- THE MAGAZINE
The third quarter sales decline of $1 billion included a $229 million impact from the 2008 divestiture of a majority interest in the automotive glass and services (AG&S) business, and about a $150 million impact from negative foreign currency translation. Year-over-year sales volumes decreased by about $500 million, or 12%, with declines in most regions, except Asia/Pacific. Selling prices declined by about $150 million vs. last year’s third quarter, primarily due to lower commodity chemicals pricing.
“In the quarter, we continued to restore profitability and to deliver strong cash generation,” said Charles E. Bunch, PPG chairman and CEO. “We benefited from our aggressive cost-reduction actions, as well as a modest improvement in demand vs. the first half of 2009, stemming from a very gradual recovery in the global economy.”
Bunch said that PPG’s third quarter adjusted earnings per share showed ongoing growth over the first two quarters of 2009. The company reported adjusted earnings per share in the first and second quarters of 2009 of $.19 and $.91, respectively.
Bunch said the company’s efforts to transform its business portfolio over the past several years were evident in the third quarter 2009 results. PPG’s combined Coatings and Optical and Specialty Materials segments achieved 7% higher year-over-year earnings and collectively accounted for more than 95% of total segment earnings, according to Bunch. “Additionally, we capitalized on our expanded geographic footprint and posted record earnings in the Asia/Pacific region due to stronger year-over-year performance in China,” said Bunch. “These improved results partially offset lower year-over-year earnings in our Glass segment and in our Commodity Chemicals segment, a business that experienced record sales and earnings levels last year.
“Also, due to our focus on working capital management, we generated about $650 million of cash from operations in the quarter. This is about 40% more than last year’s third quarter. We repaid about $700 million of debt in the quarter, and we still have about $900 million of cash on hand.
“Looking ahead to the fourth quarter, we anticipate only modest improvement in the overall economy. We expect growth in Asia to continue, and we anticipate that global automotive production will remain at least at the third quarter levels, if not higher. Currency translation, which had been a headwind for PPG all year thus far, will likely shift to a tailwind. What’s more, many of our businesses will exhibit normal, slower seasonal demand patterns.”
Glass segment sales declined $329 million compared with the prior year, due largely to the AG&S business divestiture, which was completed in September 2008. Other factors contributing to the sales decline were lower volumes because of reduced construction and general industrial demand and lower sales prices. The segment loss was $6 million, a decline of $23 million due to the lower volumes and lower sales prices. These decreases were tempered by lower manufacturing and input costs. Last year’s third quarter results for the divested AG&S business included a loss of $5 million pretax, $3 million after-tax, or $.02 per share.
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