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PPG profit slumps 65% in 4th quarter

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By Bloomberg News
Saturday, Jan. 17, 2009

PPG Industries Inc., the world's second-biggest paint maker, said fourth-quarter profit fell 65 percent because the weak global economy hurt sales of industrial coatings and glass.

Net income dropped to $71 million, or 43 cents a share, from $200 million, or $1.21, a year earlier, Pittsburgh-based PPG said Friday in a statement. Sales rose 2.7 percent to $3.19 billion.

Chief Executive Officer Charles E. Bunch is cutting jobs and reducing output because of the slowing economy, which led to losses in two units. Auto production declined about 25 percent worldwide, hurting the industrial-coatings unit, which makes car paint, and the optical unit, which makes silicas for tires and batteries, Bunch said on a call with analysts.

"I was troubled to see the optical unit had an earnings decline," Dmitry Silversteyn, an analyst at Longbow Research in Independence, Ohio, said in a phone interview. "The industrial segment was weaker." He recommends selling the shares.

PPG shares rose 2 cents to close at $41.43. Shares dropped 40 percent last year.

Profit was expected to be 41 cents a share, the average estimate of 10 analysts surveyed. Sales were estimated at $3.33 billion, the average of seven analysts surveyed.

"The fourth quarter was very challenging," Bunch said on the call. "Like many other companies, PPG experienced dramatic volume declines in several of the industrial end-use markets that we serve due to the rapid deterioration in the overall global economy."

The only unit to report improved earnings was the commodity-chemicals unit, which makes chlorine and caustic soda, known collectively as chlor-alkali. Profit in the unit rose 66 percent to $88 million, PPG said.

Still, chlor-alkali demand is set to deteriorate because of weak end-markets such as pulp and paper, Silversteyn said. That will mean an end to price increases that have buoyed PPG's results in the past couple of years, he said.

The industrial-coatings segment, which makes paint for new cars, lost $40 million, compared with profit of $77 million a year earlier, PPG said. Sales in the unit dropped 18 percent.

Performance coatings, including paints for buildings, planes, boats and damaged cars, had profit of $143 million, unchanged from a year earlier, PPG said. The European architectural-coatings business, the largest piece of the SigmaKalon Group acquisition completed a year ago, had breakeven results, PPG said.

PPG's glass segment, North America's largest maker of architectural glass, had a $7 million loss, compared with profit of $33 million a year earlier, the company said. Sales tumbled 53 percent.

Profit in the optical and specialty materials segment fell 28 percent to $33 million, because of a 20 percent drop in demand for silicas used in automobiles, Chief Financial Officer William Hernandez said on the call. The unit benefited from increased sales of Transitions eyeglass lenses, he said.

The largest maker of paints and coatings is Akzo Nobel NV.

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