INDUSTRY NEWS EXTRA: The Economy
Financial results announced by major coatings manufacturers for the third quarter indicate that sales and profits continue to be pressured by weakness in key global economies, with the Sept. 11 terrorist attacks in the United States reported to be causing additional business declines. Lower raw-material costs, however, were reported to be mitigating some of the effects of reduced sales.
Earnings declines were reported by The Sherwin-Williams Co., PPG Industries Inc., DuPont Co., ICI plc, Akzo Nobel, Ferro Corp., and Rohm and Haas Co.
Sherwin-Williams cited economic and foreign currency-exchange weakness as key factors in sales and earnings declines, but said third-quarter sales "were further negatively impacted by the temporary change in buying habits due to the attacks on the United States on Sept. 11." Sherwin-Williams reported a decline of 15.4% in third-quarter net income, to $90.3 million, while sales fell 3.2%, to $1.37 billion. For the first nine months of the year, net income declined 17.4%, to $217.7 million, as sales dropped 3.2%, to $3.93 billion.
The company said results also were adversely affected by continuing poor domestic and South American economic conditions, and discontinued paint programs at certain retail customers. But Chairman and CEO Christopher M. Connor said it was believed the Sept. 11 terrorist attacks "caused only a temporary change" in consumer buying activities.
PPG Chairman and CEO Raymond W. LeBoeuf said that in light of continued deterioration in global markets, the company will continue its "aggressive pursuit of additional cost-reduction opportunities" following previously announced cost savings totaling an estimated $70 million. PPG's third-quarter net income declined 38%, to $93 million, from the year before, despite a 6.8% increase in sales to $2.14 billion. For the first nine months of the year, net income declined 38.5%, to $304 million, including a $101 million first-quarter pretax restructuring charge. Sales fell 4.7%, to $6.26 billion.
Third-quarter operating income for PPG's coatings segment declined 25%, to $123 million, while sales fell 5.7%, to $1.068 billion. For the first nine months, coatings operating income dropped 33%, to $359 million, while sales fell 5.9%, to $3.338 billion. LeBoeuf said coatings sales and earnings reflected the effects of volume declines in the automotive and industrial segments.
In comments on DuPont Co.'s third-quarter financial results, Chairman and CEO Charles O. Holliday Jr. said the company is "experiencing one of the most challenging business environments the company has faced in decades." DuPont said third-quarter net income excluding one-time items plummeted 76%, to $128 million, as sales fell 12%, to $5.641 billion, from the prior-year period. For the first nine months of the year, net income was down 53%, to $1.127 billion, and sales for the nine-month period dropped 11%, to $19.497 billion.
DuPont's third-quarter Performance Coatings & Polymers segment operating income dropped 56%, to $75 million, as sales fell 12%, to $1.381 billion. For the first nine months of the year, Performance Coatings & Polymers operating income declined 47%, to $284 million, as sales fell 12%, to $4.353 billion. The company said the segment's results were adversely affected by a slowdown in auto manufacturing, lower refinish coatings sales in the United States and Europe, and decreased demand for printer inks, elastomers and engineering polymers.
ICI said third-quarter net income dropped 7.2% excluding exceptional items, to $125 million, while sales fell 4.8%, to $2.346 billion. For the first nine months of the year, net income declined 7%, to $335 million, and sales fell 2.1%, to $7.077 billion. Operating income for the company's Paints business rose 1.5% for the nine-month period, to $203 million, as Paints sales rose 4%, to $2.520 billion.
ICI announced a restructuring program to cut costs and boost efficiencies, and said it plans to reduce its work force by 1,300, or 3% of its employee total worldwide, over the next two years. The company, citing the "uncertain environment" in announcing the restructuring, said the plan is expected to cut costs by ¿60 million annually, or approximately $87 million.
Akzo Nobel said third-quarter net income excluding extraordinary items declined 1% from a year earlier, to 239 million euros, while sales fell less than 1%, to 3.523 billion euros. For the first nine months of the year, net income was down 2%, to 711 million euros, as sales rose 3%, to 10.725 billion euros. The company's coatings-segment operating income fell 10% in the quarter to 128 million euros, and sales slipped 1%, to 1.438 billion euros. For the first nine months of the year, coatings operating income was down 9%, to 356 million euros, while sales rose 2%, to 4.325 billion euros.
Akzo Nobel said decorative and industrial coatings results were generally down from a year earlier, while marine and protective coatings continued to show strong sales and earnings growth due to a shipbuilding boom in Asia. A recently announced restructuring program will reduce the company's work force by 1,000 positions.
Ferro Corp. reported record third-quarter sales of $365.3 million, but net income slumped 32.4%, to $12.3 million, from the prior year. For the first nine months of the year, net income was down 41.4%, at $33.2 million, while sales rose 1.9%, to $1.091 billion. Coatings-segment sales were up slightly for the quarter, but earnings were off 31% from the year before.
Rohm and Haas Co. said third-quarter earnings declined 31.2%, to $53 million, as sales fell 15%, to $1.346 billion. For the first nine months of the year, earnings declined 23%, to $814 million, while sales fell 10.5%, to $4.326 billion. The company's Performance Polymers business, which includes coatings and adhesives, reported a 1% gain in third-quarter profit, to $182 million, although sales fell 7.9%, to $794 million. For the first nine months of the year, Performance Polymers profit retreated 17.3%, to $492 million, as sales fell 8.5%, to $2.427 billion.
Rohm and Haas said sales of architectural and industrial coatings were affected by continued weak demand for automotive, paper, leather, and industrial powder coatings. Coatings sales, however, were strong in Asia and the United Kingdom, the company said.