PPG Industries‘ (PPG) continues its impressive positive surprise streak as its first-quarter 2012 adjusted earnings of $1.81 a share topped the Zacks Consensus Estimate by a couple of cents. The adjusted earnings exclude one-time charges associated with restructuring, environmental remediation and acquisitions.
However, profit (as reported) tumbled 94% year over year to $13 million or 8 cents a share, hurt by the hefty one-time charges. The Pennsylvania-based company reported profit of $228 million or $1.40 a share a year ago.
Revenues rose 6% year over year to $3,752 million, also beating the Zacks Consensus Estimate of $3,696 million. PPG Industries saw growth in each of its coatings businesses in the quarter. The company’s results were aided by strong domestic demand and growth across emerging markets, offset by softness in Europe.
Segment Analysis
Revenues from the Performance Coatings division jumped 9% year over year to roughly $1.2 billion, backed by higher volume and better selling prices. The company said that its aerospace business registered mid-teen growth in the quarter while architectural coatings revenues soared 20%. Automotive refinish and marine coatings results were healthy. Segment income improved $21 million year over year to $160 million on the back of higher sales which offset increased costs and raw material inflation.
Industrial Coatings sales climbed 5% year over year to $1.1 billion. Sales volumes in the U.S. grew over 10% in the quarter driven by strong performance of automotive OEM coatings business. Emerging markets registered growth in volume while Europe witnessed a decline. Segment earnings rose $34 million year over year to $150 million, supported by volume and price gains coupled with aggressive cost management.
Revenues from Architectural Coatings (Europe, Middle East and Africa) spiked 10% to $517 million, powered by the acquisition of Denmark-based coatings company Dyrup. Segment income increased by $4 million year over year to $16 million as lower volume was masked by the company’s cost-cutting measures.
Optical and Specialty Materials sales rose 8% to a record $334 million in the quarter. Segment income rose $19 million year over year to $109 million on the heels of higher volumes.
Revenues from the Commodity Chemicals segment were essentially flat year over year at $419 million as lower volume offset higher pricing and revenues from Equa-Chlor acquisition. Segment income increased by $3 million year over year to $100 million.
Sales from the Glass segment edged down 1% to $256 million. Segment Income fell $18 million year over year to $8 million in the reported quarter. The results were impacted by lower pricing.
Financial Position
The company ended the quarter with cash and cash equivalents and short-term investments of roughly $1 billion, down 25% year over year. Total debt decreased 11% year over year to around $3.7 billion.
Under its cash back strategy, the company returned $90 million to its shareholders in the form of dividends and repurchased 1 million shares worth nearly $100 million.
Outlook
Moving ahead, the company expects domestic growth in second-quarter 2012 to be similar to the first quarter and expects accelerated growth in emerging markets, buoyed by increased industrial activity in China. However, it feels that the European market will continue to remain under pressure. The company said that it has initiated restructuring measures, especially in its European operation, which is expected to fetch cost savings of 20-25 cents in the back half of 2012.
We currently have a long-term Neutral recommendation on PPG Industries. The company, which competes with EI DuPont de Nemours & Co. (DD) and BASF Coatings AG, currently holds a short-term Zacks #1 Rank (Strong Buy).
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