PPG Reports First Quarter 2019 Financial Results
-
Net sales of approximately $3.6 billion; flat versus prior year in
constant currencies
-
Reported earnings per diluted share from continuing operations of
$1.31 and adjusted earnings per diluted share from continuing
operations of $1.38
-
Continued operating margin recovery year-over-year driven by further
selling price realization and cost management
-
Completed acquisitions of Whitford and Hemmelrath
PITTSBURGH--(BUSINESS WIRE)--
PPG (NYSE:PPG) today reported first quarter 2019 net sales of
approximately $3.6 billion, down about 4 percent versus the prior year.
Net sales in constant currencies were flat with the prior year aided by
higher selling prices of 2.6 percent. Sales volumes were down about 3
percent versus the prior year in aggregate. Approximately half of this
volume decrease was related to the previously announced architectural
coatings customer-assortment changes in the national retail
do-it-yourself (DIY) channel. Unfavorable foreign currency translation
impacted net sales by more than 4 percent, or about $165 million, and
acquisition-related sales, net of divestitures, added less than 1
percent to sales growth.
First quarter 2019 reported net income from continuing operations was
$312 million, or $1.31 per diluted share, and adjusted net income from
continuing operations was $330 million, or $1.38 per diluted share.
First quarter 2018 reported net income from continuing operations was
$328 million, or $1.31 per diluted share, and adjusted net income from
continuing operations was $357 million, or $1.42 per diluted share. For
the first quarter 2019, the reported and adjusted effective tax rate was
about 24 percent, higher than the first quarter 2018 reported and
adjusted effective tax rate of approximately 21 percent. Reconciliations
of the reported to adjusted figures are included below.
“First quarter operating margins were higher than the prior year,
despite a challenging global macro-economic environment and industry
demand declines in certain markets. We achieved improved margins through
continued selling-price initiatives. This marks the eighth consecutive
quarter with improved sequential pricing,” said Michael H. McGarry, PPG
chairman and chief executive officer. “We continued to experience cost
inflation in raw materials, logistics and wages, and have additional
initiatives under way to offset the cumulative impacts from this
inflationary cycle.
“During the first quarter, we achieved strong double-digit percentage
sales volume growth in our aerospace and protective and marine coatings
businesses. However, our aggregate sales volumes were lower due to
weaker industry demand in automotive OEM and in certain segments of
general industrial coatings. In addition, our focus on margin recovery
resulted in us passing on certain, modest levels of business during the
quarter.
“We are happy to welcome SEM, Whitford and Hemmelrath to the PPG family,
having now closed all three recently announced acquisitions. Our
pipeline for acquisitions remains active and we continue to focus our
cash deployment on maximizing long-term shareholder value,” said McGarry.
“As we look ahead to the second quarter compared with the prior year, we
expect industry demand in several of our markets to remain mixed, but
anticipate gradual improvement over the first quarter of this year. We
will continue to aggressively manage our cost structure, work to secure
additional pricing to reflect the value of products we sell, and
integrate our recent acquisitions. We currently expect second quarter
earnings per diluted share to be in the range of $1.76 to $1.86,
including unfavorable currency translation impacts similar to those
realized in the first quarter,” McGarry added.
“More broadly, we remain optimistic that economic activity will improve
in the second half of the year, particularly in China. We will continue
to monitor the macro environment and be prepared to implement further
cost-savings initiatives, if warranted. We are still targeting full-year
sales growth of 3 to 5 percent and adjusted earnings-per-share growth of
7 to 10 percent, both excluding currency translation impacts,” McGarry
concluded.
First Quarter 2019 Reportable Segment Financial Results
-
Performance Coatings segment first quarter net sales were $2.1
billion, down $52 million, or about 2 percent, versus the prior year.
Sales in constant currencies increased by about 2 percent, driven by
increased selling prices. Acquisition-related sales were approximately
$15 million, primarily the acquisition of automotive refinish products
manufacturer SEM. Segment volumes were lower by about 2 percent,
including the prior year national retail do-it-yourself (DIY)
customer-assortment changes, which reduced segment sales by more than
2 percent, or about $60 million year-over-year. Unfavorable foreign
currency translation lowered net sales by about $85 million, or nearly
4 percent.
Aerospace coatings net sales volumes grew over 10 percent for the fourth
consecutive quarter, supported by growth across all major technology
platforms and outpacing strong industry demand. Organic sales results
for automotive refinish coatings were modestly lower as soft industry
demand in Europe was partially offset by solid growth in emerging
regions. Aggregate sales volumes in the protective and marine coatings
business increased by about 10 percent, with positive contributions from
both segments. Year-over-year organic sales in architectural coatings –
Americas and Asia-Pacific declined a high-single-digit percentage, with
differences by channel and region. In the U.S. and Canada, company-owned
architectural coatings same-store sales grew by a low-single-digit
percentage. Aggregate year-over-year volumes in the DIY national retail
and independent dealer channels declined significantly driven by the
customer-assortment changes. Latin American architectural coatings
organic sales volumes were modestly lower due to a shift in quarterly
timing of the Easter holiday promotion versus the prior year.
Architectural coatings – EMEA organic sales increased by a
mid-single-digit percentage for the second consecutive quarter, with
solid contributions from both selling price increases and sales volume
growth.
Segment income for the first quarter was $297 million, up $17 million,
or about 6 percent, year-over-year, including unfavorable foreign
currency translation impacts of about $10 million. Segment income was
aided by higher selling prices and continued execution of cost
management and restructuring initiatives, offset by raw material and
logistics cost inflation and the impact from lower architectural
coatings DIY retail sales volumes in the U.S.
-
Industrial Coatings segment first quarter net sales were about $1.5
billion, down $105 million, or 6 percent, versus the prior-year
period. Higher selling prices of more than 2 percent partially offset
lower sales volumes of about 5 percent. Acquisition-related sales were
approximately $15 million, driven by the acquisition of Whitford,
which was finalized in March. Unfavorable foreign currency translation
lowered sales by about $80 million, or about 5 percent, versus the
prior year.
Automotive original equipment manufacturer (OEM) coatings sales volumes
decreased by a high-single-digit percentage year-over-year, consistent
with lower global automotive industry production rates, including a
pronounced decrease in China demand. Selling prices for this business
were higher in each major region and were comparable to the company
average. For the industrial coatings business, sales volumes decreased
versus the prior year, mainly due to lower industrial production demand
in most regions. Packaging coatings sales volumes decreased by a
low-single-digit percentage year-over-year in comparison to above-market
growth in the prior year quarter stemming from technology-based customer
conversions.
Segment income for the first quarter was $218 million, down $21 million,
or about 9 percent, year-over-year, including unfavorable foreign
currency translation impacts of about $10 million. Segment income was
impacted by continued raw material and logistics cost inflation and
lower sales volumes related to lower global industrial activity,
partially offset by improving selling prices and strong cost management.
Businesses within both reporting segments are continuing to aggressively
manage costs and execute previously announced restructuring initiatives.
Restructuring actions delivered about $20 million of cost savings in the
first quarter, consistent with company targets. Also, combined first
quarter corporate and legacy expenses were about $50 million and are
expected to be $45 to $50 million in the second quarter.
The company continues to work on the previously communicated strategic
review of its business portfolio and remains committed to finalizing the
review by the end of the second quarter 2019.
PPG: WE PROTECT AND BEAUTIFY THE WORLD™
At PPG (NYSE:PPG), we work every day to develop and deliver the paints,
coatings and materials that our customers have trusted for more than 135
years. Through dedication and creativity, we solve our customers’
biggest challenges, collaborating closely to find the right path
forward. With headquarters in Pittsburgh, we operate and innovate in
more than 70 countries and reported net sales of $15.4 billion in 2018.
We serve customers in construction, consumer products, industrial and
transportation markets and aftermarkets. To learn more, visit www.ppg.com.
Additional Information
PPG will provide detailed commentary regarding its financial
performance, including presentation-slide content, on the PPG
Investor Center at www.ppg.com at 1 p.m. ET today, April 18. The
company will hold a conference call to review its first quarter 2019
financial performance today at 2 p.m. ET. Participants can pre-register
for the conference by navigating to http://dpregister.com/10129974.
The conference call also will be available in listen-only mode via
Internet broadcast from the PPG
Investor Center at www.ppg.com (Windows Media Player). A telephone
replay will be available today, April 18, beginning at approximately
4:30 p.m. ET, through May 2 at 11:59 p.m. ET. The dial-in numbers for
the replay are: in the United States, 877-344-7529; international,
+1-412-317-0088; passcode 10129974. A Web replay also will be available
on the PPG
Investor Center at www.ppg.com, beginning at approximately 4:30 p.m.
ET today, April 18, 2019, through April 15, 2020.
Forward-Looking Statements
Statements contained herein relating to matters that are not historical
facts are forward-looking statements reflecting PPG’s current view with
respect to future events and financial performance. These matters within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
involve risks and uncertainties that may affect PPG Industries’
operations, as discussed in the company’s filings with the Securities
and Exchange Commission pursuant to Sections 13(a), 13(c) or 15(d) of
the Exchange Act, and the rules and regulations promulgated thereunder.
Accordingly, many factors could cause actual results to differ
materially from the forward-looking statements contained herein. Such
factors include global economic conditions, increasing price and product
competition by foreign and domestic competitors, fluctuations in cost
and availability of raw materials, the ability to achieve selling price
increases, the ability to recover margins, customer inventory levels,
the ability to maintain favorable supplier relationships and
arrangements, the timing of realization of anticipated cost savings from
restructuring initiatives, the ability to identify additional cost
savings opportunities, difficulties in integrating acquired businesses
and achieving expected synergies therefrom, economic and political
conditions in international markets, the ability to penetrate existing,
developing and emerging foreign and domestic 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, the effectiveness of our internal
control over financial reporting, the unpredictability of existing and
possible future litigation, including asbestos litigation, and
governmental investigations. However, it is not possible to predict or
identify all such factors. Consequently, while the list of factors
presented here and in our amended Annual Report on Form 10-K are
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 compared with those anticipated in the forward-looking
statements could include, among other things, lower sales or earnings,
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.
All information in this release speaks only as of April 18, 2019, and
any distribution of this release after that date is not intended and
will not be construed as updating or confirming such information. PPG
Industries undertakes no obligation to update any forward-looking
statement, except as otherwise required by applicable law.
|
| |
| |
Regulation G Reconciliation - Net Income and Earnings per
Diluted Share |
($ in millions, except per-share amounts)
|
|
|
|
|
|
|
| | First Quarter | | First Quarter |
|
|
| 2019 | | 2018 |
|
|
| $ |
| EPS | | $ |
| EPS |
|
Reported net income from continuing operations
| |
$
|
312
| |
|
$
|
1.31
| | |
$
|
328
|
|
$
|
1.31
|
|
Acquisition-related costs
| |
5
| | |
0.02
| | |
—
| |
—
|
|
Environmental remediation charges
| |
8
| | |
0.03
| | |
26
| |
0.10
|
|
Costs associated with ongoing accounting
investigations
| |
3
| | |
0.01
| | |
—
| |
—
|
|
Release of business restructuring reserves
| |
(2
|
)
| |
(0.01
|
)
| |
—
| |
—
|
|
Accelerated depreciation and other costs from restructuring actions
| |
4
| | |
0.02
| | |
—
| |
—
|
|
Costs related to a customer assortment change
| |
—
|
|
|
—
|
| |
3
|
|
0.01
|
|
Adjusted net income from continuing operations, excluding
non-recurring items
|
|
$
|
330
|
|
|
$
|
1.38
|
| |
$
|
357
|
|
$
|
1.42
|
| | | | | | | | | | | | | |
|
|
|
|
| First Quarter |
| First Quarter |
|
|
| 2019 | | 2018 |
| | Income |
| |
| | | Income |
| |
| |
| | Before | | | | | | Before | | | | |
| | Income | | Tax | | Effective | | Income | | Tax | | Effective |
|
|
| Taxes |
| Expense |
| Tax Rate | | Taxes |
| Expense |
| Tax Rate |
|
Effective tax rate, continuing operations
| |
$
|
419
| | |
$
|
102
| | |
24.3
|
%
| |
$
|
421
| | |
$
|
87
| | |
20.7
|
%
|
|
Acquisition-related costs
| |
7
| | |
2
| | |
23.4
|
%
| |
—
| | |
—
| | |
—
|
%
|
|
Environmental remediation charges
| |
10
| | |
2
| | |
24.3
|
%
| |
34
| | |
8
| | |
25.1
|
%
|
|
Costs associated with ongoing accounting investigations
| |
4
| | |
1
| | |
24.3
|
%
| |
—
| | |
—
| | |
—
|
%
|
|
Release of business restructuring reserves
| |
(3
|
)
| |
(1
|
)
| |
25.6
|
%
| |
—
| | |
—
| | |
—
|
%
|
|
Accelerated depreciation and other costs from restructuring actions
| |
6
| | |
2
| | |
25.0
|
%
| |
—
| | |
—
| | |
—
|
%
|
|
Costs related to a customer assortment change
| |
—
|
|
|
—
|
|
|
—
|
%
| |
4
|
|
|
1
|
|
|
24.3
|
%
|
|
Adjusted effective tax rate, continuing operations, excluding
non-recurring items
|
|
$
|
443
|
|
|
$
|
108
|
|
|
24.4
|
%
| |
$
|
459
|
|
|
$
|
96
|
|
|
20.9
|
%
|
| | | | | | | | | | | | | | | | | | | |
|
|
| |
| |
| PPG INDUSTRIES, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) |
|
(All amounts in millions except per-share data)
|
|
|
|
| | |
Three Months Ended
|
| | |
March 31
|
| | | 2019 | | 2018 |
|
Net sales
| |
$
|
3,624
| | |
$
|
3,781
| |
|
Cost of sales, exclusive of depreciation and amortization
| | |
2,073
| | | |
2,181
| |
|
Selling, general and administrative
| | |
889
| | | |
906
| |
|
Research and development - net
| | |
105
| | | |
112
| |
|
Depreciation
| | |
86
| | | |
87
| |
|
Amortization
| | |
32
| | | |
36
| |
|
Release of business restructuring reserves
| | |
(3
|
)
| | |
-
| |
|
Interest expense
| | |
31
| | | |
26
| |
|
Interest income
| | |
(6
|
)
| | |
(5
|
)
|
|
Other (income) charges - net (Note A)
|
|
|
(2
|
)
|
|
|
17
|
|
|
Income before income taxes
| |
$
|
419
| | |
$
|
421
| |
|
Income tax expense
|
|
|
102
|
|
|
|
87
|
|
|
Income from continuing operations, net of tax
| | |
317
| | | |
334
| |
|
Income from discontinued operations, net of tax
|
|
|
-
|
|
|
|
6
|
|
|
Net income attributable to the controlling and noncontrolling
interests
| | |
317
| | | |
340
| |
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
(5
|
)
|
|
|
(6
|
)
|
|
Net income (attributable to PPG)
|
|
$
|
312
|
|
|
$
|
334
|
|
|
|
|
|
|
|
|
|
Amounts attributable to PPG:
|
|
|
|
|
|
Income from continuing operations, net of tax
| |
$
|
312
| | |
$
|
328
| |
|
|
Income from discontinued operations, net of tax
|
|
|
-
|
|
|
|
6
|
|
|
Net income (attributable to PPG)
|
|
$
|
312
|
|
|
$
|
334
|
|
|
|
|
|
|
|
|
|
Earnings per common share (attributable to PPG)
|
|
|
|
|
|
Income from continuing operations, net of tax
| |
$
|
1.32
| | |
$
|
1.32
| |
|
|
Income from discontinued operations, net of tax
|
|
|
-
|
|
|
|
0.02
|
|
|
Net income (attributable to PPG)
|
|
$
|
1.32
|
|
|
$
|
1.34
|
|
|
|
|
|
|
|
|
|
Earnings per common share (attributable to PPG) - assuming dilution
|
|
|
|
|
|
Income from continuing operations, net of tax
| |
$
|
1.31
| | |
$
|
1.31
| |
|
|
Income from discontinued operations, net of tax
|
|
|
-
|
|
|
|
0.02
|
|
|
Net income (attributable to PPG)
|
|
$
|
1.31
|
|
|
$
|
1.33
|
|
| | | | |
|
|
Average shares outstanding
|
|
|
236.7
|
|
|
|
249.8
|
|
| | | | |
|
|
Average shares outstanding - assuming dilution
|
|
|
238.0
|
|
|
|
251.4
|
|
|
Note A:
|
|
|
Other income during the three months ended March 31, 2019 includes
an environmental remediation charge of $10 million. Other charges
for the three months ended March 31, 2018 includes environmental
remediation charges of $34 million.
|
|
|
|
|
| PPG INDUSTRIES, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED BALANCE SHEET HIGHLIGHTS (unaudited) |
|
($ in millions)
|
|
|
|
| |
|
March 31
|
|
December 31
|
|
March 31
|
| | | 2019 | | 2018 | | 2018 |
|
Current assets:
| | | | | | |
|
Cash and cash equivalents
| |
$
|
784
| |
$
|
902
| |
$
|
1,346
|
|
Short-term investments
| | |
55
| | |
61
| | |
58
|
|
Receivables - net
| | |
3,197
| | |
2,845
| | |
3,343
|
|
Inventories
| | |
1,965
| | |
1,783
| | |
1,963
|
|
Other
| |
|
408
|
|
|
370
|
|
|
400
|
|
Total current assets
| |
$
|
6,409
|
|
$
|
5,961
|
|
$
|
7,110
|
| | | | | | |
|
|
Current liabilities:
| | | | | | |
|
Short-term debt and current portion of long-term debt
| |
$
|
653
| |
$
|
651
| |
$
|
19
|
|
Accounts payable and accrued liabilities
| | |
3,684
| | |
3,623
| | |
3,924
|
|
Current portion of operating lease liabilities
| | |
168
| | |
-
| | |
-
|
|
Restructuring reserves
| |
|
83
|
|
|
99
|
|
|
87
|
|
Total current liabilities
| |
$
|
4,588
|
|
$
|
4,373
|
|
$
|
4,030
|
| | |
|
|
|
|
|
|
Long-term debt
| |
$
|
4,626
|
|
$
|
4,365
|
|
$
|
5,199
|
| | | | | | | | |
|
|
| |
| |
| |
| PPG OPERATING METRICS (unaudited) |
|
($ in millions)
|
|
|
|
| | |
March 31
| |
December 31
| |
March 31
|
| | | 2019 | | 2018 | | 2018 |
|
Operating Working Capital (a)
| |
$
|
2,607
| | |
$
|
2,224
| | |
$
|
2,560
| |
|
As a percent of quarter sales, annualized
| | |
18.0
|
%
| | |
15.3
|
%
| | |
16.9
|
%
|
|
(a)
|
|
Operating working capital includes: (1) receivables from customers,
net of allowance for doubtful accounts, (2) FIFO inventories and (3)
trade liabilities.
|
| |
|
|
|
| PPG INDUSTRIES, INC. AND SUBSIDIARIES |
| CONSOLIDATED BUSINESS SEGMENT INFORMATION (unaudited) |
|
($ in millions)
|
|
|
|
| |
|
Three Months Ended
|
| | |
March 31
|
| | | 2019 |
| 2018 |
|
Net sales
| | | | |
|
Performance Coatings
| |
$
|
2,108
| | |
$
|
2,160
| |
|
Industrial Coatings
| |
|
1,516
|
|
|
|
1,621
|
|
|
Total
| |
$
|
3,624
|
|
|
$
|
3,781
|
|
| | | | |
|
|
Segment income
| | | | |
|
Performance Coatings
| |
$
|
297
| | |
$
|
280
| |
|
Industrial Coatings
| |
|
218
|
|
|
|
239
|
|
|
Total
| |
$
|
515
| | |
$
|
519
| |
| | | | |
|
|
Items not allocated to segments
| | | | |
|
Corporate
| | |
(45
|
)
| | |
(43
|
)
|
|
Legacy (Note A)
| | |
(2
|
)
| | |
4
| |
|
Interest expense, net of interest income
| | |
(25
|
)
| | |
(21
|
)
|
|
Environmental remediation charges
| | |
(10
|
)
| | |
(34
|
)
|
|
Release of business restructuring reserves
| | |
3
| | | |
-
| |
|
Accelerated depreciation and other costs from restructuring actions
| | |
(6
|
)
| | |
-
| |
|
Acquisition-related costs
| | |
(7
|
)
| | |
-
| |
|
Costs associated with ongoing accounting investigations
| | |
(4
|
)
| | |
-
| |
|
Costs related to customer assortment change
| |
|
-
|
|
|
|
(4
|
)
|
|
Income before income taxes
|
|
$
|
419
|
|
|
$
|
421
|
|
|
Note A:
|
|
|
Legacy items include current costs related to former operations of
the Company, including pension and other postretirement benefit
costs, certain charges and recoveries for legal matters and certain
recurring environmental remediation costs, and certain other charges
and income which are not associated with PPG's current business
portfolio.
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View source version on businesswire.com: https://www.businesswire.com/news/home/20190418005124/en/
PPG Media Contact:
Mark Silvey
Corporate Communications
+1-412-434-3046
silvey@ppg.com
PPG Investor Contact:
John Bruno
Investor Relations
+1-412-434-3466
jbruno@ppg.com
investor.ppg.com
Source: PPG