Coatings Industry News

Main News Page

PPG Sees Volumes Grow in Q3

Friday, October 21, 2016

Comment | More

Led by growth in its Industrial Coatings segment, PPG reported an improvement in year-over-year volumes across both its coating segments in the third quarter of 2016, the company announced with the release of its quarterly financial results Thursday (Oct. 20).

Michael H. McGarry, chairman and chief executive officer of the Pittsburgh-based paint and coatings manufacturer, noted that general industrial and packaging coatings continued to outpace their respective markets.

Additionally, the Performance Coatings segment saw a modest volume increase, with architectural coatings growth in the U.S. and Canada region and in Mexico partially offset by slight declines in architectural coatings – Europe, Middle East and Africa and persistently weak demand for marine coatings, according to McGarry.

PPG Chairman and CEO McGarry
Images courtesy of PPG

“Our third quarter global sales volumes grew 1.6 percent despite a noticeable and broad deceleration of volume growth trends in Europe, where most of our coatings businesses experienced lower growth rates,” said chairman and chief executive officer Michael H. McGarry.

“Versus our expectations at the beginning of the quarter, our third quarter earnings were impacted by slower-than-expected volume growth rates in Europe and higher-than-anticipated unfavorable foreign currency translation stemming from weakening in the Mexican peso and British pound,” McGarry said.

“In addition, we had higher spending on growth-related initiatives primarily to support new product launches.”

Sales, Income and Shares

PPG reported net sales of $3.8 billion in Q3 2016, an increase of almost 2 percent over the prior year, although sales were hurt by unfavorable foreign currency translation to the tune of approximately $65 million, or almost 2 percent.

Sales volume reportedly went up 1.6 percent, with acquisition-related sales adding more than 2 percent, although partly offset by a slight decline in selling prices.

McGarry noted that the company saw growth in this area “despite a noticeable and broad deceleration of volume growth trends in Europe, where most of our coatings businesses experienced lower growth rates compared to the second quarter.”

The company reported a net loss from continuing operations of $201 million for the quarter, or $0.75 per share.

It saw $415 million in adjusted net income from continuing operations, or $1.56 per share. This figure does not include an after-tax charge of $616 million, or $2.31 per share for previously disclosed settlement charges, PPG noted.

PPG Q3 2016 Segments

PPG reported that volumes improved across its two coatings reporting segments, led by growth in its Industrial Coatings segment, where general industrial and packaging coatings continued to outpace their respective markets. Volumes grew modestly in the Performance Coatings segment.

“We grew adjusted earnings per share by 1 percent versus the prior year, which is well below our expectations but reflective of the sluggish global economy,” McGarry said.

In Q3 2015 the company reported net income and earnings per diluted share from continuing operations of $415 million and $1.52, respectively. Adjusted net income for that period was $421 million, or $1.54 per diluted share, including after-tax charges for pension settlement and transaction-related costs totaling $6 million, or $0.02 cents per diluted share.

The effective tax rate for Q3 2016 was 52.5 percent, and the adjusted effective tax rate was 24.4 percent, versus 24 percent for each in Q3 2015. 

Figures for both reporting periods do not include financial results for the recently divested flat glass business, which are now reported as discontinued operations, PPG explained.

“We continued to execute on our strategic objectives during the quarter, including annuitizing about $1.8 billion of pension obligations and announcing the sale of our ownership interest in two Asian fiber glass joint ventures,” McGarry stated.

“Also, on Oct. 1, we finalized the sale of both the European fiber glass and flat glass businesses,” he added.

PPG previously reported a cash deployment range of $2 billion to $2.5 billion on acquisitions and share repurchases for the combined years 2015 and 2016. To date, it has spent $1.85 billion, including about $250 million for share repurchases Q3 2016.

Additionally, the company’s board of directors recently authorized another $2 billion share repurchase program. This is on top of the company’s existing share repurchase authorization, which was approved in 2014 and had approximately $520 million remaining as of Sept. 30.

PFG Taiwan

PPG had announced in September that it would divest its 50 percent ownership interests in two PFG Fiber Glass joint ventures to Nan Ya Plastics Corp., which held the other 50 percent ownership.

As of Oct. 20, PPG reported cash and short-term investments totaling approximately $1 billion at the end of Q3 2016. This figure excludes about $1 billion of gross proceeds from the two recently divested businesses, along with the pending sale of its 50 percent ownership interests in two Asian fiber glass joint ventures. The company stated it expects only modest tax leakage from these divestments.

Performance Coatings Results

Net sales for the performance coatings segment were reported at $2.22 billion, down $17 million, or less than 1 percent, year-over-year.

Sales volumes grew about 1 percent, and acquisition-related sales added approximately $15 million, or less than 1 percent versus the prior-year period.

The segment felt the effects of unfavorable foreign currency translation, to the tune of about $45 million, or 2 percent, which more than offset modestly favorable pricing, PPG noted.

Income for the segment was $368 million, having declined 3 percent, or $11 million, for the quarter compared to the prior year. Unfavorable foreign currency translation, including the Mexican peso and British pound, had a negative effect on segment income by $10 million year-over-year.

Higher sales volumes generated increased segment income, but were reportedly offset by about $15 million of incremental growth-related spending.

Sales growth continued at a low-single-digit percentage rate in constant currencies for automotive refinish coatings. This was credited to higher end-use demand in the Asia Pacific region but was partly offset by modest European demand declines.

Aerospace saw a low-single-digit percentage increase in sales volumes year-over-year, consistent with the past quarter.

PPG Garage Door

Sales volumes improved by a low- to mid-single-digit percentage for architectural coatings – Americas and Asia Pacific, versus a weak prior-year comparable period.

For protective and marine coatings, sales volumes dipped by a mid-single-digit percentage. Gains in protective coatings were more than offset by declines in marine coatings as a result of lower shipbuilding activity in Asia Pacific, the company explained.

Sales volumes declined by a low-single-digit percentage in architectural coatings – EMEA, led by weakness in central Europe.

Sales volumes improved by a low- to mid-single-digit percentage for architectural coatings – Americas and Asia Pacific, versus a weak prior-year comparable period. Volumes in the U.S. and Canada company-owned stores network and national retail account (do-it-yourself, or DIY) channels improved, the company said, including certain new product sales at several major retail customers. In the U.S. independent dealer channel, sales volumes were flat year-over-year.

In Latin America, Mexico constant currency sales grew at more than double the Mexican gross domestic product (GDP) growth rate, and business expansion continued in Central America.

Industrial Coatings Performance

In the Industrial Coatings segment, Q3 2016 net sales were $1.44 billion, an increase of $83 million, or more than 6 percent, compared to the previous year.

Sales volumes rose by almost 4 percent, led by growth in the Asia Pacific region and Europe, although European volume growth had weakened compared to previous quarters. Acquisition-related sales added approximately 5 percent, or about $75 million.

Unfavorable foreign currency translation reduced sales by more than 1 percent, or approximately $15 million.


Sales volumes dipped by a mid-single-digit percentage for protective and marine coatings. Gains in protective coatings were more than offset by declines in marine coatings as a result of lower shipbuilding activity in Asia Pacific, PPG said.

Segment income was reported at $249 million for Q3, up $8 million, or 3 percent, from the Q3 2015 as a result of higher sales volumes and continued cost management. Acquisition-related income also contributed to segment gains, but at a level that is currently below the average segment margin.

Unfavorable foreign currency translation, primarily from the Mexican peso, reduced segment income by about $5 million.

Automotive original equipment manufacturer (OEM) coatings sales volumes were consistent with global industry growth rates, increasing by a low- to mid-single-digit percentage versus a year ago.

General industrial coatings and specialty coatings and materials aggregate sales volumes were also up by a mid-single-digit percentage and outpaced growth in global industrial production for the third consecutive quarter. This was credited to strong Asian demand offsetting the continued soft end-use market in the U.S. and Canada region.

Packaging coatings sales volumes also saw growth of a low- to mid-single-digit percentage, driven by ongoing new-technology conversions and despite comparison to strong growth in the prior-year period.

Glass Performance

Net sales for the glass segment were reported at $129 million, down $2 million, or 2 percent, year-over-year. Higher sales volumes reportedly helped to offset the unfavorable impact of foreign currency translation. Volumes increased in Europe and were lower in the U.S. and Canada region.

Aggressive cost-management efforts helped the segment achieve income of $12 million for the quarter, up $6 million versus the prior-year period.

Third quarter financial results for the Glass segment comprise PPG’s global fiber glass operations.

Results for the flat glass business are presented as discontinued operations for current and all prior periods.

Q4 Outlook

The net income loss reported in Q3 was not unexpected, due in part to pension settlement charges, the  company had indicated in an Oct. 7 release.

At the time, McGarry noted, "We are disappointed with this quarter’s EPS [earnings per share] growth rate as we continue to operate in a sluggish economic environment with no clear near-term catalyst for improving global GDP growth.”

He then acknowledged that the company was reviewing potential actions to reduce its overall cost structure, both through broad global operating-cost improvements and targeted regional actions where economic conditions are weakest.

He noted that the cost actions would be in addition to the restructuring program announced in 2015, adding that the company would "maintain appropriate spending on initiatives focused on accelerating our organic growth rate.”

In looking toward the fourth quarter, McGarry said the company anticipates “a continuation of only modest improvements in global demand” and that its year-over-year earnings growth rates will be comparable to or slightly higher than the third quarter.

He also reiterated its plan to review various restructuring scenarios to reduce structural operating and functional costs, with an emphasis in regions or end-use markets where conditions are the weakest.

“We will, however, continue appropriate investments on growth-related initiatives,” he explained.

The company expects to use at least $650 million of cash in the fourth quarter, McGarry added, which he said will put it at the top end of its earnings-accretion-focused cash deployment target.


Tagged categories: Aerospace; Architectural coatings; Asia Pacific; Automotive coatings; Business matters; Coating Materials; Coatings manufacturers; Earnings reports; EMEA (Europe, Middle East and Africa); Fiberglass; Finance; Glass; Latin America; Marine Coatings; Market trends; North America; OEM (Original Equipment Manufacturers); PPG; Protective Coatings

Comment Join the Conversation:

Sign in to our community to add your comments.

Tarps manufacturing, Inc.

Paint BidTracker

Strand’s Industrial Coatings

Sauereisen, Inc.


Modern Safety Techniques

HoldTight Solutions Inc.

NLB Corporation


Technology Publishing Co., 1501 Reedsdale Street, Suite 2008, Pittsburgh, PA 15233

TEL 1-412-431-8300  • FAX  1-412-431-5428  •  EMAIL

The Technology Publishing Network

PaintSquare the Journal of Protective Coatings & Linings Paint BidTracker

EXPLORE:      JPCL   |   PaintSquare News   |   Interact   |   Buying Guides   |   Webinars   |   Resources   |   Classifieds
REGISTER AND SUBSCRIBE:      Free PaintSquare Registration   |   Subscribe to JPCL   |   Subscribe to PaintSquare News
MORE:      About   |   Privacy Policy   |   Terms & Conditions   |   Support   |   Site Map   |   Search   |   Contact Us