PPG Reports First Quarter 2009 Financial Results
PITTSBURGH April 16, 2009: PPG Industries today reported sales for the first quarter of $2.8 billion, a decline of 30 percent versus the prior year’s first quarter including a 6 percent decline resulting from a business divestiture in 2008. The company reported a loss of $111 million, or 68 cents per share, which included a significant charge for business restructuring. Adjusted net income was $32 million, or 19 cents per share. First quarter 2008 sales were $4 billion and reported net income was $100 million, or 61 cents per share, and adjusted net income was $189 million, or $1.15 per share.
First quarter 2009 net loss includes aftertax charges of $141 million, or 86 cents per share, for business restructuring and $2 million, or 1 cent per share, to reflect the net increase in the current value of the company’s obligation under its proposed asbestos settlement, which is pending court proceedings. First quarter 2008 net income included non-recurring acquisition-related costs of $89 million aftertax, or 54 cents per share, stemming from the January 2008 acquisition of SigmaKalon.
“Our first quarter results reflect continued deterioration in the global economy, resulting in lower demand in many of the end-use markets we serve,” said Charles E. Bunch, PPG chairman and chief executive officer. “The most significant drop-offs occurred in global automotive OEM and in many industrial markets. We quickly implemented broad actions, including business restructurings and general spending controls which were successful in offsetting some of the earnings impact from the lower demand levels.”
Commenting on trends during the quarter, Bunch said “March ended better than we initially anticipated, as activity steadied in several U.S. end-use markets. Our Asia Pacific region performed well in both February and March, nearly matching our strong prior year demand levels in both months. And, in Europe, our Architectural Coatings EMEA segment, despite being down for the quarter in total, delivered flat year-over-year sales volumes in March.”
“Looking ahead,” Bunch added, “we anticipate some seasonal demand growth in the second quarter, but expect activity levels to remain low in comparison with recent years. We will realize further benefits from our restructuring actions in the coming quarters. Also, we remain focused on prudently managing our cash and we ended the quarter with about $530 million of cash on hand, which is up several hundred million dollars from our 2007 and 2008 first quarter levels.”
The first quarter 2009 charge of 86 cents per share relates to a business restructuring plan announced by the company last month that is expected to deliver pretax cost savings of approximately $60 million in 2009, growing to an annual run rate of about $140 million thereafter. The plan includes the closure of a paint manufacturing operation at the company’s Saultain, France, plant; several smaller production, laboratory, warehouse and distribution facilities across PPG’s businesses and regions; and a broad reduction in employment across the company globally. Last September, PPG announced another restructuring plan expected to result in pretax cost savings at an annual run-rate of about $100 million by the end of 2009.
Sales in the quarter were down $1.2 billion, including a $242 million impact from the divestiture of the automotive glass and services business. The remaining sales decline occurred in all regions of the world, led by declines exceeding 30 percent in EMEA (Europe, Middle East and Africa) and 20 percent in the United States, while Asia Pacific sales were down high-teen percentages. Foreign currency translation was a major factor in the Asia Pacific sales decline and a contributing factor in EMEA. Segment earnings, which exclude the impact of the 2009 restructuring charge and the 2008 acquisition-related costs, dropped to $192 million in the first quarter of 2009 compared with $396 million a year ago, primarily as a result of the lower sales.
Performance Coatings segment sales in the first quarter 2009 decreased $186 million, or 17 percent, versus the prior year’s quarter. Sales declined as a result of lower volumes, particularly in the company’s automotive refinish business and architectural coatings – Americas and Asia/Pacific business. Weaker foreign currency also reduced sales. These decreases were slightly offset by improved pricing in all businesses. Segment earnings decreased $31 million, as lower volumes and weaker foreign currencies were not fully offset by increased selling prices and tighter cost control.
Industrial Coatings segment sales for the quarter decreased $414 million, or 39 percent, due primarily to lower volumes in the automotive OEM coatings and industrial coatings businesses, reflecting the continued severe declines in global demand. Weaker foreign currencies also detracted from sales. Improved selling prices only slightly countered these factors. Segment earnings for the quarter were a loss of $16 million, a decrease of $111 million due primarily to the negative effects of lower volumes. These declines were partially offset by lower overhead and manufacturing costs.
The Architectural Coatings EMEA sales for the quarter decreased $127 million, or 24 percent, due primarily to weaker foreign currency and lower volumes. These declines were slightly offset by increased selling prices. Segment earnings decreased by $6 million as lower overhead costs partially offset the impact of lower sales volumes.
Optical and Specialty Materials segment sales for the quarter decreased $50 million, or 17 percent. Lower sales volumes and weaker foreign currency were the primary factors that reduced sales. Segment earnings declined $14 million due largely to the lower volumes.
Commodity Chemicals segment sales for the quarter decreased $62 million, or 15 percent, due primarily to lower volumes partially offset by increased selling prices. The decline in demand was due to lower U.S. industrial activity. Segment earnings increased $15 million, as pricing gains and lower energy costs more than countered the impact of lower sales volumes, higher pension costs and higher manufacturing costs stemming from the lower activity levels.
Glass segment sales declined $340 million compared with the prior year due largely to the divestiture of a majority interest in the automotive glass and services business, which was completed in September 2008. Other factors contributing to the decline in sales were lower volumes reflecting reduced construction and general industrial demand and weaker foreign currency, which were slightly offset by higher selling prices. Segment earnings for the quarter were a loss of $27 million, a decrease of $57 million on lower volumes, lower equity earnings, higher manufacturing costs stemming from reduced operating rates, higher pension expenses and the absence of earnings from the divested automotive glass and services business.
First quarter 2008 results for the divested automotive glass and services business were earnings of $11 million pretax, $7 million aftertax, or 4 cents per share.