PPG Reports Improved Earnings in 4th Qtr
PPG’s fourth quarter 2009 adjusted net income was $144 million, or $.86 per share. Fourth quarter 2008 adjusted net income was $68 million, or $.41 per share. Fourth quarter 2009 reported net income included an after-tax charge of $2 million, or $.01 per share, to reflect the net increase in the current value of the company’s obligation under its proposed asbestos settlement, which is pending court proceedings. Fourth quarter 2008 net income included after-tax earnings of $3 million, or $.02 per share, related to the proposed asbestos settlement.
“The fourth quarter of 2009 capped what was a challenging year,” said Charles E. Bunch, PPG’s chairman and CEO. “The global recession was both steep and broad, and it adversely affected many of our end-use markets. PPG reacted decisively by implementing aggressive restructuring and cost-reduction actions. The impact of these efforts is clearly evident in our fourth quarter and full-year financial results. Led by our coatings and Optical and Specialty Materials segments, we have continued to realize positive momentum in our financial performance. These segments performed well and delivered higher year-over-year earnings in the quarter.”
Bunch noted that, due to challenging economic conditions, results from the company’s Performance Glazings business and Commodity Chemicals segment weakened in comparison with the prior year’s quarter, as well as the seasonally stronger third quarter.
“While our earnings still have not fully recovered, I am pleased with the pace of our improvement given the continued challenges in the global economy,” said Bunch. “A primary driver of this improvement has been the completion of our restructuring actions ahead of schedule. These actions have benefited us in 2009 and will do so to a greater degree in 2010.”
As an example, Bunch pointed to PPG’s Industrial Coatings segment, which had an earnings improvement of $129 million in the quarter vs. the same period last year. “This significant change in performance provides evidence that actions taken by PPG during the recession have reduced our cost structure and provided us with solid earnings leverage as volumes gradually return,” he said.
“As we begin 2010, we are guardedly optimistic,” said Bunch. “While recovery in the global economy remains gradual, PPG is well-positioned in several ways. Our strong and growing presence in Asia will continue to yield benefits based on economic growth in the region. We will also realize an incremental $100 million of savings from our completed restructuring actions that will enable us to fully leverage anticipated higher full-year global activity levels. And we have a strong cash position of just over $1 billion to support earnings growth opportunities.”
Performance Coatings segment sales in the fourth quarter of 2009 decreased $78 million, or 7%, vs. last year’s fourth quarter. Sales decreased as a result of lower volumes across all businesses and regions, with a volume decline similar to those seen in the first three quarters of 2009. Favorable foreign currency and pricing gains partially offset the volume reduction. Segment earnings improved $6 million, or 4%, as the lower sales volumes were offset by improved selling prices and lower costs, including the impact of aggressive cost management.
Industrial Coatings segment sales for the quarter increased $92 million, or 12%, due to higher year-over-year volumes in Automotive OEM Coatings and foreign currency. The trend of segment volume improvement vs. prior quarters continued due to gradual recovery in global industrial demand, including higher automotive production. Segment earnings for the quarter were $89 million, an increase of $129 million from the prior year’s fourth quarter, due to improved sales volumes leveraged by reduced costs primarily from aggressive cost-savings initiatives and restructuring actions.
Architectural Coatings–Europe, Middle East and Africa (EMEA) segment sales for the quarter increased $43 million, or 10%, primarily due to stronger foreign currencies, while acquisitions and price increases also contributed. Slightly lower volumes detracted from sales. Volumes were down by mid-single-digit percentages for the full year, and fourth quarter results were modestly better. Segment earnings increased $11 million, as savings from cost-reduction initiatives and increased selling prices outpaced the impact of volume declines.
Optical and Specialty Materials segment sales for the quarter increased $6 million, or 3%, as a result of foreign currency. Year-over-year sales volumes declined by low-single-digit percentages. Segment earnings increased $14 million due largely to lower costs.
Glass segment sales declined $22 million compared with the prior year due to lower volumes from reduced construction and general industrial demand. Pricing also declined due to lower energy and fuel surcharges. Segment income was $1 million, an increase of $8 million, as the effects of lower sales were offset by lower costs and higher other income, particularly equity earnings.
For all of 2009, PPG’s sales were $12.2 billion and net income was $336 million, or $2.03 per share. Reported net income includes after-tax charges of $141 million, or $.86 per share, for business restructuring and $8 million, or $.05 per share, to reflect the net increase in the current value of the company’s obligation under its proposed asbestos settlement. Adjusted net income was $485 million, or $2.94 per share.
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