The fortunes of major coatings manufacturers continued to improve in the second quarter, building on the momentum of late 2003 and the first quarter of 2004. Sales and earnings benefited from strong economic growth rates, robust housing and construction activity and improved industrial-production levels.

Leading the second-quarter charge was PPG Industries Inc., which set a sales record for any quarter in the company's history at $2.43 billion. Coatings-segment sales also set a new high-water mark, at $1.35 billion. The company's net income rose 20%, while coatings-segment operating income was up 8.8% and also posted a record high at $223 million.

The Sherwin-Williams Co. reported solid second-quarter sales and earnings gains and upped its sales and profit forecast for all of 2004 on the strength of robust volumes for architectural coatings and improving market conditions for industrial maintenance coatings and product finishes. Sherwin-Williams' second-quarter net income rose 14.8%, to $126.4 million, while sales posted a 9% increase, to $1.62 billlion. The company's giant Paint Stores segment reported an 11% sales increase, to $1.04 billion, while operating profit rose 17.3%, to $143.8 million.

Chairman and CEO Christopher M. Connor said the company is "launching new products, actively pursuing new customers, opening stores, enhancing the shopping experience in our stores, and increasing the productivity of our operations to improve sales and operating income in all operating segments of our business."

For the year as a whole, Sherwin-Williams raised its estimated sales gain over 2003 to the high single-digits, with net income per share forecast to be in a range of $2.58 to $2.66 compared to $2.26 in 2003. The company in April forecast a sales increase in the mid- to high single digits.

Other major industry players chimed in with impressive results of their own:

  • The Valspar Corp. reported net income of $44.913 million for the company's third quarter ended July 30, a 12% increase from the same period a year earlier. Sales for the quarter rose 9.6%, to $655.598 million. For the nine-month period ended July 30, net income was $102.389 million, a 16.5% increase from the prior-year period. Sales for the nine-month period rose 10.2%, to $1.796 billion.

  • Akzo Nobel reported second-quarter net income excluding one-time items of 216 million euros, or approximately $269 million, a 7% increase from the second quarter of 2003. Sales for the quarter declined 2%, to 3.325 billion euros ($4.139 billion). For first six months of the year, net income excluding one-time items was 392 million euros, a 7% increase from the prior-year period. Sales for the six-month period declined 3%, to 6.463 billion euros.

    For the company's Coatings segment, second-quarter operating income excluding one-time items was 146 million euros ($182 million), a 7% increase from the second quarter of 2003. Coatings sales for the quarter declined 1%, to 1.397 billion euros ($1.739 billion). For the first six months of the year, Coatings operating income was 228 million euros, a 10% increase from the prior-year period. Coatings sales for the six-month period declined 2%, to 2.628 billion euros. Excluding the prior-year sales for the company's recently divested impregnated papers business, Coatings sales for the second quarter of this year rose 4% from 2003, while first-half sales rose 3%.

  • DuPont said second-quarter net income rose 29% from the second quarter of 2003 to $805 million, excluding restructuring costs and other one-time items, while sales increased 2%, to $7.5 billion. Net income including one-time items fell 34%, to $503 million.

    For the company's Coatings & Color Technologies segment, second-quarter operating income was $150 million, a 43% decline from the second quarter of 2003. Sales for the quarter rose 10%, to $1.560 billion. For the first six months of the year, Coatings & Color Technologies operating income was $303 million, a decline of 17% from the same period a year earlier. Sales for the six-month period rose 10.8%, to $2.977 billion. The segment incurred a $64 million second-quarter charge for employee-separation costs.

  • ICI plc reported second-quarter net income excluding one-time items of £77 million, or approximately $140 million, an 18.4% increase from the second quarter of 2003. Sales for the quarter fell 6.7%, to £1.434 billion ($2.6 billion). For the first six months of the year, net income excluding one-time items was £121 million ($220 million), a 25% increase from the year before. Sales for the six-month period declined 6%, to £2.771 billion ($5.03 billion).

    For the company's Paints segment, second-quarter operating income was £66 million ($120 million), a 6% increase from the second quarter of 2003. Sales for the quarter fell 2%, to £568 million ($1.03 billion). For the six-month period, operating profit was £100 million, a 12% increase from the year before. Sales for the six-month period rose 1%, to £1.067 billion.

    ICI said second-quarter architectural-coatings sales were up 1% in Europe, 4% in North America, 26% in Asia, and 17% in Latin America. Packaging-coatings sales posted a sales gain of 5%, with sales particularly strong in Asia.

  • Rohm and Haas Co. swung to a net profit of $118 million for the quarter from a $3 million net loss in the prior-year period., as sales rose 15%, to $1.801 billion. The second-quarter 2003 net loss included a $94 million after-tax charge for restructuring and asset impairment. For the first six months of the year, net income was $232 million, compared to $71 million for the prior-year period. Sales for the six-month period rose 14%, to $3.633 billion.

    The company's Coatings segment also swung to a profit of $66 million from a $4 million loss in the second quarter of 2003. Coatings sales for the quarter rose 14%, to $642 million. For the first six months of the year, Coatings-segment earnings were $122 million, compared to $43 million for the prior-year period. Coatings sales for the six-month period rose 14%, to $1.208 billion.

  • RPM Inc. reported record sales and earnings for the company's fourth quarter and fiscal year ended May 31, with sales rising 12%, to $2.3 billion for the year and net income surging 302%, to $141.9 million. Excluding an after-tax charge of $88 million taken in the previous fiscal year, the net income increase was 15.5%. Earnings before interest and taxes (EBIT) rose 15%, to $246.6 million, from the year before.

    For the company's fourth quarter ended May 31, net income was $53 million, compared to a net loss of $43.4 million for the same period a year earlier. Sales for the quarter rose 15.5%, to $680.878 million. For the year, the company's industrial and consumer operating segments recorded sales increases of 14% and 11% percent, respectively.

  • Arch Chemicals Inc. reported second-quarter net income of $25.2 million compared to net income of $10.9 million for the second quarter of 2003. Sales for the quarter rose 30%, to $408.2 million. For the first six months of the year, net income was $28.2 million, compared to $12.3 million for the prior-year period. Sales for the six-month period rose 28%, to $681.5 million.

    For the company's Wood Protection and Industrial Coatings segment, second-quarter operating income was $10.7 million, compared to $4.1 million for the second quarter of 2003. Segment sales for the quarter rose 33%, to $95.5 million. For the first six months of the year, Wood Protection and Industrial Coatings segment operating income was $14.1 million, compared to $6.3 million for the prior-year period. Sales rose 38%, to $181.6 million.

    Outlook Viewed as ‘Positive';
    Raw-Material Costs Remain a Worry

    In comments on the widespread gains in sales and earnings, top company executives cited strong economic growth rates, the continued boom in the housing market and improved industrial-production activity. Recent restructuring actions and favorable currency translations were also given credit for the improved bottom lines.

    PPG Chairman and CEO Raymond W. LeBoeuf attributed sales and earnings gains for the quarter and six-month periods to "a growing economy" and "the consistent application of strategies that have generated profitable growth in our coatings segment, the continued success of our optical products and our relentless focus on reducing costs." LeBoeuf added, "Although we expect the overall economy to continue growing, there will not be consistency across all sectors of the economy. The overall expansion, however, continues."

    PPG said second-quarter coatings-segment sales and income were driven by stronger volumes in the architectural, industrial, automotive OEM, aerospace and automotive-refinish businesses and the strengthening of foreign currencies. The company said increased volumes and improved manufacturing efficiencies "more than offset additional selling expenses in the architectural business, the impact of cost inflation and lower selling prices."

    Valspar Chairman and CEO Richard M. Rompala said sales growth "was strong across all our product lines, particularly industrial and architectural coatings." He said, however, that earnings for the company's fourth quarter would be flat or show only a slight gain from the previous year due to escalating raw-material costs.

    Rompala said the company anticipates increased earnings for the company's next fiscal year due to the recent acquisition of the forest-products business of Associated Chemists Inc. and the launch of a concrete-coatings strategic alliance with The Quikrete Cos.

    Akzo Nobel said improved Coatings-segment earnings were the result of sales increases in Asia-Pacific and the United States and the company's restructuring actions.

    "Decorative Coatings is under pressure from a hesitant business climate in Western Europe and Turkey," while the Marine & Protective Coatings, Industrial Finishes and Powder Coatings businesses continued to improve, the company said. "The performance of Car Refinishes is suffering from pressure on margins," and recently announced a worldwide restructuring program.

    ICI Chief Executive John McAdam said market conditions "continued to be generally favorable in the second quarter," with results benefiting from strong sales and major restructuring actions announced in 2003. He said additional price increases are needed in the second half to compensate for the effect of rising raw-material costs.

    Arch Chemicals Chairman, President and CEO Michael E. Campbell said the company's record second-quarter earnings were the result of stronger performances in several business and product areas, including biocides for marine antifouling paints and new wood-preservative materials. The strong gain in sales for the Wood Protection and Industrial Coatings segment were due primarily to increased volumes for Wolman and Tanalith wood-preservative products, which the company said offer alternatives to traditional CCA materials.

    RPM President and CEO Frank C. Sullivan said the fourth-quarter results "capped off a strong year, with growth generated from a host of new and innovative products and services developed over the last several years and from the benefits of a number of acquired product lines."

    Rohm and Haas Chairman and CEO Raj L. Gupta said gains in sales for the company's Coatings businesses were fueled in part by robust demand seen in the global Architectural and Functional Coatings sectors, particularly in North America and Asia-Pacific. In North America, growth was driven by strong housing and remodeling markets, while growth in Asia-Pacific occurred across most market segments, the company said.

    Rohm and Haas said sales for its Powder Coatings and Automotive Coatings businesses rose due to "some improvement in industrial powder-coatings markets," favorable currency translations and some market-share gains.

    Commenting on the outlook for the rest of the year, Gupta said the "overall economic outlook is positive," with a continued expansion in demand anticipated. But he said significantly higher raw-material, natural-gas and transportation costs will exert a drag on earnings growth.