Global paints and coatings supplier PPG Industries (PPG) reported third quarter earnings of $161 million or 96 cents, better than the Zacks Consensus Estimate of 89 cents. Although earnings were down 29% year on year, results improved considerably sequentially on cost reduction. PPG Industries had reported earnings of 19 cents and 91 cents in the first and second quarters of 2009, respectively.
Reported sales of $3.2 billion for the quarter was a decline of 24% from the same period of the previous year, driven by lower sales volumes and prices. The segmental break-up is as follows:
Performance Coatings: Sales declined 12% due to lower volumes across all businesses. Weaker foreign currency was also a factor, offset by pricing gains. However, earnings from the segment rose 5% on lower overhead costs resulting from aggressive cost-management strategies and restructuring actions.
Industrial Coatings: Sales for the quarter decreased 19% year over year, primarily driven by lower volumes in the automotive coatings and industrial coatings businesses, reflecting the continued severe declines in global demand. Demand in the quarter, however, improved from the two earlier quarters of 2009. Earnings from the segment increased 15% on aggressive cost-reduction actions.
Architectural Coatings: Europe, Middle East and Africa (EMEA) sales for the quarter decreased 12%, attributable to weaker foreign currencies and lower volumes. Segment earnings also decreased over 3%.
Optical and Specialty Materials: Lower sales volumes drove 11% decline in the Optical and Specialty Materials segment sales while lower cost increased earnings by 10%.
Commodity Chemicals: Sales for the quarter decreased 43% on lower volumes and prices. This segment’s earnings were more than cut in half due to the lower selling prices, which were only partially offset by lower energy costs and other cost-saving measures.
Glass: Divesture of the automotive glass and services business in 2008 lead to a loss of $6 million in the segment. Lower sales volumes on reduced construction and general industrial demand and lower sales prices also added to the losses.
PPG Industries operating cash flow increased 40% year over year to $650 million in the quarter. The company repaid about $700 million of debt in the quarter and sits on a cash balance of $900 million as of Sept. 30, 2009.
For the fourth quarter of 2009, PPG Industries expects strong growth in Asia.
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