PPG’s Glass Segment Sees Sales Decline, Income Increase in 2015 Fourth Quarter
PPG Industries recently reported fourth quarter 2015 net sales from continuing operations of $3.7 billion, consistent with the prior year. Net sales in local currencies grew 7% year-over-year, with acquisition-related sales adding 5% and sales volume growth contributing nearly 2%. Unfavorable foreign currency translation impacted net sales by 7%, or about $250 million.
Fourth quarter 2015 reported net income from continuing operations was $314 million, or $1.16 per diluted share. Fourth quarter 2015 adjusted net income from continuing operations was $332 million, or $1.23 per diluted share. Adjusted net income excludes an after-tax charge for transaction-related costs totaling $11 million, or $.04 per diluted share, and an equity affiliate debt-refinancing charge of $7 million, or $.03 per diluted share. The adjusted effective tax rate for the quarter was 24.5%.
Fourth quarter 2014 reported net income and earnings per diluted share from continuing operations were $86 million and $.31, respectively. Fourth quarter 2014 adjusted net income from continuing operations of $293 million, or $1.05 per diluted share, excluded after-tax charges of $200 million, or $.72 per diluted share, for debt refinancing, and $36 million or $.13 per diluted share, for transaction-related costs, primarily for the Comex acquisition, partially offset by a tax benefit of $29 million, or $.11 per diluted share, from a favorable ruling on a prior-year tax matter. The adjusted effective tax rate for the prior-year quarter was 23.5%.
“We once again delivered strong financial performance in the fourth quarter and for the full year of 2015,” said Michael H. McGarry, president and CEO. “Results improved despite the persistent, unfavorable impact of weaker foreign currencies, which were more than offset by benefits from our earnings-accretive cash deployment, improving sales volumes and our unwavering focus on costs. For the fourth quarter, our adjusted earnings per diluted share from continuing operations increased 17%, supported by higher earnings in each reporting segment. While overall global economic demand remained mixed in the quarter, our sales volumes grew about 2%, which is our highest year-over-year volume growth in any quarter of 2015. This solid volume growth stemmed from our ability to continue to grow share of wallet through customers’ adoption of new or leading PPG technologies. In addition, we benefited from broadening improvement in European demand, as our volumes in this region steadily improved each quarter during the year. We also returned to a solid mid-single-digit percentage growth rate in Asia, while in the Americas results were mixed by country but consistent with the prior year.”
Glass segment net sales were $265 million for the quarter, down $7 million, or 3%, year-over-year as higher sales volumes and improved selling prices were offset by unfavorable foreign currency translation and reduced sales stemming from the 2014 sale of a flat glass production facility. Solid flat glass demand continued for value-added products serving residential and non-residential end-use markets. Fiber glass sales volumes also increased, as higher U.S. demand offset lower activity in Europe. Segment income was $38 million, up $5 million vs. the prior year, driven by improved organic sales that were partially offset by weak manufacturing cost performance related to the Fresno, Calif., flat glass facility, which is scheduled to undergo a major repair project in the first quarter 2016.
Performance Coatings segment fourth quarter net sales were $2.06 billion, down $31 million, or about 2%, vs. the prior-year period. Sales in local currencies were up 6%, excluding an unfavorable foreign currency translation impact of 8%. Acquisition-related sales totaled about $120 million, including one month of Comex sales stemming from the November 2014 acquisition. Organic growth continued in automotive refinish coatings, reflecting increased end-use market demand, particularly in Asia. Excluding the impact of foreign currency translation and acquisitions, architectural coatings Americas and Asia Pacific sales were flat, with higher organic sales in Mexico and the U.S. offset by weaker demand in Canada, Brazil and China. Architectural coatings EMEA sales volumes increased by a low-single-digit percentage vs. the prior-year period, as demand in the region continued to improve but remained uneven by country. Aggregate protective and marine coatings sales volumes improved by a mid-single-digit percentage, aided by protective coatings, which included the benefit of Comex-related sales synergies. Aerospace coatings sales volumes declined primarily due to strong growth in the prior-year period and customer order patterns. Segment income of $250 million was up $11 million, or 5%. Segment income benefited from acquisition-related earnings, primarily from Comex, and lower costs, including benefits from acquisition-related synergies. Unfavorable foreign currency translation impacted segment income by about $15 million.
Industrial Coatings segment fourth quarter net sales were $1.37 billion, increasing $27 million, or 2%, over the prior year. Results included sales volume growth of 4% and acquisition-related sales growth of 6% partially offset by an unfavorable foreign currency translation impact of 7%. Automotive original equipment manufacturer (OEM) coatings delivered higher sales volumes, growing in aggregate by a mid-single-digit percentage, which exceeded the global industry growth rate of about 4%. The industrial coatings and specialty coatings and materials businesses delivered higher year-over-year growth following two consecutive quarters of sales volume declines, with contributions across all major regions led by Europe and Asia. Packaging coatings sales volumes grew by a mid-single-digit percentage, aided by new-technology-related customer conversions. Total segment income for the quarter was $240 million, up $17 million, or 8%, year-over-year as a result of the increased sales and lower costs, including initial benefits from business restructuring. Unfavorable foreign currency translation impacted segment income by approximately $10 million.
Full-year 2015 net sales from continuing operations were $15.3 billion, consistent with the prior year. Acquisition-related sales contributed 6% year-over-year, supplementing sales volume growth of 1%, which offset an unfavorable foreign currency translation impact of 7%. The company’s 2015 full-year reported net income from continuing operations was $1.41 billion, or $5.14 per diluted share, vs. $1.13 billion, or $4.05 per diluted share, in 2014. Full-year 2015 adjusted net income from continuing operations was $1.56 billion, or $5.69 per diluted share, vs. $1.36 billion, or $4.88 per diluted share, in 2014, representing an adjusted earnings per diluted share increase of 17%. In 2015, foreign currency translation unfavorably impacted sales by $1.1 billion and pre-tax income by approximately $120 million. The adjusted effective tax rate for 2015 was 24.5%, vs. 23.9% for 2014.
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