PPG reported: first quarter 2012 sales of USD 3.8 billion, up 6% versus prior year; strong growth in US coatings sales; adjusted diluted earnings per share of USD 1.81, up 29% versus record prior year; record adjusted earnings per share for seven consecutive quarters; company ends quarter with USD 1 billion of cash and short-term investments.
PPG Industries reported net sales for the first quarter of 2012 of USD 3.8 billion, an increase of 6% versus the prior year’s first quarter. Net income for the quarter was USD 13 million, or 8 cents per diluted share, including nonrecurring charges. Adjusted net income for the quarter, excluding the nonrecurring charges, was USD 279 million, or USD 1.81 per share. First quarter 2011 net sales were USD 3.5 billion, and net income was USD 228 million, or USD 1.40 per diluted share.
First quarter 2012 results include after-tax charges of USD 163 million, or USD 1.06 per diluted share, for business restructuring, USD 99 million, or 64 cents per diluted share, for environmental remediation charges, and USD 4 million, or 3 cents per diluted share, for business acquisition-related costs. There were no nonrecurring charges in the first quarter 2011.
“PPG’s earnings growth momentum continued during the first quarter, and we achieved a seventh consecutive quarter of record earnings with adjusted earnings per share up about 30% versus last year,” said Charles E. Bunch, PPG chairman and CEO. “We have delivered consistently strong earnings over nearly two years despite the prolonged, gradual recovery from the economic crisis and continued raw materials cost inflation. Our broad business portfolio and operating discipline have been critical factors in our record performance, and we still have further growth opportunities as demand in some of our larger end-use markets continues to recover.
“In the quarter, we benefited from strengthening demand in the United States in most end-use markets and growth in emerging regions, which offset weaker European activity,” Bunch said. “In aggregate, our core coatings and Optical and Specialty Materials segments delivered nearly 25% year-over-year earnings growth, with each segment delivering fairly equal growth rates. Business results were strong in the aerospace, automotive OEM coatings, industrial coatings and optical products businesses, as well as in the architectural coatings business in the US. In addition, the Commodity Chemicals segment matched its excellent 2011 performance.
“Looking ahead, the second quarter is typically our best sales quarter seasonally, and we expect year-over-year growth rates in the United States to be similar to the first quarter coupled with lower regional natural gas input costs,” Bunch said. “We anticipate that growth in emerging regions will accelerate, supported by higher Chinese industrial activity. We expect European demand to remain muted, and we are now implementing restructuring actions focused mainly in this region, with anticipated cost savings of 20 to 25 cents per share in the second half of the year. Finally, we continue to have a strong cash position and expect to deploy cash in a manner that is focused on earnings accretion.”
The company reported today that cash and short-term investments totalled approximately USD 1 billion at the end of the first quarter 2012. Cash generated from operations improved by about USD 150 million versus the prior year’s first quarter. During the quarter, approximately USD 90 million of cash was returned to shareholders in the form of dividends, 1 million shares of stock were repurchased for slightly less than USD 100 million, and capital spending including acquisitions totalled about USD 220 million.
Performance Coatings segment sales were a first quarter record of USD 1.2 billion, up USD 98 million versus the prior year. Sales increased as a result of higher selling prices and volume growth. The aerospace business delivered mid-teen percentage sales growth that exceeded industry growth rates, and U.S. architectural coatings sales improved about 20%. Automotive refinish and protective and marine coatings results were solid but with more modest sales growth. Architectural coatings volumes in emerging regions declined slightly. Segment earnings grew USD 21 million versus the prior year to USD 160 million due to higher sales, partly offset by raw materials cost inflation and higher costs to support the sales growth.
Industrial Coatings segment sales were also a first quarter record of USD 1.1 billion, an increase of USD 51 million, or 5%, versus the prior year. Segment volumes grew by more than 10% in the United States, including strong automotive OEM coatings business performance that outpaced the industry. Growth in emerging regions continued, albeit at a lesser rate and with less consistency throughout the quarter than in the recent past. European volumes declined by about 5%. Segment earnings for the quarter were USD 150 million, an increase of USD 34 million from the prior year. Earnings were aided by higher volumes, a continued focus on manufacturing costs and higher selling prices. Pricing in this segment considerably lagged inflation during 2011.
Architectural Coatings – EMEA (Europe, Middle East and Africa) segment sales for the quarter of USD 517 million increased USD 46 million, or 10%, versus the prior year due principally to incremental sales from the Dyrup acquisition. Despite low-single-digit percentage segment volume declines, segment earnings of USD 16 million grew by USD 4 million versus the prior year’s first quarter due to continued aggressive cost management.
Optical and Specialty Materials first quarter segment sales of USD 334 million were a record for any quarter, up USD 26 million, or 8%, versus the prior year. Segment earnings grew USD 19 million year-over-year to USD 109 million, due mainly to higher optical product volumes resulting from further market penetration and modest customer inventory restocking.
Commodity Chemicals segment sales were USD 419 million for the quarter, level with the prior year. Improved pricing and sales from the acquired Equa-Chlor business were offset by lower volumes in comparison with high industry demand in the prior year’s first quarter. The negative impact of lower capacity utilization was offset by lower natural gas input costs. Quarterly segment earnings were USD 100 million, up USD 3 million from the first quarter 2011.
Glass segment sales were USD 256 million for the quarter, down USD 2 million, or 1%, year-over-year. Fiber glass pricing declined from prior-year levels driven by the effects of lower European and Asian demand. Segment earnings were USD 8 million, a decrease of USD 18 million from the prior-year quarter as a result of lower pricing, decreased capacity utilization and lower international licensing and equity earnings.