PPG Industries (PPG) reported net income (GAAP) of $262 million or $1.58 per share in the third quarter of 2010 compared with $159 million or 96 cents per share in the year-ago quarter. However, adjusted net income was $264 million or $1.59 per share versus $161 million or 97 cents per share during the third quarter of 2009.
The adjustments included after-tax charges of $2 million or 1 cent per share associated with the company’s pending court proceedings related to the proposed Asbestos Settlement. The company has surpassed the Zacks Consensus Estimate of $1.46 per share.
Net sales for the quarter were $3.46 billion, up 7.3% from $3.23 billion in the third quarter of 2009. It even outperformed the Zacks Consensus Estimate by $52 million.
The improvement in the results was attributed to the company’s expansion in high-growth emerging markets, successful cost reduction initiatives and gradual industrial recovery worldwide, partly offset by rising raw material costs and disappointing trends in the construction markets in the developed economies.
Segment Details
Revenues in the Performance Coatings segment were $1.1 billion in the quarter versus $1.08 billion in the year-ago quarter. The segment income was $174 million compared with $155 million in the prior-year quarter. The impressive results in the quarter were based on higher selling prices, improved business mix and a lower cost structure.
Industrial Coatings segment recorded revenues of $927 million and income of $86 million, up 13% and 48%, respectively, from the year-ago levels of $824 million and $58 million, respectively. Positive factors affecting the improvements were a 14% year-over-year rise in volumes along with lower costs associated with restructuring activities, partially offset by inflation in raw material costs.
Architectural Coatings (Europe, Middle East and Africa) division posted revenues of $512 million, down 8.5% from last year’s $559 million. Besides, income also experienced 15% decline to $50 million from prior-year’s $59 million. This segment experienced a fall in revenues mainly due to currency conversion along with a negative trend in volume.
Optical and Specialty Materials segment revenues were $288 million, up 12% from the year-ago quarter. Income was $82 million compared with $67 million in the third quarter of 2009. The growth in this segment was driven by a double-digit percentage growth in volumes in both businesses, partly counterbalanced by increased selling and advertising costs.
The quarter saw a 29% increase in revenues to $370 million for the Commodity Chemicals segment led by improved pricing and volumes, partially offset by higher maintenance costs. Segment income was $60 million, witnessing a record growth from $19 million posted in the prior-year quarter.
Revenues in the Glass segment were $260 million compared with $223 million in the prior-year quarter. Income was $32 million in this quarter, improving significantly from the year-ago loss of $6 million. The segment reaped benefits from higher fiber glass volumes, lower manufacturing costs, higher equity earnings and royalty income.
Financial Position
PPG Industries had cash and cash equivalents worth $930 million as of September 30, 2010 compared with $898 million as of September 30, 2009. Total debt was $3.14 billion as of September 30, 2010 compared with $3.54 billion as of September 30, 2009. Inventories at the end of the quarter amounted to $1.64 billion versus $1.67 billion as of September 30, 2009.
Strong third quarter performance along with successful adoption of growth strategies and their meaningful implementation keep us confident about the company. In addition, the macro economy and the concerned industry are also showing signs of recovery Therefore, PPG Industries has a Zacks #2 Rank (Buy) on its stock in the short term and we have recommended the shares of the company as Outperform in the long term.
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