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First quarter 2010 net income includes after-tax charges of $85 million, or $.51 per share, as a result of a change in U.S. tax law that is part of the recently enacted U.S. Patient Protection and Affordable Care Act, and $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. The first quarter 2009 net loss included after-tax charges of $141 million, or $.86 per share, for business restructuring, and $2 million, or $.01 per share, related to the proposed asbestos settlement.
“Throughout the first quarter, we continued to experience a moderate recovery in several of the global end-use markets we serve,” said Charles E. Bunch, PPG’s chairman and CEO. “This recovery, combined with lower costs resulting from our restructuring initiatives and other cost-reduction actions, positively impacted our financial results in comparison with what were very low earnings levels last year.
“Higher year-over-year sales volumes were most evident in our Industrial Coatings segment, which benefited from improving global automotive builds and gains in several general industrial applications. Also, our investments over the past several years to expand our presence in emerging regions, such as Asia/Pacific, continue to pay off. This region, in addition to our Optical and Specialty Materials segment, posted record-setting results and continues to drive growth for the corporation.”
Bunch added that several of PPG’s businesses experienced weather-related sales softness early in the quarter, but rebounded strongly. “We easily exceeded our internal projections for March,” he said. “Overall for the quarter, I am very pleased that all of the hard work and difficult steps we took over the past 18 months, throughout the recession, to position the company for economic recovery are now beginning to yield measurable benefits.”
Looking ahead to the rest of the year, Bunch said he was “encouraged that we are now entering what has historically been PPG’s best quarter with a very low cost position and growing momentum.” He said several businesses that have been slower to recover, such as Commodity Chemicals, are beginning to exhibit signs of improvement that, combined with PPG’s continued cost-reduction and execution focus, provide the company with a clear path for continued earnings recovery.
Performance Coatings segment sales in the first quarter of 2010 increased by $37 million, or 4%, vs. last year’s first quarter. Sales increased as a result of higher selling prices and favorable foreign currency. Volumes declined slightly, with lower volumes in North America and Europe offsetting growth in Asia/Pacific and Latin America. Segment earnings grew $38 million, or 43%, due to lower costs, including the impacts of aggressive cost management, and from the factors impacting sales.
Industrial Coatings segment sales for the quarter rose $249 million, or 39%, due to volume growth exceeding 30%, with higher year-over-year volumes in all businesses and regions. Foreign currency also aided sales. Segment earnings for the quarter were $101 million, an increase of $117 million from the prior year’s first quarter, due to the improved sales volumes along with reduced costs, primarily from aggressive cost-reduction initiatives and restructuring actions.
Architectural Coatings–Europe, Middle East and Africa (EMEA) segment sales for the quarter increased by $27 million, or 7%, due principally to stronger foreign currencies. Segment earnings grew $8 million due to lower costs.
Optical and Specialty Materials segment sales for the quarter increased by $39 million, or 16%, as a result of double-digit percentage volume growth and foreign currency. Segment earnings rose $22 million due to the improved sales volumes.
Commodity Chemicals segment sales for the quarter decreased by $33 million, or 9%, due to declines in year-over-year selling prices, partially offset by improving volumes. Segment earnings decreased by $80 million due to the lower selling prices and higher input costs, which were partially countered by the higher sales volumes and lower manufacturing costs.
Glass segment sales increased by $24 million, or 12%, compared with the prior year as a result of improved volumes and foreign currency, which were partially offset by lower pricing, including reduced energy surcharges. The segment loss was $3 million, an improvement of $24 million, due to lower costs and higher equity earnings and royalty income, which offset the effects of the lower selling prices.
For more information, visit www.ppg.com.