittsburgh-based company, the CEO said.
Volumes in the Architectural Coatings’ Americas and Asia/Pacific business were flat, and sales for the Architectural Coatings’ EMEA (Europe, Middle East and Africa) segment declined 7% from the prior year, the company reported.
Sales, Earnings Overview
PPG reported record fourth-quarter sales of $3.4 billion, an 8% increase over the fourth quarter of 2009. Reported net income for the quarter increased to $205 million, or $1.24 per share. Fourth-quarter 2009 sales were $3.1 billion, and reported net income was $142 million, or 85 cents per share.
PPG’s fourth-quarter 2010 adjusted net income was $207 million, or $1.25 per share, compared with $144 million, or 86 cents per share, for Q4 2009.
Annual sales for 2010 were $13.4 billion, a 10% increase over 2009 sales of $12.2 billion. PPG’s full-year 2010 adjusted net income was $862 million, or $5.18 per share, compared with $485 million, or $2.94 per share, for 2009. Reported net income for 2010 increased to $769 million, or $4.63 per share, from $336 million, or $2.03 per share, in 2009.
Both years include an aftertax charge of $2 million, or 1 cent per share, reflecting the net increase in the current value of the company’s obligation under its proposed asbestos settlement, which is pending court proceedings.
Coatings Prices to Continue Climb
“Our record fourth-quarter sales and earnings capped what was an excellent year for PPG and give us momentum heading into 2011,” said Charles E. Bunch, PPG chairman and CEO.
“In the quarter, our Coatings and Optical and Specialty Materials segments combined to post sales and earnings records, despite increasing raw materials costs for coatings. Our Commodity Chemicals and Glass segments continued their significant improvement trends by growing earnings by a combined $90 million year-over-year and delivering solid double-digit operating margins in a seasonally slow quarter.”
The company increased selling prices in each quarter of 2010, and businesses in emerging regions once again grew by double-digit percentages, Bunch said. PPG is implementing price increases in its Commodity Chemicals segment and in each of its coatings segments to fully counter rising raw materials costs, he added.
Sales Still Below 2008
“Our performance for all of 2010 demonstrates how strongly we are emerging from the recession, and we’re only now beginning to see the full earnings power of the company,” Bunch said.
“In the last two quarters, we achieved record earnings per share, and we nearly posted a full-year record despite volumes that remain well below pre-recession levels. Despite a partial recovery, 2010 sales volumes still remained $1.2 billion below 2008 levels.”
Bunch said PPG was operating with a “sharp cost and execution focus” that had cut its costs by more than $500 million since 2008. PPG also repurchased 8.1 million shares during the year.
Coatings Segment Performance
Fourth-quarter Performance Coatings segment sales increased $76 million, or 7%, over last year as a result of higher selling prices and improved volumes in every region, the company said.
Protective, marine and aerospace coatings businesses recorded double-digit percentage growth, and the automotive refinishing business showed “solid growth,” PPG said.
Industrial Coatings segment sales for the quarter rose $90 million, or 10%, over Q4 2009. Volume recovery continued in several industrial end-use markets, particularly in automotive OEM coatings, where share gain supplemented the recovery.
Asia/Pacific remained the strongest growth region, with total fourth-quarter segment sales surpassing those in the United States and Canada. Segment earnings for the quarter were $79 million, a decrease of $10 million from 2009’s fourth quarter. The benefit from improved volumes, lower costs and pricing did not fully offset raw material cost inflation, PPG said
Other Segments, Outlook
Earnings in the Optical and Specialty Materials segments increased by $10 million to $57 million, due mainly to higher sales volumes, offset slightly by increased selling and advertising costs. Segment sales for the quarter increased $23 million, or 9%.
Fourth-quarter Commodity Chemicals segment sales increased $70 million, or 23%, over the prior year due to higher pricing. Segment earnings grew $65 million.
Glass segment sales increased $35 million, or 16%, compared with the prior year. Segment income was $29 million, a $28 million improvement due to lower manufacturing costs, higher volumes and higher pricing, the company said.
“Looking ahead to 2011, we anticipate that the global economic recovery will strengthen and broaden,” Bunch said. “This should drive volume increases for PPG, which we expect to leverage into higher earnings through our continued cost focus.”