INDUSTRY NEWS EXTRA: Business Pulse
First-Quarter Reports Reflect Deliberate Pace of Economic Recovery
The Sherwin-Williams Co., PPG Industries Inc., DuPont Co., ICI plc, and Ferro Corp. reported declines in first-quarter earnings and sales from the same period a year earlier, and PPG announced additional restructuring moves aimed at reducing costs. Akzo Nobel said net income rose from the prior year, but operating income for the company's Coatings business fell slightly.
On the plus side, Rohm and Haas Co. reported a 20% increase in earnings, attributed in part to cost-reduction moves, while The Valspar Corp. said net income for its second quarter ended April 26 rose 45% from the prior-year period.
Executives with several companies are forecasting improved financial results in the second half of this year. But the companies said the strength of economic recovery appears to be uncertain, and indicated they are continuing to reduce costs and take other measures to address sales volumes that generally remain below levels of a year earlier. Also mentioned as a drag on results is the economic situation in Latin America, particularly in Argentina where a severe downturn has led to a devaluation of the peso.
In comments on his company's first-quarter results, Sherwin-Williams Chairman and CEO Christopher M. Connor said "some signs of a strengthening domestic economy are beginning to appear in certain markets in which we participate." But he added that "the broader economic recovery will be slow and will continue to impact our sales and profit improvements." The company reported first-quarter net income excluding accounting changes of $34.8 million, a 5.8% decline from the first quarter of 2001. Sales for the quarter fell 0.8%, to $1.15 billion.
Connor said the company anticipates "only a slow pick-up in the industrial and OEM markets" during the rest of the year.
DuPont said it expects business conditions in the United States and possibly in Europe to continue to improve during the second quarter, generating volume increases for most of its businesses. But a "significant period of demand growth is needed to absorb capacity before pricing strengthens in the manufacturing sector," the company said. Volume gains and lower raw material costs will be mitigated by a continued strong dollar and a "difficult price environment," the company said.
DuPont reported net income of $552 million excluding one-time items, a decline of 2.6% from the first quarter of 2001. Sales for the quarter fell 11%, to $6.8 billion. Key factors in earnings declines included selling prices that were 4% lower in local regions, a stronger U.S. dollar and reduced volumes, partially offset by lower raw-material costs, the company said. Net income including one-time items was $479 million, a decline of 4% from the prior-year period.
For DuPont's Coatings & Color Technologies segment, first-quarter operating income was $85 million, a decline of 39.3% from the prior-year period. Sales for the segment fell 5.6%, to $1.137 billion, with the decline resulting primarily from lower prices for OEM coatings and titanium dioxide pigments.
Other companies echoed the views expressed by executives with Sherwin-Williams and Du Pont. Results for those companies included the following:
PPG's Coatings segment reported a 14.1% gain in first-quarter operating income, to $71 million, despite a 4.8% decline in sales, to $1.052 billion. The company said the drop in sales was the result of declines in automotive OEM and refinish coatings and industrial and aerospace-coatings volumes, with the sharpest retreats occurring in Europe. The operating-income gain was attributed to cost-cutting and lower raw-material costs.
For ICI's Paints business, first-quarter earnings were unchanged at ¿38 million ($55.6 million), while operating profit rose 6%, to ¿25 million ($36.6 million). Sales for the quarter declined 2%, to ¿509 million ($731 million).
Ferro's first-quarter coatings-segment operating income was $24.0 million, a gain of 8.9% from the prior-year quarter. Segment sales rose 24.5%, to $286.3 million, primarily as a result of the dmc2 acquisition.