Record Q4 Seals Banner Year for PPG
PPG Industries crowned 2013 with a blockbuster fourth quarter dominated by double-digit growth in Performance and Industrial Coatings.
Now the world's largest paint and coatings company, the Pittsburgh-based multinational turned in record fourth-quarter net sales that bested the year-ago quarter by 14 percent and a share price that crushed the 2012 figure.
“Our record fourth-quarter financial performance caps off one of the most successful years in the company’s history, both financially and strategically,” PPG chairman and CEO Charles E. Bunch reported in releasing the fourth-quarter and year-end results Thursday (Jan. 16).
The company also announced a quarterly dividend of 61 cents per share.
Q4 Sales and Earnings
PPG reported fourth-quarter net sales of $3.7 billion, up 14 percent from last year.
Fourth-quarter 2013 reported net income from continuing operations was $254 million, or $1.78 per diluted share—up 55 cents per diluted share over 2012.
(Adjusted net income was $258 million, or $1.81 per diluted share, which excludes $4 million, or 3 cents per diluted share, for acquisition-related costs.)
With a 45 percent increase in earnings per share versus last year, PPG has "now delivered 14 consecutive quarters of record adjusted earnings," Bunch said.
A bullish Charles E. Bunch called 2013 "one of the most successful years in the company’s history, both financially and strategically."
The black ink was built on "our continuing operating and cost discipline," coupled with "a higher level of organic sales growth,” Bunch said.
For the full year of 2013, the company reported:
“We delivered all-time record full-year earnings, more than replacing the earnings from the separated commodity chemicals business," said Bunch, due to "aggressive management" and "earnings accretion from cash deployed."
PPG bought back $1.0 billion in stock in 2013 and ended the year with cash and short-term investments totaling $1.75 billion.
Fourth-Quarter Segment Results
Performance Coatings net sales for the quarter were up 25 percent, to $1.4 billion. The huge division comprises Protective and Marine's six brands, the Aerospace portfolio, the 24 brands of Architectural Coatings (Americas and Asia/Pacific), and more than 20 brands in the Automotive Refinish business.
PPG's 2013 acquisition of Akzo Nobel's North American architectural coatings business was the second-largest acquisition in PPG's history.
The Architectural Coatings business ballooned on April 1, when PPG completed its $1.05 billion acquisition of Akzo Nobel's North American architectural coatings business—the second-largest acquisition in PPG's 130-year history.
PPG said the Performance Coatings increase was due primarily to acquired-business sales, partly offset by a 3 percent decline in segment volumes. Sales grew in both Aerospace and Automotive Refinish. Segment volumes continued to take a hit from lower marine new-build activity, but PPG said that decline was stabilizing.
Bunch said the company "remained slightly ahead of schedule" on achieving its cost synergy goals related to the Akzo Nobel acquisition.
Net sales in Industrial Coatings rose 10 percent over 2012 in the quarter, to $1.2 billion, driven mainly by "strong volume improvement" and acquisition-related gains, the company said. Sales volumes in Automotive OEM coatings grew by more than 10 percent globally—about triple the industry growth rate worldwide, PPG said.
North America led the volume growth in industrial coatings, while growth remained patchy in Asia and flat in Europe. Growth in Asian packaging coatings was offset by declines in Europe. Still, packaging segment earnings increased 21 percent.
Industrial maintenance coatings are part of PPG's booming Architectural Coatings business.
The good news did not extend to Architectural Coatings-EMEA (Europe, Middle East and Africa), where fourth-quarter sales volumes of residential and commerical paints slipped by 4 percent.
Still, PPG took a glass-half-full approach, noting that the first half of 2013 saw declines averaging 10 percent. Despite the sales dip, cost cutting and restructuring squeezed out segment earnings of $22 million, $13 million higher than 2012, according to PPG.
Favorable foreign currency translations added $1 million to segment net sales for the quarter, bringing the total to $466 million.
Glass segment fourth-quarter net sales grew 8 percent, to $264 million, on improved global demand for fiber glass, used in a host of products from thermoplastic composties to medical casting.
Flat-glass pricing increased, as did commercial construction-related demand. The flat-glass division primarily serves the commercial and residential construction markets.
PPG is forecasting savings of $75 million to $90 million in its "acquisition-related cost synergies" in the North American business in 2014.
Increasing global demand for fiber glass products helped drive 8 percent growth in the glass business.
Global growth is expected to be modest, Bunch said, led by broad growth in several coatings markets in the United States.
"Emerging-regions growth, while still uneven, is expected to continue at a solid pace for PPG, comparable to recent trends," Bunch said. "In Europe, which represents about one-third of our sales, economies appear to be improving but remain fragile."
Restructuring, however, should yield "measured growth" in that region, he added.
PPG offers detailed commentary regarding its financial performance, including presentation-slide content, at the PPG Investor Center. The company's conference call on its fourth-quarter and full-year performance are also available there through Jan. 30.