PPG releases financial results for the first quarter of 2019

On April 18, PPG released its financial results for the first quarter of 2019. According to the report, the net sales of PPG in the first quarter of 2019 is about $3.6 billion, down about 4% from last year; the net income from continuing operations in the first quarter of 2019 is $312 million, or diluted earnings per share is $1.31, adjusted net income from continuing operations is $330 million, or diluted earnings per share is $1.38. In the first quarter of 2019, the net sales were about 3.6 billion US dollars, down about 4% from last year. Net sales at a fixed exchange rate were flat compared with the same period last year, while sales prices rose 2.6%. Total sales are down about 3% from last year. About half of this reduction is related to the previously announced changes in the customer classification of architectural coatings in the national retail self-service (DIY) channel. Adverse foreign currency translation impacts net sales of more than 4%, or about $165 million, with acquisition related sales (excluding divestitures) increasing by less than 1% of sales growth. In the first quarter of 2019, the net income from continuing operations was $312 million, or diluted earnings per share was $1.31, adjusted net income from continuing operations was $330 million, or diluted earnings per share was $1.38. The net income from continuing operations reported in the first quarter of 2018 was $328 million, or diluted earnings per share of $1.31, and the adjusted net income from continuing operations was $357 million, or diluted earnings per share of $1.42.

In the first quarter of 2019, the reported and adjusted effective tax rate is about 24%, higher than that in the first quarter of 2018, and the adjusted effective tax rate is about 21%. Michael H. McGarry, chairman and CEO of PPG, said, "despite the challenging global macroeconomic environment and the decline in industry demand in some markets, the operating profit margin in the first quarter was still higher than that in the same period last year. We have achieved higher profit margin through continuous sales price plan. This marks an improvement in sequential pricing for the eighth quarter in a row. We continue to experience cost inflation in raw materials, logistics and wages, and are taking other measures to offset the cumulative impact of this inflation cycle. In the first quarter, our aerospace, protection and marine coatings business achieved a strong double-digit percentage growth. However, due to the weak demand of automobile OEM and some general industrial coatings, our total sales volume is low. In addition, our focus on the recovery of profit margin led us to abandon certain moderate business level in this quarter. We are pleased to welcome SEM, Whitford and hemmelrath to the PPG family. Our acquisition channels are still active and we continue to focus our cash deployment on long-term shareholder value. " McGarry added, "looking forward to the second quarter, we expect industry demand in several markets to remain mixed, but expect gradual improvement in the first quarter of this year.

We will continue to actively manage our cost structure, strive to ensure that additional pricing reflects the value of the products we sell, and integrate our recent acquisitions. We currently expect diluted earnings per share in the second quarter to be between $1.76 and $1.86, including adverse currency translation effects similar to those in the first quarter. " "More broadly, we remain optimistic that economic activity will improve in the second half of the year, especially in China. If necessary, we will continue to monitor the macro environment and prepare for further cost saving initiatives. Our goal remains to increase annual sales by 3% to 5% and adjusted earnings per share by 7% to 10%, both of which do not include currency translation. " McGarry concluded. Segment financial performance in the first quarter of 2019 net sales of high performance coatings sector in the first quarter was $2.1 billion, down $52 million from the previous year, down about 2% year on year. Fixed currency sales rose about 2% driven by higher selling prices. Sales related to the acquisition amounted to approximately $15 million, mainly for the acquisition of SEM, a manufacturer of automotive touch up paint products. Segment sales fell by about 2%, including changes in DIY customer classification last year, which reduced segment sales by more than 2%, or about $60 million year-on-year. Unfavourable foreign currency translation reduced net sales by about $85 million, or nearly 4 per cent.

Aviation coating net sales increased by more than 10% for the fourth consecutive quarter, supported by the growth of major technology platforms and strong growth of industry demand. Organic sales of automotive touch up paint fell slightly as soft industry demand in Europe was partially offset by robust growth in emerging regions. The total sales volume of the protection and marine coatings business increased by about 10%, and both departments have made positive contributions. Compared with the same period last year, the organic sales of architectural coatings in the United States and Asia Pacific region decreased by a single digit, but the channels and regions were different. In the United States and Canada, the same store sales growth rate of building coatings owned by the company is lower than the single digit percentage. Due to the change of customer classification, the overall year-on-year sales volume of DIY national retail and independent dealer channels decreased significantly. Organic sales of architectural coatings declined slightly in Latin America as the quarterly timing of Easter holiday promotions changed from the previous year. Organic sales of architectural coatings in Europe, the Middle East and Africa increased by a median percentage for the second quarter in a row, with both the increase in sales price and the increase in sales volume firmly contributing.

Segment revenue in the first quarter was $297 million, an increase of $17 million, or about 6%, compared with the same period last year, including adverse foreign exchange effects of about $10 million. Higher sales prices and continued implementation of cost management and restructuring programs offset higher raw material and logistics costs and lower retail sales of U.S. architectural coatings DIY. The net sales of industrial coatings sector in the first quarter was about $1.5 billion, down $105 million, or 6%, from the same period last year. Sales prices above 2% partially offset lower sales of about 5%. The acquisition related sales were about $15 million, driven by the acquisition of Whitford, which was completed in March. Unfavourable foreign currency translation reduced sales by about $80 million, or about 5%, compared with the previous year. Automotive OEM paint sales fell by a single digit percentage year-on-year, in line with the decline in productivity in the global automotive industry, including a significant decline in Chinese demand. The sales price of the business is higher in each major region and is equivalent to the average level of the company.

The sales volume of industrial coatings business decreased compared with the previous year, mainly due to the decline of industrial production demand in most regions. Due to the change of technology-based customers, the sales volume of packaging coatings fell by a low single digit year-on-year, while the growth rate in the last quarter was higher than the market level. Segment revenue for the first quarter was $218 million, down $21 million, or about 9%, year-on-year, including the impact of adverse foreign exchange, of about $10 million. Segment revenues were partially offset by higher sales prices and strong cost management, driven by continued inflation in raw materials and logistics costs and a decline in sales volumes associated with a reduction in global industrial activity. Businesses in both reporting departments continue to actively manage costs and implement previously announced restructuring plans. According to the company's objectives, the restructuring achieved cost savings of about $20 million in the first quarter. In addition, corporate and traditional expenses totaled about $50 million in the first quarter and are expected to reach $45 to $50 million in the second quarter. PPG continues to work on the previously communicated business portfolio strategy assessment and will continue to work on completing the review by the end of the second quarter of 2019.