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PPG Reports Sales, Volume Growth in Q2

Friday, July 20, 2018

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Global coatings supplier PPG Industries (Pittsburgh) reported increased net sales and sales volumes in its 2018 second-quarter earnings report, released Thursday (July 19), noting that a new restructuring program, which will include layoffs and the closure of a facility in Texas, is expected to realize about $85 million in savings.

Net sales were reportedly $4.1 billion, up nearly 9 percent from the same quarter in 2017, and volumes were up 3 percent. The company continues increase selling prices for some products in response to challenges, including higher raw-material costs and higher transportation costs due to rising oil prices.

PPG PLace
© iStock.com / jfarleyphoto

PPG's net sales in Q2 were reportedly $4.1 billion, up nearly 9 percent from the same quarter in 2017, and volumes were up 3 percent.

The company’s adjusted net income from continuing operations—notwithstanding nonrecurring items like $63 million related to business restructuring charges and $7 million related to the investigation into improper accounting practice by a since-terminated controller—was $468 million, up from $465 million in the second quarter of 2017.

Performance Coatings

PPG’s Performance Coatings segment, which includes architectural, protective and marine, auto refinish and aerospace coatings, saw a 9 percent increase in net sales year over year, to $2.5 billion in Q2 2018. In addition to increased sales volumes (by nearly 4 percent) and increased prices, sales in the segment were affected favorably by foreign currency translation, to the tune of $55 million.

Income in the segment was $428 million, up 6 percent compared with 2017, with increases due to higher volumes and selling prices offset some by increased raw-materials and logistics costs.

Aerospace coating sales were up more than 10 percent, the company says, due to demand in the U.S. and Asia-Pacific. Protective and marine sales volumes increased “by a low-single-digit percentage,” thanks to small increases in both parts of that market.

Architectural coatings sales volumes in the Americas and Asia-Pacific were up by a mid-single-digit margin compared with the prior year, PPG says, with sales growth in PPG’s own retail stores, but declining volumes among national retail accounts, owing to the company’s ouster from Lowe’s stores when the home-improvement brand struck an exclusivity deal with The Sherwin-Williams Company.

PPG Paints store
© iStock.com / jetcityimage

Architectural coatings sales volumes in the Americas and Asia-Pacific were up by a mid-single-digit margin compared with the prior year, PPG says, with sales growth in PPG’s own retail stores.

Architectural sales volumes in Latin America grew by a mid-single-digit margin, while volumes in Europe the Middle East and Africa were down by a low-single-digit number.

Volumes in auto refinish were up mid-single digits versus last year.

Industrial Coatings

In the Industrial segment, net sales were $1.6 billion, up nearly 9 percent versus the second quarter of 2017. Numbers were driven by increased volumes—up nearly 3 percent—and a $40 million boost from favorable currency translation. Increased raw-materials and logistics costs were not fully offset by the increased volumes and selling prices throughout the segment; income for the segment was $223 million for the quarter, down 16 percent from last year’s numbers.

Automotive OEM coatings volumes were up by a low-single digit percentage, packaging coating volumes up by a mid-single-digit margin and general industrial volumes experienced what the company only described as “solid sales volume growth.”

2017 Figures Adjusted; Restructuring Underway

PPG’s prior-year numbers are based on figures calculated after the investigation into accounting practices under former vice president and controller Mark C. Kelly, who was terminated in May. Numbers from late 2016 through early 2018 were adjusted to account for the incorrect classification of some expenses that reportedly occurred under Kelly’s direction.

PPG’s probe of the accounting improprieties wrapped up in late June; the Securities and Exchange Commission has not yet released findings related to the matter.

PPG

Protective and marine sales volumes increased “by a low-single-digit percentage,” thanks to small increases in both parts of that market.

The company also noted in its report that recently announced restructuring efforts in its architectural business should realize $85 million in savings; the move, which will involve cuts to more than 1,000 jobs and the closure of a plant near Houston, came as a result of the loss of the Lowe’s account. In the wake of the Lowe’s announcement, PPG revealed that it would be adding its Olympic stains to Home Depot stores.

In late 2016, PPG announced a global restructuring that it said would save $125 million, with up to 1,700 jobs on the chopping block, largely in regions and markets where demand was weakest. The company says it is currently realizing benefits from that action.

Editor's Note: Corrected image credit.

   

Tagged categories: Coatings manufacturers; Earnings reports; Finance; Market; PPG

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