PPG Releases Q2 Numbers
Global coatings manufacturer PPG Industries (Pittsburgh) announced its second-quarter earnings Thursday morning (July 20), touching on a slight uptick in net sales year over year and also discussing the impact that raw material cost inflation has had on the company.
Also on Thursday, PPG approved a 13 percent dividend increase for its shareholders and announced the election of Gary R. Heminger, chairman and CEO of Marathon Petroleum Corporation, to its board of directors.
Q2 Earnings Report
Net sales in 2017’s second quarter came in at $3.8 billion, which the company says is about a 1 percent increase versus the same period in 2016.
Second-quarter net income from continuing operations was $504 million, or $1.95 per diluted share, up from the second quarter in 2016, which showed a reported net income from continuing operations of $339 million, or $1.25 per diluted share.
After the net income is adjusted, however, the year-over-year increase is smaller. Adjusted net income in 2017’s second quarter was $472 million, of $1.83 per share, while the adjusted income in Q2 2016 was $466 million, or 48 cents per diluted share.
In 2017’s figure, the adjusted net income excludes an after-tax gain from the sale of the Mexican Plaka wallboard business ($24 million), a legal settlement ($11 million), and after-tax transaction-related costs ($3 million).
“We achieved higher adjusted earnings per diluted share, increasing 6 percent year-over-year,” said Michael McGarry, PPG chairman and chief executive officer. “This improvement was despite significant raw material cost inflation and continued unfavorable foreign currency translation. We worked to offset these headwinds through aggressive cost management, including accelerated execution of our restructuring program announced in 2016, and benefits from our ongoing cash deployment.”
Earnings by Segment
In the Architectural Coatings segment, the second-quarter results vary. American and Asia Pacific sales volumes declined a low single-digit percentage while the U.S. and Canada company-owned stores’ sale volumes grew by a mid-single digit percentage.
In the Architectural Coatings segment, the second quarter results varies. The Americans and Asia Pacific sales volumes declined a low single-digit percentage while the U.S. and Canada company-owned stores’ sale volumes grew by a mid-single digit percentage.
The Easter holiday shift from first quarter to second quarter unfavorably impacted sales volumes in the Performance Coatings segment, the company noted, as volumes declined 2 percent year over year. Net sales were $2.3 billion, down $37 million, or less than 2 percent, versus 2016.
Aggregate Industrial Coatings and Specialty Coatings and Materials sales volumes increased by a mid-single digit percentage versus last year, and the company notes that this outpaced the global industrial production growth rates for the sixth consecutive quarter.
Much of the Industrial Coatings segment was positive, however, as net sales came in at $1.51 billion, up $61 million, or more than 4 percent, versus 2016. Sales volume also increased by about 3 percent and it was noted that acquisition-related sales added about $65 million. The raw materials cost inflation did hit this segment, however, as selling prices were considered “modestly lower year over year.”
McGarry added that the company looks to have a better second half in 2017.
“We expect a higher level of earnings-accretive cash deployment in the second half of 2017 versus the first half,” he said. “This deployment will likely include both acquisitions and share repurchases and we are resuming share repurchases in the third quarter. We previously communicated an intent to deploy $2.5 billion to $3.5 billion of cash on acquisitions and share repurchases in years 2017 and 2018, and are now targeting the upper-end of that range at a minimum,” McGarry concluded.
Dividends & Elections
Continuing the fiscal discussion, PPG’s board of directors approved a 5-cents-per-share increase to the company’s dividend, declaring a quarterly dividend of 45 cents per share. The last quarterly dividend increase was 11 percent in the second quarter of 2016. This is the company’s 476th consecutive dividend payment.
The board also elected Gary R. Heminger, chairman and CEO of Marathon Petroleum Corporation, to serve on the audit committee and its nominating governance committee.