Coating, glass and chemical products maker PPG Industries Inc. (PPG) reported Thursday a higher profit for the third quarter, reflecting sharply lower one-time charges. On an adjusted basis, profit fell from last year on a 24% drop in net sales, yet topped market projections. Looking ahead to the fourth quarter, the Pittsburgh, Pennsylvania-based company said it expects only modest improvement in the overall economy, and also anticipates that global automotive production will remain at least at third quarter levels.
Third-quarter net income attributable to PPG was $159 million or $0.96 per share, higher than prior year's $117 million or $0.70 per share.
The latest quarter results included a charge of $2 million or $0.01 per share, to reflect the net increase in the current value of the company's obligation under its proposed asbestos settlement, which is pending court proceedings. In contrast, the prior-year quarter results included charges of $110 million or $0.67 per share for business restructuring and $3 million or $0.02 per share for the proposed asbestos settlement, partly offset by a gain of $3 million or $0.02 per share on the divestiture of the AG&S business.
On an adjusted basis, excluding items, third-quarter net income was $161 million or $0.97 per share, lower than $$227 million or $1.37 per share in the same quarter last year.
On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.89 per share for the quarter. Analysts' estimates typically exclude special items.
According to Charles Bunch, PPG chairman and chief executive officer, the company's third-quarter adjusted earnings per share showed ongoing growth over the first two quarters of 2009. The company reported adjusted earnings per share in the first and second quarters of 2009 of $0.19 and $0.91, respectively.
Net sales in the third quarter declined 24% to $3.23 billion from $4.23 billion in the prior year quarter. Eight Wall Street analysts had a consensus estimate of $3.13 billion.
The company noted that of the total sales decline, 5% was due to the 2008 divestiture of a majority interest in the automotive glass and services, or AG&S, business. Negative foreign currency translation also impacted the results badly. Year-over-year sales volumes decreased 12%, with declines in most regions, except Asia/Pacific. Selling prices fell about $150 million from last year, primarily due to lower commodity chemicals pricing.
On a segmental basis, Performance Coatings sales declined 13% from last year to $1.075 billion, mainly due to lower volumes across all businesses, as well as weaker foreign currency, despite pricing gains. Industrial Coatings segment sales dropped 19% to $824 million, due primarily to lower volumes in the automotive coatings and industrial coatings businesses, reflecting the continued severe declines in global demand.
Sales from Architectural Coatings - Europe, Middle East and Africa segment fell 12%, Optical and Specialty Materials segment sales dropped 11%, and Commodity Chemicals segment sales plunged 43% in the quarter. Glass segment sales declined to $223 million from $552 million last year, mainly due to AG&S business divestiture.
Commenting on the results, Bunch said, "In the quarter, we continued to restore profitability and to deliver strong cash generation. We benefited from our aggressive cost-reduction actions, as well as a modest improvement in demand versus the first half of 2009, stemming from a very gradual recovery in the global economy."
In its preceding second quarter, PPG had reported a sharp decline in profit to $146 million or $0.89 per share from $250.0 million or $1.51 per share last year, as sales declined in all major regions of the world, negatively impacted by foreign currency changes and business divestiture. Adjusted net income was $148 million or $0.91 per share. Net sales for the quarter fell 30% to $3.1 billion.
Amongst others in the sector, Cleveland, Ohio-based Sherwin-Williams Co. (SHW) is scheduled to report its financial results for the third quarter on October 20, 2009. Analysts expect the company to earn $1.35 per share on revenues of $2.01 billion for the quarter, lower than prior year's earnings of $1.50 per share and sales of $2.27 billion, respectively.
On October 5, specialty chemical products maker RPM International, Inc. (RPM) reported a 5% increase in profit for the first quarter to $73.03 million or $0.57 per share, aided by cost-cutting measures and improvement in gross profit margins. The Medina, Ohio-based company's net sales for the quarter were $915.95 million, down 7.1% from last year.
For the nine months of fiscal 2009, PPG reported net income attributable to the company of $194 million or $1.17 per share, lower than prior year's $467 million or $2.82 per share. Net sales fell to $9.12 billion from $12.66 billion last year.
Looking ahead to the fourth quarter, Bunch said, "we anticipate only modest improvement in the overall economy. We expect growth in Asia to continue, and we anticipate that global automotive production will remain at least at the third quarter levels, if not higher. Currency translation, which had been a headwind for PPG all year thus far, will likely shift to a tailwind. What's more, many of our businesses will exhibit normal, slower seasonal demand patterns."
PPG is currently trading at $61.19, down $0.34 or 0.55%, on a volume of 1.145 million shares.
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