The Bottom Line for 2003: Expanding Economies, Restructuring Moves Help Drive Earnings and Sales Gains
For U.S.-based companies, the relative weakness of the dollar against overseas currencies also was cited by coatings producers as a plus in the profit equation for 2003.
Industry giants The Sherwin-Williams Co., DuPont Co., PPG Industries Inc. and other major coatings makers reported overall sales and profit increases and solid performances for coatings businesses for the fourth quarter and 2003 as a whole. ICI plc, another major player, reported a net loss for the fourth quarter and continued weak profits for the year, but said its Paints business posted sales and earnings increases.
Positive earnings announcements also were issued by The Valspar Corp., RPM Inc. and Ameron International Corp. for those companies' most recent fiscal reporting periods.
In comments accompanying announcements on financial results, top company executives said sales and earnings benefited from the continued strength of the booming U.S. housing market, accompanied by the beginnings of a long-awaited rally by the manufacturing sector.
Automotive-coatings powerhouse DuPont Co. reported a 9% sales increase for its Coatings & Color Technologies business over 2002, and the company issued an upbeat outlook for 2004. Chairman and CEO Charles O. Holliday Jr. said a cyclical recovery is anticipated for the world's major industrial economies, with continued expansions forecast for emerging economies.
"We saw strong economic growth in the fourth quarter and believe it will continue to gain momentum in 2004," Holliday said. "Indeed, we believe that 2004 may provide the best global economic improvement we've seen in several years."
DuPont is forecasting worldwide economic growth of 3.5% for the year, which would be the strongest full-year expansion since 2000. In addition, the company said the manufacturing sectors of the developed industrial economies will grow at rates above regional gross domestic product (GDP). Key "risks and uncertainties" associated with this outlook are "sustained increases in oil and natural-gas prices or a faltering U.S. economic expansion," the company said.
Sherwin-Williams Chairman and CEO Christopher M. Connor said the company's robust sales and earnings increases for the fourth quarter and year were fueled by continued strength in architectural-coatings sales and "the beginning signs of recovery in the industrial maintenance and product-finishes markets" seen late in the year. The company reported a 6.9% increase in net income for the year, to $332.1 million, while sales rose 4.3%, to $5.41 billion. Fourth-quarter net income surged 24% from the prior-year period on the strength of a sales gain of 11%.
For global coatings leader Akzo Nobel, Coatings-segment sales retreated 5% in 2003 from the year before, to 5.233 billion euros, or approximately $6.563 billion. The segment's operating income slipped 7% for the year, but ended the year with a 6% increase from the year before.
Akzo Nobel described market conditions as "difficult" for decorative coatings in Europe, particularly in the consumer sector, while decorative-coatings sales continued to expand in "emerging markets." Chairman of the Board of Management Hans Wijers said the company's Industrial Coatings unit "held up reasonably well," including wood and coil-coatings and powder coatings. The auto-refinishes business remains "very competitive," the company said.
PPG's results swung solidly into the black with net income of $494 million for 2003 following a net loss of $69 million in 2002. The prior-year's earnings were impacted by significant charges for an asbestos-settlement plan and restructuring actions. Sales for the year rose 8%, to $8.76 billion.
PPG's coatings segment reported a 14% gain in operating income for 2003, to $707 million, while the segment's sales rose 7.3%, to $4.835 billion. The company attributed the sales gain to favorable currency translations and volume increases across the segment's architectural, aerospace, automotive and industrial product lines.
PPG Chairman and CEO Raymond W. LeBoeuf said optimism about the global economy picked up momentum during 2003 and continued into early 2004, "fueled by improvements in North America and Asia, where we are well positioned." Signs of improved economic growth in Europe, however, "could be negated by a stronger euro," he said.
ICI said that despite tepid earnings results for the company as a whole, the company's Paints business turned in sales and operating-profit increases for the fourth quarter, while Paints sales for the year edged down slightly. The company said sales in Latin America and Asia posted particularly strong performances, with fourth-quarter architectural-paint sales surging 36% in Latin America as the region's economies rallied from major downturns.
Rohm and Haas Co. swung to a profit for the quarter and year following net losses in 2002, and said its coatings businesses benefited from improving electronics and architectural-coatings markets. A fourth-quarter increase in powder-coatings sales reflected "particularly strong growth in Europe and evidence of a recovery in industrial markets in North America," the company said.
RPM Inc. said it recorded record sales, earnings and earnings per share for the second quarter and first six months of the company's fiscal year ended Nov. 30, 2003. President and CEO Frank C. Sullivan said the sales gains were the result of both internal growth and the impact of acquisitions, and said increased sales for the company's industrial businesses were "long overdue."
For the six-month period, RPM said net income rose 12%, to $82.9 million, from the same period a year earlier. Sales for the period increased 11%, to $1.180 billion.
The Valspar Corp. said sales for its fiscal year ended Oct. 31, 2003, rose 5.7%, to $2.248 billion. Net income for the year edged down 6.3% from the previous year, to $112.514 million. Chairman and CEO Richard M. Rompala said results for the quarter and fiscal year were viewed as positive in light of "challenging market conditions" that included a weak industrial economy and raw-material cost pressures. Rompala said the impact on industrial-coatings sales from weakness in the manufacturing sector were "more than offset by strong performances from our architectural and packaging-coatings product lines."
Ameron International Corp. reported record-high earnings per-share and said sales also set a new high-water mark of $600.5 million for the company's fiscal year ended Nov. 30, 2003. Sales rose sharply from the 2002 figure of $539 million.