Each major region and reporting segment achieved volume and price gains. Net income for the quarter increased to $340 million, or $2.12 per diluted share. Second quarter 2010 sales were $3.5 billion, and net income was $272 million, or $1.63 per diluted share.
“Our strong execution during the quarter enabled us to deliver excellent financial performance, including record earnings for any quarter,” said Charles E. Bunch, PPG chairman and CEO. “We implemented further pricing initiatives and managed our businesses aggressively to overcome continued input cost inflation, a global economy that has only partially recovered and several transitory impacts to some businesses’ volumes early in the quarter. Our strong performance underscores the benefits of our broad end-use market reach and the global business portfolio we have built,” Bunch said.
Bunch noted that April was the weakest month in the quarter, with negative year-over-year company volumes due to several issues including the full brunt of automotive OEM industry production curtailments due to supplier disruptions related to the March earthquake and tsunami in Japan, poor weather-related architectural painting conditions in the United States, and production downtime in the Commodity Chemicals segment. “Our sales volumes rebounded soundly after April, with most segments realizing mid-single-digit percentage volume gains in May and June versus last year,” he said.
“Our coatings segments delivered excellent results. The Performance Coatings segment established a new all-time earnings record, and the Industrial Coatings segment earnings matched the previous record. This was done despite operating margins for these segments that dropped modestly versus last year as a result of the weakened April volumes and an architectural customer bankruptcy charge,” Bunch said. He stated that coatings margins in May and June were consistent with the prior year, as volume growth resumed and prices were increased in all eight coatings businesses to counter inflationary pressures.
The company’s Optical and Specialty Materials segment achieved record quarterly sales and earnings, according to Bunch, with further geographic expansion as increased advertising capitalized on high-growth opportunities in emerging regions. Sales in the Commodity Chemicals segment grew due to higher pricing and earnings doubled, despite increased maintenance costs and lower facility utilization due to scheduled and unscheduled downtime. Glass segment results were up notably versus last year based on improved fiber glass pricing, he added.
“We anticipate the global economic recovery will continue, although at its current uneven pace,” Bunch said. “The resumption of automotive OEM production and our position in high-growth businesses and regions, such as aerospace and Asia/Pacific, will supplement PPG’s growth in the remainder of the year.” He noted that although inflation has moderated somewhat, PPG intends to secure additional pricing in businesses where it has been unable to fully offset inflation despite aggressive cost management and further pricing actions this past quarter. These factors are expected to be coupled with continued positive price trends in the Commodity Chemicals segment, he said.
“Lastly, we are continuing to utilize our strong cash position. In the second half of the year, we expect to deploy $500 million to $1 billion of cash focused on earnings accretion, and we will continue our heritage of returning cash to our shareholders.” Bunch said that over the past 12 months, the company has returned 100 percent of cash generated from operations to shareholders in the form of dividends and share repurchases.
PPG reported today that it ended the quarter with approximately $1.25 billion in cash and short-term investments. During the quarter, the company finalized the acquisitions of Equa-Chlor and Ducol Coatings and announced its agreement to acquire Dyrup A/S.
Included in the company’s second quarter Architectural Coatings – EMEA (Europe, Middle East and Africa) segment results is a charge of approximately $9 million related to the second quarter bankruptcy filing of a U.K.-based “do-it-yourself” (DIY) home center customer. This charge was offset by a $9 million net benefit stemming primarily from a bargain purchase gain reflecting the excess of the fair value of the net assets acquired from Equa-Chlor during the quarter over the price paid. This benefit was itemized separately in the company’s segment reporting and is not included in the company’s Commodity Chemicals segment results.
Performance Coatings segment sales for the quarter were $1.2 billion, up $119 million, or 11 percent, versus last year’s second quarter. Each business delivered higher selling prices, and foreign currency translation aided segment sales. Overall segment volumes were flat with improved volumes in aerospace and automotive refinish offsetting lower architectural coatings volumes, due principally to the impact of poor weather conditions in April. Segment earnings grew $14 million to an all-time quarterly record of $204 million, reflecting the benefit from the higher sales, as higher selling prices and lower overhead costs further countered persistent raw material cost inflation.
Industrial Coatings segment sales rose $136 million, or 14 percent, to $1.1 billion versus last year’s second quarter. Despite automotive OEM industry production curtailments stemming from the Japan crisis, the segment realized volume growth in the quarter, with Asia/Pacific posting the highest regional growth rate followed by Europe. Each business achieved higher pricing, and favorable currency translation added 8 percent to year-over-year sales. Segment earnings for the quarter were $115 million, an increase of $3 million from the prior year’s second quarter as volume and price gains were coupled with aggressive cost management to offset cost inflation.
Sales for the Architectural Coatings – EMEA segment for the quarter of $611 million increased $111 million, or 22 percent, versus the prior year. Foreign currency translation represented two-thirds of the increase, with positive volume and price accounting for the remainder. Segment earnings of $50 million matched the prior year. Positive results from volume growth, strong cost controls and currency translation were countered by the $9 million charge stemming from the bankruptcy filing of the U.K.-based home center customer.
The Optical and Specialty Materials segment delivered record quarterly sales and earnings. Segment sales were $326 million for the quarter, up $25 million, or 8 percent, versus the prior year. Segment earnings improved $4 million to $90 million, as the benefit from higher sales, including 30 percent growth in emerging regions, partly offset growth-focused increases in selling and advertising costs.
Commodity Chemicals segment sales were $470 million for the quarter, increasing $110 million, or 31 percent, versus the prior year largely due to higher pricing. These higher prices were also a key factor in segment earnings growing to $106 million, up $53 million, despite notably higher maintenance costs due to planned and unplanned outages.
Glass segment sales were $274 million, up $27 million, or 11 percent, compared with the prior year as a result of improved volumes, fiber glass pricing and favorable foreign currency translation. Segment income was $29 million, an improvement of $13 million.
PPG: BRINGING INNOVATION TO THE SURFACE.™
PPG Industries' vision is to continue to be the world’s leading coatings and specialty products company. Through leadership in innovation, sustainability and color, PPG helps customers in industrial, transportation, consumer products, and construction markets and aftermarkets to enhance more surfaces in more ways than does any other company. Founded in 1883, PPG (ppg.com) has global headquarters in Pittsburgh and operates in more than 60 countries around the world. Sales in 2010 were $13.4 billion. PPG shares are traded on the New York Stock Exchange (symbol: PPG).
PPG will provide detailed commentary regarding its financial performance, including presentation-slide content, on the PPG Investor Center at ppg.com at 1 pm. ET today, July 21. The company will hold a conference call to review its second quarter financial performance today at 2 pm. ET. The dial-in numbers are: in the United States, 866-730-5770; international, 857-350-1594; passcode 48384454. The conference call also will be available in listen-only mode via Internet broadcast from the PPG Investor Center at ppg.com (Windows Media Player). A telephone replay will be available today, July 21, beginning at approximately 5 pm. ET, through Thursday, Aug. 4, at 5 pm. ET. The dial-in numbers for the replay are: in the United States, 888-286-8010; international, 617-801-6888; passcode 71605887. A Web replay also will be available on the PPG Investor Center at ppg.com, beginning at approximately 5 pm. ET, today, July 21, 2011, through Friday, July 20, 2012.
Statements in this news release relating to matters that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 reflecting the company’s current view with respect to future events or objectives and financial or operational performance or results. These matters involve risks and uncertainties as discussed in PPG Industries’ periodic reports on Form 10-K and Form 10-Q, and its current reports on Form 8-K, filed with the Securities and Exchange Commission (SEC). Accordingly, many factors could cause actual results to differ materially from the company’s forward-looking statements.
Among these factors are global economic conditions, increasing price and product competition by foreign and domestic competitors, fluctuations in cost and availability of raw materials, the ability to maintain favorable supplier relationships and arrangements, difficulties in integrating acquired businesses and achieving expected synergies therefrom, the ability to penetrate existing, developing or emerging foreign and domestic markets, and economic and political conditions in international markets, foreign exchange rates and fluctuations in such rates, fluctuations in tax rates, the impact of future legislation, the impact of environmental regulations, unexpected business disruptions and the unpredictability of possible future litigation, including litigation that could result if the asbestos settlement discussed in PPG’s filings with the SEC does not become effective. However, it is not possible to predict or identify all such factors. Consequently, while the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.
Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on PPG’s consolidated financial condition, results of operations or liquidity.
Forward-looking statements speak only as of the date of their initial issuance, and PPG does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.
PPG industries and consolidated subsidiaries condensed statement of operations (unaudited) detail is available online.
Vince Morales, PPG Investor Relations
P: 412-434-3740 / E: vmorales[.]ppg.com.