PPG Announces 2016 Financial Results
PPG recently reported fourth quarter 2016 net sales of $3.5 billion.
PPG recently reported fourth quarter 2016 net sales of $3.5 billion, down more than 1% vs. the same period last year. Sales in local currencies increased by more than 1%, aided by year-over-year sales volume growth approaching 2%. The net impact from business portfolio actions contributed less than 1% to sales growth, as acquisition-related sales increases modestly exceeded the absence of sales from the divested European fiber glass business. These aggregate net sales gains were more than offset by unfavorable foreign currency translation, which reduced net sales by about 3%, or approximately $100 million.
Fourth quarter 2016 reported net income from continuing operations was $77 million, or $0.29 per diluted share. Adjusted net income from continuing operations was $313 million, or $1.19 per diluted share. Adjusted net income excludes after-tax charges totaling $236 million, or $.090 per diluted share. These after-tax charges include: $146 million for business restructuring; $51 million for increases to legacy environmental reserves; $23 million for tax true-ups related to asbestos settlement funding; $5 million for a premium on the early retirement of debt; and $44 million for the loss on the sale of the European fiber glass business offset by a $33 million net gain on the disposals of ownership interests in business affiliates.
“We delivered fourth quarter and full-year adjusted earnings-per-diluted-share growth despite modest and uneven global economic growth and the impact of significant unfavorable foreign currency translation,” said Michael H. McGarry, chairman and CEO. “We achieved these milestones due to improving sales volumes, continued aggressive cost management and ongoing earnings-accretive focused cash deployment.
“As we begin 2017, we are operating in an uncertain and evolving macroeconomic and regulatory environment. We expect improved momentum in overall global economic growth, including gradually improving growth rates in developed regions and continuing but uneven growth in emerging regions. However, the timeline for this growth improvement remains uncertain, so we are aggressively managing all elements within our control and recently initiated a new business restructuring program targeting $125 million in annual savings. Additionally, we will continue our growth investments, and we have announced targeted selling-price increases to combat recent inflationary cost pressures. Finally, we anticipate deploying an additional $2.5-3.5 billion of cash on acquisitions and share repurchases in years 2017 and 2018 combined, as we remain focused on shareholder value creation.”
Performance Coatings segment net sales in the fourth quarter were $1.98 billion, down $80 million, or less than 4%, vs. the prior year. Sales volumes were down less than 1%, with acquisition-related sales providing a minimal benefit. Unfavorable foreign currency translation reduced segment sales by about 3%, or about $70 million.
Automotive refinish sales grew organically by a low-single-digit percentage, led by increased demand in Europe. Aerospace sales in local currencies were consistent with the prior year, as industry demand growth remains modest. Protective and marine coatings sales volumes declined by a low-double-digit percentage year-over-year, as growth in protective coatings was more than offset by further weakness in shipbuilding activity in Asia-Pacific. Architectural coatings–Europe, Middle East and Africa sales volumes were in line with the prior year, with growth in Europe offset by lower demand in Africa. Architectural coatings–Americas and Asia-Pacific sales volumes improved by a low-single-digit percentage vs. the prior year. Sales volume growth continued in the U.S. and Canada company-owned store network, but was offset by weakness in the independent dealer channel and national retail accounts. Mexican growth continued despite strong growth in the prior-year comparable period.
Performance Coatings segment income for the fourth quarter 2016 was $239 million, down about 4%, or $11 million, vs. the prior year, including unfavorable foreign currency translation of about $15 million. The favorable impact from continued cost management more than offset the unfavorable impact from modestly lower sales volumes. Industrial Coatings segment net sales for the fourth quarter were $1.44 billion, up $66 million, or nearly 5%, compared to the previous year, despite unfavorable foreign currency translation of more than 2%, or approximately $30 million. Sales volumes grew by about 5%, led by strong emerging-region growth in all businesses. Acquisition-related sales added approximately 3%, or about $40 million.
Glass segment net sales for the fourth quarter were $80 million, down $41 million, or 34%, year-over-year primarily due to the divestiture of the European fiber glass business. Sales volumes for the remaining North American fiber glass business were down approximately 3% due to the weaker demand for wind-energy-related products, partly offset by growth in the construction end-use market. Segment income for the quarter was $12 million, up $1 million vs. the prior-year period due to significant cost-management efforts and despite the absence of the divested fiber glass business and joint ventures. Fourth quarter financial results for the Glass segment consist only of PPG’s North American fiber glass operations. The sale of the European fiber glass business was finalized in October 2016, and the sale of PPG’s ownership interest in its two Asian fiber glass joint ventures was finalized in November 2016.
Full-year 2016 net sales from continuing operations were $14.8 billion, consistent with the prior year, including an unfavorable foreign currency translation impact of nearly 3%, or approximately $400 million. Sales volume growth of 1% vs. the prior year was supplemented by acquisition-related sales growth of nearly 2%, net of sales divested with the European fiber glass business. The company’s 2016 full-year reported net income from continuing operations was $564 million vs. $1.34 billion in 2015. Full-year 2016 adjusted net income from continuing operations was $1.55 billion vs. $1.49 billion in 2015, representing an adjusted-earnings-per-diluted-share increase of 7%. In 2016, foreign currency translation unfavorably impacted pre-tax income by approximately $70 million.
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