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PPG Releases Q4, FY 2020 Earnings Report

Monday, January 25, 2021

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Global coatings company PPG released its fourth-quarter and full-year earnings report for 2020 last Thursday (Jan. 21), reporting fourth-quarter net sales of $3.8 billion, about 2% higher year over year.

PPG noted that impact of the COVID-19 pandemic included a sales volume decrease of about 1.5% and a selling price increase of about 1.5%. The four-quarter net income was reported at $272 million, with adjusted net income coming in at $378 million.

Meanwhile, full-year net sales landed at approximately $13.8 billion, down about 9% from the year prior.

PPG Chairman and CEO Michael H. McGarry focused on 2020 cashflow as well as the company’s portfolio in his comments.

“Our strong earnings momentum continued in the fourth quarter as we delivered a second consecutive quarter of record operating margins. The more than 20% increase in our adjusted EPS was the result of strengthening year-over-year sales growth in our Industrial Coatings reportable segment, led by the automotive original equipment manufacturer (OEM), general industrial and packaging coatings businesses. In addition, the global architectural coatings business continued its excellent execution as we leveraged higher year-over-year sales into strong earnings growth. Consistent with the third quarter, we achieved improved operating results despite continued weakness in several key end-use markets, including aerospace and automotive refinish coatings, which are still being heavily impacted by the ongoing pandemic.

© iStock.com / jfarleyphoto

Global coatings company PPG released its fourth-quarter and full-year earnings report for 2020 last Thursday (Jan. 21), reporting fourth-quarter net sales of $3.8 billion, about 2% higher year over year.

“In addition to improving sales performance, we delivered nearly $40 million of incremental structural cost savings from business restructuring programs, bringing full-year savings to about $115 million. These permanent cost reductions will enable higher operating earnings leverage in future quarters as we experience further volume recovery from the pandemic. We also finished the year by generating record fourth quarter operating cash flow, bringing our full year total to $2.1 billion, driven by a 180 basis-point reduction in operating working capital as a percent of sales. Finally, in the past several months, we have announced several value-creating acquisitions, with each bringing differing strategic values to our portfolio.”

Q4 By Segment

PPG’s Performance Coatings segment recorded net sales of about $2.2 billion, down about 1% year over year. Despite increases from high selling prices and acquisition-related sales, those gains were reportedly offset by lower sales volumes, which are attributed to the pandemic.

In the Architectural Coatings segment, however, EMEA’s net sales increased by a low-teen percentage and the Americas and Asia Pacific businesses were up by a mid-single-digit percentage. The PPG-Comex business, in Mexico, was also up by about 10%. However, subsegments such as aerospace coatings, had volumes down by more than 30%. In all, the segment income came in at around $299 million, down by 3% year over year.

The Industrial Coatings segment, however, had Q4 net sales of around $1.6 billion, or about 7% higher than the previous year. PPG attributes this to a demand for automotive and general industrial coatings. OEM coatings sales volumes also rose by a high-single-digit percentage. Segment income was at $282 million, up approximately 40% year over year.

“We continue to prioritize the health and safety of our employees while providing excellent support to our customers. I am proud of our global PPG team, and I want to thank our employees for their continued focus during these challenging times. To recognize our front-line and field workers for their outstanding commitment throughout the year, we accrued in the fourth quarter and are in the process of distributing about $6 million in bonuses in appreciation of their efforts. In addition, during the quarter, the PPG Foundation continued to provide relief support by donating about $2 million to communities in which we call home,” McGarry said.

FY 2020, Looking Ahead

The company’s 2020 full-year reported net income from continuing operations was about $1.1 billion, or $4.44 per diluted share, versus $1.2 billion, or $5.22 per diluted share, in 2019. Full-year 2020 adjusted earnings per diluted share from continuing operations was $5.70 compared to $6.22 in 2019.

In addition to 2020 numbers, PPG also released a list of Q1 2021 forecasts, which includes:

  • Aggregate year-over-year sales volumes are anticipated to be flat to slightly higher, differing by business and region, and factors in one fewer shipping day compared to the prior-year quarter, impacting many of our distribution-oriented businesses;
  • Total incremental structural cost benefits from restructuring actions are expected to be between $30 million and $35 million, and about $25 million of interim cost savings are expected to be sustained during the quarter;
  • Corporate expenses are expected to be about $60 million, which is similar to each of the first and fourth quarters of 2020;
  • Net interest expense is expected to be between $27 million and $29 million;
  • The company’s first quarter global ongoing effective tax rate is expected to be in the range of 24% to 25%; and
  • Beginning in 2021, the company will report adjusted earnings per diluted share excluding amortization expense relating to intangible assets from completed acquisitions which, for the first quarter of 2021, is expected to be between $1.55 and $1.61. The mid-point of this range would be over 20% higher than the comparable adjusted-per-diluted-share figure for the first quarter of 2020 which was $1.31.

“Looking ahead, overall global coatings demand continues to improve in many of the end-use markets we serve and across all our major regions, and we expect overall global economic activity to strengthen in the first half of 2021. However, due to increasing pandemic-related restrictions and certain supply chain disruptions, there is uncertainty regarding when this coatings demand growth will fully materialize. Regardless of timing, PPG is well positioned to benefit from a number of positives that are anticipated to occur in the coming quarters. These include sales volume recovery in our technology-advantaged automotive refinish and aerospace coatings businesses, an eventual inventory restocking in certain industrial end-use markets, and synergy realization and earnings accretion as we integrate recently announced acquisitions,” McGarry said.

“The performance we achieved in 2020 is a testament to our company’s capabilities and is truly the result of the fortitude of PPG’s global team as we work together to make it happen. I am looking forward to welcoming the employees from our acquisitions, and together I have no doubt that we are beginning 2021 as a stronger company.”

   

Tagged categories: Asia Pacific; Business matters; COVID-19; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Good Technical Practice; Latin America; North America; PPG; Z-Continents

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