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Profit Rises in PPG’s Q4

Friday, January 22, 2016

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Acquisition activity and cost cutting measures have helped Pittsburgh-based coatings giant PPG Industries Inc. to deliver an increase in profits for its fourth quarter and full year.

“We once again delivered strong financial performance in the fourth quarter and for the full year of 2015,” said Michael H. McGarry, PPG president and CEO.

“Results improved despite the persistent, unfavorable impact of weaker foreign currencies, which were more than offset by benefits from our earnings-accretive cash deployment, improving sales volumes and our unwavering focus on costs.”

PPG reported its fourth quarter and full-year results Thursday (Jan. 21).

By The Numbers

For the fourth quarter of 2015, PPG reported net sales of $3.7 billion, which was consistent with the prior year. Net sales in local currencies grew 7 percent year-over-year, with acquisition-related sales adding 5 percent.

Michael H. McGarry
Photos: PPG Industries

Michael H. McGarry became president and CEO of PPG Industries Inc. in March 2015.

Net income for the quarter was $314 million (or $1.16 per diluted share), up from $86 million (or 31 cents per diluted share in the same quarter of 2014, according to its earnings report.

For the fiscal year, the company reported net sales of $15.3 billion, consistent with 2014 sales. Net income for the year was $1.41 billion (or $5.14 per diluted share) up from $1.13 billion (or $4.05 per diluted share) reported in 2014. Adjusted net income was $1.56 billion for the year.

Segment Results

Quarterly sales for the company’s Performance Coatings segment—comprised of Architectural Coatings (Americas and Asia Pacific), Architectural Coatings (Europe, Middle East and Africa), Protective and Marine, Aerospace and Automotive Refinish—were $2.06 billion, down $31 million versus the prior-year period.

Sales in local currencies were up 6 percent, excluding an unfavorable foreign currency translation hit of 8 percent. Acquisition-related sales totaled about $120 million, including one month of Comex sales stemming from the November 2014 acquisition, valued at $2.3 billion.

Excluding the impact of foreign currency translation and acquisitions, architectural coatings Americas and Asia Pacific sales were flat, with higher organic sales in Mexico and the U.S. offset by weaker demand in Canada, Brazil and China, the company reported.

PPG Infographic

Architectural coatings EMEA sales volumes increased by a low-single-digit percentage versus the prior-year period, as demand in the region continued to improve but remained uneven by country.

Aggregate protective and marine coatings sales volumes improved by a mid-single-digit percentage, aided by protective coatings, which included the benefit of Comex-related sales synergies, the company reported.

Aerospace coatings sales volumes declined primarily due to strong growth in the prior-year period and customer order patterns.

Comex storefront

PPG completed a $2.3 billion acquisition of Consorcio Comex in 2014.

Segment income of $250 million was up $11 million, or 5 percent, benefitting from acquisition-related earnings, primarily from Comex, and lower costs, including benefits from acquisition-related synergies. Unfavorable foreign currency translation impacted segment income by about $15 million.

Other Segments

Industrial Coatings segment sales for the fourth quarter were $1.37 billion, an increase of 2 percent over the prior-year period. Results included sales volume growth of 4 percent and acquisition-related sales growth of 6 percent partially offset by an unfavorable foreign currency impact of 7 percent.

Automotive original equipment manufacturer (OEM) coatings delivered higher sales volumes, growing in aggregate by a mid-single-digit percentage, exceeding the global growth rate of about 4 percent.

The general industrial coatings and specialty coatings and materials businesses delivered higher year-over-year growth following two consecutive quarters of sales volume declines.

PPG

“As we enter 2016, we anticipate global economic growth will continue, but at a varied pace and mixed by major economy,” said McGarry.

Packaging coatings sales volumes grew by a mid-single-digit percentage, aided by new-technology-related customer conversions.

The company’s glass segment posted net sales of $265 million for the quarter, down 3 percent year-over-year.

Outlook

“As we enter 2016, we anticipate global economic growth will continue, but at a varied pace and mixed by major economy,” according to McGarry.

“In the Asia Pacific region, growth will likely remain uneven through the year but solid on a full-year basis. The primary driver for this growth is increased consumer spending, which is beneficial to PPG as this affects the majority of our products sold in the region.”

“Economic expansion in North America is likely to continue at a modest pace, comparable to this past year, supported by multiple sectors,” he added. “Also, we expect the European economies to build on the broadening growth rates achieved in 2015, which will be favorable to PPG given about 30 percent of our sales are in that region and we have substantially reduced our cost structure there.”

McGarry says the company remains focused on delivering higher organic growth and brining coatings advances to the market.

“Also, we will continue to be aggressive on cost and productivity initiatives. Finally, our balance sheet remains strong, and we intend to continue to create shareholder value through earnings-accretive cash deployment,” McGarry concluded.

   

Tagged categories: Business conditions; Coatings manufacturers; Earnings reports; Finance; Market; PPG

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