PPG Reports Sales Growth in Q4, 2018
Global coatings supplier PPG Industries (Pittsburgh) reported, in a press release Thursday (Jan. 17), a 2 percent increase in constant currencies in fourth-quarter net sales, compared with the same quarter from the prior year. Fiscal 2018 also yielded up a 4 percent increase in net sales from continuing operations.
Net sales were reportedly roughly $3.6 billion, a 1 percent decrease from the prior year, and net sales in constant currencies grew about 2 percent year over year, which was largely attributed to higher selling prices of more than 2 percent. Sales volumes were down by 1 percent, and foreign currency translation impacted net sales by $110 million, or 3 percent. Sales related to acquisitions, net of divestitures, contributed less than 1 percent to sales growth.
For the fourth quarter, reported net income from continuing operations was $256 million, or $1.07 per diluted share, up from 2017’s fourth-quarter $148 million, with adjusted net income for the same business segment totaling $271 million, or $1.15 per diluted share.
“In the fourth quarter, we delivered net sales growth in local currencies of about 2 percent, led by higher selling prices marking seven consecutive quarters of improved pricing,” said Michael H. McGarry, PPG chairman and chief executive officer.
“These price increases, along with our ongoing cost management efforts, remain focused on offsetting continued input cost inflation, as we made further progress on recovering our operating margins toward prior-year levels. Also impacting our sales were softening global economic growth and demand declines in certain end-use markets.
“For the full year, we delivered adjusted earnings per diluted share growth despite significant and persistent raw material and logistics cost inflation, which impacted the entire coatings industry and rose sequentially throughout much of the year. In addition to achieving higher pricing, we aggressively managed our cost structure delivering about $80 million of full-year cost savings, reaching the top-end of our target. Strategically, during the past year, we announced six acquisitions, including recent announcements of SEM, Whitford and Hemmelrath.”
Cash from operations remained strong, amounting to $1.5 billion for fiscal 2018, which is in line with the previous year, according to McGarry.
Fourth-quarter sales for PPG’s Performance Coatings segment totaled $2.1 billion, up $16 million, or nearly 1 percent, from 2017. Sales in constant currencies also saw a 3 percent increase, which was attributed to higher selling prices. Acquisition-related sales totaled roughly $15 million, which includes acquiring automotive refinish products manufacturer SEM. Volumes for the segment were flat, including the customer assortment changes in the national retail do-it-yourself channel, which cut down segment sales by roughly two percent. Foreign currency translation cut net sales by about 3 percent, or $55 million.
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Organic sales for the Americas and Asia-Pacific segment of architectural coatings saw a low-single-digit percentage decline year-over-year.
Thanks to industry demand, net sales values for PPG’s aerospace coatings grew by over 10 percent. Organic sales for automotive refinish coatings were flat, which was attributed to customer inventory destocking in the U.S. and growth in other regions. Aggregate protective and marine coatings sales volumes were also up by a high-single-digit percentage. Organic sales for the Americas and Asia-Pacific segment of architectural coatings saw a low-single-digit percentage decline year-over-year, and organic sales volumes for architectural coatings in the EMEA region increased by a mid-single-digit percentage.
Segment income for the fourth quarter was $261 million, a $2 million increase over 2017’s fourth quarter. Bettering selling prices and cost management were both named contributors to the increase, though these were offset by costs of raw materials and logistics and lower sales volumes.
Compared to the prior year’s performance in the same quarter, net sales for PPG’s Industrial Coatings segment were about $1.5 billion, down $53 million, or more than 3 percent. Lower sales volumes were offset by higher selling prices of roughly 2 percent. Foreign currency translation decreased sales by about $55 million, or more than 3 percent, in comparison with 2017’s fourth quarter.
Automotive original equipment manufacturer coatings sales volumes decreased by about 5 percent, which remained in line with lower global production rates for the automotive industry and decreased automotive demand in China and Europe. Industrial coatings and specialty coatings and materials sales volumes were up by a low-single-digit percentage.
Segment income was $187 million, down $27 million, or about 13 percent from last year’s fourth quarter.
According to PPG, reported net sales from continuing operations were approximately $15.4 billion, up about 4 percent from 2017, which includes foreign currency translation of less than 1 percent, or approximately $105 million. Organic sales growth saw a 3 percent increase, while acquisition-related sales clocked in a nearly 1 percent increase.
Aggregate protective and marine coatings sales volumes were also up by a high-single-digit percentage.
PPG’s reported net income from continuing operations for fiscal was $1.3 billion, or $5.40 per diluted share, versus $1.4 billion, or $5.31 per diluted share, in 2017.
“As we look ahead, while we remain confident we are well-positioned strategically and financially, we enter 2019 with more global economic uncertainty," McGarry said.
"The carryover impact from the first-half 2018 cost inflation, significantly unfavorable year-over-year foreign currency translation and modestly lower sales volumes will impact our performance in the first half of 2019. As a result, we currently expect first quarter earnings per diluted share to be in the range of $1.18 to $1.23. We are focused on delivering increased financial results and will be providing certain detailed informationregarding our full year 2019 forecast and financial targets in a separate communication."