Strong showings by Performance Coatings and Industrial Coatings helped bring home a powerful third quarter for PPG Industries, the company reported Thursday (Oct. 19).
Just as its chief global competitor was unveiling a plan to shore up its own financials, Pittsburgh-based PPG announced that it had notched $3.8 billion in third-quarter net sales—an 11 percent increase over the third quarter of 2010.
|PPG reported strong quarterly performance in Performance and Industrial Coatings, which made up 60 percent of the company’s sales in 2010.|
Net income for the quarter increased to $311 million, or $1.96 per diluted share, compared to $262 million, and $1.58, respectively, in 2010.
“This is the fifth consecutive quarter in which we eclipsed our prior quarterly earnings record,” said Charles E. Bunch, chairman and CEO.
“This consistent improvement in performance, especially in light of today’s economic backdrop, demonstrates the value of our management’s aggressive focus on operations and the continuing benefit of the structural changes that we have made to the company the past few years….”
Thursday’s Q3 report by PPG, the world’s No. 2 paint and coatings company, contrasted with that of No. 1 AkzoNobel, which released a performance improvement plan in conjunction with its report.
PPG implemented higher selling prices in all 13 of its businesses over the quarter, and pricing on a corporate basis increased for the sixth consecutive quarter.
Overall volumes were flat year over year, with continued gains in Asia-Pacific, Latin America and other emerging regions offsetting lower demand in Europe and modest demand in North America, Bunch said.
“Both the Performance Coatings and Optical and Specialty Materials segments delivered record third-quarter earnings, aided by record performance in several businesses,” Bunch reported. “The Industrial Coatings segment delivered its best third-quarter earnings in more than a decade on emerging-region growth and stronger global auto production.”
Architectural coatings demand declined, “due to continued anemic construction markets,” while Commodity Chemicals showed “excellent” results despite several unplanned production outages, Bunch added.
PPG reported a strong cash position, with year-to-date cash from operations up more than 10 percent over last year. The company ended the quarter with about $1.3 billion in cash and short-term investments.
PPG also repurchased 3.25 million shares of stock in the third quarter, bringing the year-to-date total shares repurchased to 7.5 million.
Selected Segment Results
Performance Coatings segment sales for the quarter were $1.2 billion, up 10 percent over last year’s third quarter. Each business delivered higher selling prices, and foreign currency translation aided segment sales. Overall segment volumes were flat, with improvement in aerospace and automotive refinishing offsetting reductions in protective and marine coatings due to an expected decline in original-equipment ship builds.
Industrial Coatings segment sales rose $112 million to $1 billion, a 12 percent increase over last year’s third quarter. Q3 volume grew 3 percent, based on continued emerging-region growth and increased global auto builds. Each business achieved higher pricing, and favorable currency translation added 5 percent to year-over-year sales. Segment earnings for the quarter were $101 million, an increase of $15 million on the prior year’s third quarter, as volume and price gains were coupled with aggressive cost management to offset input cost inflation.
|Like AkzoNobel, PPG reported a dip in marine coatings sales, due to a decline in original-equipment ship builds.|
Commodity Chemicals segment sales were $445 million for the quarter, a 20 percent increase over the prior year’s third quarter. Higher prices offset a volume decrease attributed to unplanned production outages early in the quarter and low inventory levels.
Architectural Coatings sales were up more than 10 percent over the prior year, reflecting higher pricing imposed to address inflation. Segment earnings grew $16 million versus last year to a third-quarter record of $190 million.
The Optical and Specialty Materials segment, which includes the silicas business, delivered record third-quarter sales and all-time record quarterly earnings.
Glass segment sales were $273 million, up 5 percent over 2010 year due to higher pricing and favorable foreign currency translation.
Outlook: ‘Keeping a Watchful Eye’
Bunch said PPG expected current macro and regional economic trends to continue, and he even signaled hope for moderating of the climbing raw materials costs of recent years.
“In general, we anticipate normal seasonal fourth-quarter patterns to occur,” he said. “Raw material inflation rates are flattening, and we are in the process of implementing additional price increases in several businesses to counter the inflation we have absorbed.
“Our cash position remains strong, and we intend to continue to focus cash deployment on earnings growth initiatives. Finally, we are keeping a watchful eye on the global economy, and we are prepared to adapt to changing conditions.”