Global coatings manufacturer PPG Industries (Pittsburgh, Pennsylvania) reported growth in net sales and sales volumes in its first quarter, bolstered in part by a 7 percent jump in sales in the Industrial Coatings segment.
The company, which is currently the largest coatings supplier in the world by sales, announced its Q1 earnings early Thursday (April 20), highlighting its growth and an increase in adjusted earnings per diluted share from continuing operations. The report to shareholders also makes a note of PPG’s highly publicized offers to buy rival AkzoNobel (Amsterdam), which have to this point been rebuffed by the Dutch firm.
The first-quarter report coincided with PPG's annual shareholders meeting, where chairman and CEO Michael McGarry noted four major acquisitions made in 2016 and early 2017, and stressed the company's community and sustainability efforts.
PPG reported net income from continuing operations of $334 million in the first quarter of 2017, down slightly from $337 million in Q1 of 2016, but a slight increase in net income per diluted share: $1.29 per diluted share in 2017 versus $1.25 per diluted share in the prior-year period.
The company says net sales in local currencies grew nearly 3 percent over prior-year numbers, though unfavorable currency translation had a 2 percent impact—about $65 million—on net sales overall.
PPG’s recent portfolio actions had a slight positive impact on sales numbers, the company says. Net sales increases associated with acquisitions “modestly exceeded” net sales losses associated with the divestitures of some of the company’s glass business units. Net sales associated with portfolio actions contributed less than 1 percent to net sales for the quarter, the company says.
“We continued to deliver higher year-over-year adjusted earnings per diluted share, increasing by more than 6 percent in the first quarter,” McGarry said. “This growth was despite moderate but uneven global market demand and the unfavorable impact from foreign currency translation.”
In the Performance Coatings segment, which includes protective and marine coatings, aerospace coatings, auto refinish and architectural coatings, net sales were down about 1 percent from prior-year numbers, at $2.02 billion.
Protective and marine sales volumes declined by a “low double-digit percentage” from prior-year numbers, largely due to decreased demand for marine coatings, especially in the Asia Pacific region, the company says. Protective coatings, however, saw a slight increase in sales. Aerospace coatings sales were about the same as the prior year, the company says.
Architectural coatings sales volumes increased in the Europe, Middle East and Africa (EMEA) region, but declined by less than a percentage point in the Americas and Asia Pacific. In the Americas, company-owned stores in the U.S. and Canada saw a slight increase in sales, while demand was down among independent dealers, and the market among big retailers was mixed.
PPG’s Industrial Coatings segment, which includes automotive OEM coatings and packaging coatings, posted net sales of $1.47 billion, up $97 million—a 7 percent increase—over prior-year numbers. The company says that increase includes “solid mid-single-digit” increases in sales volume in that segment, as well as $60 million in acquisition-related sales.
Net sales numbers were impacted by increased raw-materials prices, a matter the company says it is addressing with “initial pricing actions.” Unfavorable currency translation had an impact of more than 1 percent.
PPG has divested of much of its glass business in recent years, but still has enough glass holdings to do $83 million in sales in the first quarter. That’s down $50 million from the prior year, largely because the company shed its European fiber glass business last year, along with two Asian joint ventures.
In its first-quarter report, PPG noted its attempts to bring rival AkzoNobel, the world’s second-largest coatings supplier, to the table for talks about a potential merger. AkzoNobel released its first quarter numbers Wednesday (April 19), reporting what it called “record profitability” and detailing a plan to split its Specialty Chemicals business off into a separate entity—a plan that doesn’t include PPG.
“We recently made a very attractive and highly compelling offer to acquire AkzoNobel,” McGarry said. “This offer was rejected, and to date, the boards of AkzoNobel have declined PPG’s multiple invitations to discuss the proposal. We remain willing to engage with AkzoNobel and continue to believe strongly that a combination of the two companies is in the best interest of both companies’ stakeholders.
“Separately, our pipeline for bolt-on acquisitions remains active in most end-markets and geographies. We will remain focused on maximizing long-term shareholder value.”
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