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PPG Reports Sales Decrease in 2020 Q3

Wednesday, October 21, 2020

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Global coatings company PPG (Pittsburgh) released its third-quarter 2020 earnings report on Monday (Oct. 19), announcing lower net sales at $3.7 billion, or 4% lower than in 2019.

Third-quarter 2020 reported net income from continuing operations was $442 million, up from $366 million last year, while adjusted net income from continuing operations was $458 million, up from $396 million last year.

“As reported earlier this month, we delivered record operating results in the third quarter, with both of our reportable business segments delivering higher segment income than the prior year, despite continued, negative pandemic-related economic effects,” said Michael H. McGarry, PPG chairman and Chief Executive Officer.

“In aggregate, we delivered operating margins that were about 300 basis points higher than the prior year. Our continued execution of both interim and structural cost-savings initiatives is driving higher incremental earnings on improving sales volumes.

“In the quarter, we delivered about $90 million of cost savings from various interim initiatives and about $35 million of incremental structural savings from business restructuring programs, including the execution of some manufacturing footprint optimization initiatives. In addition to our earnings performance, we generated more than $800 million of cash from operations in the quarter, including the benefit of a 150-basis-point reduction in working capital as a percent of sales versus the third quarter 2019.”

Performance Coatings

The Performance Coatings segment third-quarter net sales were about $2.3 billion, roughly 3% lower than the prior year.

© iStock.com / jfarleyphoto

Global coatings company PPG (Pittsburgh) released its third-quarter 2020 earnings report on Monday (Oct. 19), announcing lower net sales at $3.7 billion, or 4% lower than in 2019.

Segment income for the third quarter was $426 million, up about $45 million, or about 12%, year-over-year. Segment income was aided by higher selling prices, cost-mitigation efforts and restructuring initiatives, partially offset by the unfavorable earnings impact from lower sales volumes stemming from the pandemic.

Within that segment, aerospace coatings sales volumes decreased by about 35% in the third-quarter, while net sales for automotive refinish coatings improved significantly compared with the prior sequential quarter, but still declined about 10% on a year-over-year basis.

Sales in the protective and marine coatings business were down a mid-single-digit percentage, driven by lower demand in all major regions except Asia-Pacific.

And year-over-year sales in architectural coatings Americas and Asia Pacific were up a low-single-digit percentage, with differences by channel and region, and in Mexico, the PPG-Comex architectural coatings business grew organic sales by a mid-single-digit percentage.

PPG adds that its architectural coatings EMEA year-over-year net sales, excluding the impact of currency and acquisitions (organic sales), increased by about 10%, driven by increased consumer demand after many countries permitted retail store re-openings following mandated closures during the second quarter.

McGarry attributed "strong year-over-year organic sales growth in global architectural coatings and continued cost management" are what drove earnings growth in the company's Performance Coatings reporting segment.

Industrial Coatings

The Industrial Coatings segment third-quarter net sales were $1.4 billion, down about $80 million, or 5%, versus the prior-year period. Segment income was about $253 million, up nearly $45 million, or approximately 23%, year-over-year.

© iStock.com / jetcityimage

Third-quarter 2020 reported net income from continuing operations was $442 million, up from $366 million last year, while adjusted net income from continuing operations was $458 million, up from $396 million last year.

Within the segment, automotive OEM coatings sales volumes differed by region but in aggregate were relatively flat compared to the prior year and above global industry auto production rates, according to PPG.

While sales revealed a mix of results, McGarry reported that PPG's leading technology and service capabilities benefited the company as demand for automotive OEM coatings and general industrial coatings began recovering in the quarter. Over that process, strong PPG operating leverage and boosting earnings in te Industrial Coatings reporting segment were generated.

Moving Forward

The company ended the third quarter with net debt of $3.5 billion, approximately $600 million lower than the second quarter. The company prepaid $1 billion of a $1.5 billion term loan maturing in April 2021. The company’s $2.2 billion revolving credit facility is currently undrawn.

“Looking ahead, we are likely to experience normal seasonal trends in the fourth quarter, especially in our European and North American architectural coatings businesses. Even with the continued uncertainty from the pandemic we expect overall economic activity to continue to recover, but in an uneven manner,” said McGarry.

“The pandemic is still significantly impacting the demand for certain coatings products—most notably, global commercial aerospace, marine and protective coatings that support the oil and gas industry. In addition, we expect that automotive refinish coatings demand in the U.S. and Europe will remain below 2019 levels until there is a return to more normal commuting patterns.”

“We will continue to prioritize the health and safety of our employees, while providing excellent support to our customers with our technology-advantaged products. I am very proud of the entire global PPG team, and I want to thank everyone for their continued focus and diligence during these challenging times. As I said last quarter, I remain confident that we are on the path to emerge from this crisis as an even stronger company, and these record quarterly results lay the foundation for delivering on this commitment,” McGarry concluded.

   

Tagged categories: Asia Pacific; Business management; Business operations; Consumer Reports; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Latin America; North America; Paint and Coating Sales; PPG; Program/Project Management; Z-Continents

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