) topped earnings expectations in the second quarter of 2014 on
healthy results across major markets, notably Europe where earnings
jumped 28%. Cost reduction measures and strength in the automotive
OEM coatings market supported the results.
Profit from continued operation (as reported) was $393 million or
$2.80 per share in the second quarter, climbing roughly 24% from
$318 million or $2.19 per share posted a year ago. Consolidated
profit rose 13% year over year to $386 million or $2.75 per share.
The improvement was led by strong performance in Europe as PPG
gained from gradual economic recovery in the region.
Barring one-time items, the Pittsburgh-based company raked in
earnings from continuing operations of $2.83 a share in the quarter
that topped the Zacks Consensus Estimate of $2.79. The adjusted
earnings exclude pension-related costs and acquisition charges.
Revenues moved up 5% year over year to $4,082 million in the
reported quarter. It fell short of the Zacks Consensus Estimate of
$4,097 million. The company benefited from higher volumes across
major regions in the quarter.
Revenues from the Performance Coatings division went up 4% year
over year to $2.3 billion in the quarter helped by acquisitions,
higher volumes, favourable currency impact and improved pricing.
The company saw higher sales across aerospace and automotive
refinish businesses. Architectural coatings sales rose modestly in
North America while sales volumes in EMEA (Europe, Middle East and
Africa) moved up in low single-digit clip. However, PPG Industries
continues to see lower marine coatings sales.
Sales from the Industrial Coatings segment rose 7% to $1.5 billion
on the back of volume gains across the board. Automotive OEM
coatings volumes rose by high single-digit percentages in the
quarter. The industrial coatings and specialty coatings and
materials businesses also recorded strong volume gains on strength
in specific end markets.
Revenues from the Glass segment moved up 7% to $289 million on
higher demand of fiber glass. Flat glass volumes rose on increased
residential activity in North America.
PPG Industries ended the quarter with cash and cash equivalents of
$1,986 million, up around 60% year over year. Long-term debt was
$2,958 million, down roughly 12% year over year.
PPG Industries repurchased 500,000 shares worth $100 million
during the quarter and plans to spend $3 billion to $4 billion in
2014 and 2015 on acquisitions and share repurchases.
PPG Industries remains focused on effectively deploying its healthy
cash position on further earnings-accretive opportunities. The
company believes that its cost-cutting actions coupled with
geographic diversity will enable it to continue its strong earnings
performance leveraging higher global demand.
PPG Industries will continue to gain from cost synergies from
acquisitions. The acquisition of
) North American architectural coatings business, in Apr 2013, has
bolstered its branded paint product offerings and scale in the
North American architectural paint market.
Moreover, the recently announced buyout of Mexico's leading paint
company - Consorcio Comex S.A. de C.V. - for $2.3 billion
represents a significant move by PPG Industries as it will
reinforce its architectural coatings business in Mexico and Central
America by offering a leading architectural coatings portfolio. The
deal came after U.S. paint major
) ended its pursuit of Comex's Mexican business in Apr 2014.
PPG Industries has a diversified base of products and markets, and
looks to grow its businesses strategically along with controlling
costs. However, some of the end markets such as non-residential
construction and marine coatings remain somewhat sluggish.
PPG Industries is a Zacks Rank #3 (Hold) stock.
Another chemical company
LyondellBasell Industries NV
), which retains a Zacks Rank #2 (Buy), is slated to report its
second-quarter results on Jul 25.
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