PPG sales, earnings per share reach record highs in 2Q
Acquisitions are paying off for PPG Industries Inc.
The Pittsburgh company, which has focused on buying coatings businesses worldwide, on Thursday said sales and earnings per share in the second quarter reached record levels for any three-month period in the company's history.
Net income for the period was slightly lower than a year ago.
The biggest boost came from the $1.05 billion acquisition of AkzoNobel N.V.'s North American architectural coatings business, which was completed on April 1 and was the second-largest in PPG's history. It added $475 million in sales, as acquisitions as a whole boosted revenue by 15.2 percent, PPG said. With brand names such as Glidden paints and Liquid Nails, it is the main supplier of paints to Wal-Mart.
To capture additional benefits from that deal by reducing costs, PPG's board approved a $102 million restructuring program to integrate the AkzoNobel business with PPG's legacy architectural business. The expense is expected to include severance and other costs of combining the units. Akzo sites are in Ohio, Texas and Georgia; PPG sites are in Pittsburgh and four states.
“We still have a lot of work to do,” CEO Charles E. Bunch said.
Even so, the record sales and earnings per share came from “continued strong performance of our coatings businesses,” which increased its earnings by 25 percent compared with last year's record level, he said.
Profit for the quarter was $341 million, or $2.35 a share, compared with a profit of $362 million, or $2.34 a share, last year. Revenue jumped to $4.1 billion compared with $3.5 billion last year.
PPG shares jumped 2 percent, closing at $160, up $3.14. The stock is up 18.2 percent this year.
PPG's coatings business benefited from sales to auto manufacturers, automotive refinishers and aerospace markets. Sales rose in optical and specialty materials segments compared with a year ago, Bunch said. Profit from PPG glass business declined in challenging market conditions, he said.
“Glass margins were pretty ugly,” said Goldman Sachs analyst Robert Koort during PPG's conference call with analysts.
Glass, the product that gave the company its Pittsburgh Plate Glass name from 1883 to 1968, accounted for just 6.5 percent of sales during the quarter, down from 27 percent a decade ago.
Sales in the period were $269 million, down 4 percent. Earnings for the segment were $8 million, down from $23 million, as the profit margin fell to 3 percent from 8.4 percent last year.
“It was a disappointing quarter for glass,” Bunch said. He expects a pickup in the construction market for flat glass products in the third quarter, but not Fiberglas.
“Glass continues to be part of PPG's portfolio,” said spokesman Bryan Iams.
Bunch said PPG continues to pursue possible acquisition candidates: “We are confident we can continue to make acquisitions and achieve the (financial) targets we set for them.”
Other recent acquisitions and divestitures by PPG include the $2.2 billion sale at the end of the year of its commodity chemicals business, which produces chlorine, caustic soda and other chemicals, to Georgia Gulf Corp. The combined company was renamed Axiall Corp.
Another was the purchase of waterborne and chrome-free coating technology from Deft Inc. of Irvine, Calif., for an undisclosed price — a deal that will strengthen PPG's aerospace coatings business.
John D. Oravecz is a Trib Total Media staff writer. Reach him at 412-320-7882 or firstname.lastname@example.org.
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