PITTSBURGH – PPG Industries reported third-quarter 2012 net sales of $3.8 billion. Net income for the quarter was $339 million, or $2.18 per diluted share, including nonrecurring charges. Adjusted net income for the quarter, excluding the nonrecurring charges, was $348 million, or $2.24 per diluted share. Third-quarter 2011 net sales were $3.8 billion, and net income was $311 million, or $1.96 per diluted share.
“We delivered record third-quarter earnings per share despite uneven demand among regions and end-use markets,” said Charles E. Bunch, PPG Chairman and CEO. “Our coatings segments drove the record performance on improved local currency sales and 20 percent earnings growth.
“North American sales activity remained strongest, highlighted by excellent automotive OEM (original equipment manufacturer) and refinish coatings growth,” Bunch noted. “Business levels in Asia and Latin America were flat in aggregate but mixed by end-use market, including growth in our automotive OEM and packaging coatings businesses that was offset by weakening coatings demand due to lower marine new builds. European volume remained below the prior-year quarter, but the trend improved notably in comparison with second quarter year-over-year results due to less customer inventory destocking. Sales declined in our Optical and Specialty Materials segment in all regions due to customer inventory management actions stemming from lower growth rates in the optical channel and in anticipation of the upcoming introduction of our next-generation TRANSITIONS® lenses.”
According to Bunch, sales for the entire company were flat versus the third quarter 2011 as the impact of negative currency translation offset local currency sales growth of 4 percent.
Performance Coatings segment sales for the quarter were $1.2 billion, flat with the prior year. The negative impacts of foreign currency translation and slightly lower volume were offset by sales increases from acquisitions and improved selling prices. Volumes rose modestly in the U.S. and were down in all other regions. Aerospace sales grew despite progressively more difficult prior-period comparisons. Automotive refinish organic sales grew, aided by higher U.S. and emerging-region results. While refinish activity fell in Europe, the decline was not as severe as in the previous quarter due to less customer inventory destocking. U.S. architectural coatings daily sales grew by low- to mid-single-digit percentages, with growth in each channel and the strongest results in company-owned stores. Emerging-region volumes remained hampered by lower architectural demand and weakening marine new build activity, partly offset by higher global protective coatings volume. Segment earnings grew 7 percent to $203 million. In addition to the sales impacts, the segment achieved lower costs through discretionary cost management and restructuring related benefits, and while cost inflation continued, it was at a lower rate than in prior periods.
Industrial Coatings segment sales for the quarter were $1.1 billion, an increase of $51 million, or 5 percent, versus the prior year. Strong volume growth, pricing and acquisitions added to sales, but these were partly offset by notable currency translation that reduced sales by approximately $50 million. Robust automotive OEM coatings volume growth continued globally despite European weakness, with company gains easily outpacing industry growth. Demand in the industrial coatings business was lower and uneven by region and end-use application, including weaker consumer electronics demand partly offset by higher automotive parts activity. Packaging coatings volume grew within emerging regions, helping offset weaker results in developed regions. Segment earnings for the quarter were $153 million, an increase of $52 million, as the earnings impact from the higher sales combined with lower manufacturing costs stemming from ongoing cost management and restructuring benefits.
Architectural Coatings – EMEA (Europe, Middle East and Africa) segment sales for the quarter were $564 million, a decrease of $9 million, or 2 percent, versus the prior year. Currency translation negatively impacted sales by approximately 11 percent, while sales from the Dyrup acquisition completed in January 2012 increased sales 8 percent providing a partial offset. Volumes declined by low-single-digit percentages; however, the decline was less severe than in the previous quarter. Despite the reduced volumes, segment earnings grew by $3 million versus the prior year to reach $56 million, aided by restructuring cost benefits and an improved sales margin mix. On a year-to-date basis the Dyrup acquisition increased segment sales by 9 percent, but the Dyrup business traditionally experiences a sales decline in the fourth quarter that exceeds that of the overall segment, reflecting the seasonal nature of the products acquired with the business.