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Sales Up, Volumes Largely Flat for PPG in Q1

Friday, April 20, 2018

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Pittsburgh-based coatings firm PPG released its first-quarter financial report for 2018 on Thursday (April 19), indicating a 9 percent increase in net sales over the prior year, totaling $3.8 billion, while the company noted that an audit is ongoing to investigate possibly faulty accounting that may have underreported expenses for the quarter.

First Quarter Financials

The net income for PPG’s first quarter from continuing operations totaled $347 million, or $1.38 per diluted share, with adjusted net income totaling $350 million, an over 4 percent increase comapred to the first quarter of 2017.

“In the first quarter, selling price initiatives continued to gain momentum with increases across all regions that totaled nearly 2 percent. This is our most significant sequential improvement since raw material inflation began approximately one year ago and includes an almost 200 basis points of sequential improvement in the Industrial Coatings segment,” said Michael H. McGarry, PPG chairman and chief executive officer.

© iStock.com / JoeCollver

Pittsburgh-based coatings firm PPG released its first-quarter financial report for 2018 on Thursday (April 19), indicating a 9 percent increase in net sales over the prior year, totaling $3.8 billion, and a marginal increase in overall sales volume.

“During the quarter, we experienced further raw material inflation and higher logistics costs across all of our businesses. We are continuing to prioritize working with our customers to further offset the impact of inflation. These efforts, along with our continued focus on operational excellence are expected to aid our margin recovery efforts.”

McGarry also noted that in the Performance Coatings segment, “sales volumes were flat year-over-year as above-market growth in aerospace coatings was offset by lower European architectural coatings demand.” In Industrial Coatings, sales volumes increased by 1.5 percent thanks to solid growth in both the general industrial and packaging coatings sectors.

Activity by Segment

First quarter net sales for the Performance Coatings segment were roughly $2.2 billion, up $148 million, or 7 percent, compared with 2017’s first quarter. Sales volumes were flat, partially due to fewer shipping days, which negatively impacted distribution businesses.

Aerospace coatings sales volumes also increased by a high-single-digit percentage due to increased demand in the U.S. and Asia-Pacific. Organic sales for architectural coatings in the same areas advanced a low-single-digit percentage year-over-year. Protective and marine coatings sales volumes were also slightly higher year-over-year for the third straight quarter.

First-quarter segment income totaled $285 million, mirroring the first quarter of 2017.

PPG

The net income for PPG’s first quarter from continuing operations totaled $347 million, or $1.38 per diluted share, with adjusted net income totaling $350 million, an over 4 percent increase comapred to the first quarter of 2017.

The Industrial Coatings segment reported net sales of $1.6 billion for the first quarter, up nearly $152 million, or more than 10 percent, from 2017’s Q1. Year-over-year sales volumes also increased by 1.5 percent. Sales volume growth took a hit from businesses executing selling price initiatives, which resulted in certain business "being turned away."

Automotive OEM coatings sales volumes were in line with 2017. Sales volumes for general industrial coatings and specialty coatings and materials outpaced global industrial production growth rates for the ninth consecutive quarter.

First-quarter segment income was $240 million, down $36 million, or 13 percent.

Restructuring measures to be taken in both segments are slated to provide cost savings between $50 million and $55 million in 2018.

Report Error

As the report was being finalized, PPG received a notice that there had been potential violations of the company’s “accounting policies and procedures regarding the failure to accrue certain specified expenses in the first quarter.” After a preliminary review, PPG pinpointed $1.4 million of expenses that should have been accrued in the first quarter. Earnings reported today reflect that accrual.

“The report also alleges that there may have been other unspecified expenses, potentially up to $5 million in the aggregate, that were improperly not accrued in the first quarter,” PPG noted. “The Audit Committee of the company’s Board of Directors is overseeing an investigation of the matters set forth in the report, with the assistance of outside counsel. The company is currently unable to predict the timing or outcome of the investigation and will move with diligence.”

   

Tagged categories: Business matters; Business operations; Earnings reports; Finance; PPG

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