PPG Industries Inc
) beat earnings expectations in the first quarter of 2013 buoyed
by continued momentum across automotive OEM and aerospace
markets. Strength across North America and Asia was somewhat
masked by nagging weakness in Europe.
The Pittsburgh-based company posted earnings (excluding one-time
items) from continuing operations of $1.58 a share in the
quarter, which beat the Zacks Consensus Estimate by a couple of
cents. The adjusted earnings exclude pension and environmental
costs, acquisition expenses and tax-related gains.
PPG Industries, in Jan 2013, spun off its commodity chemicals
business to Georgia Gulf Corp., now known as
), for $2.1 billion. The business has been reported as
Consolidated profit, as reported, zoomed to around $2.4 billion
or $16.31 per share from $13 million or 8 cents per share earned
in the prior-year quarter. The bottom line was boosted by a
one-time gain on sale of the commodity chemicals business. Profit
from continued operation was $219 million or $1.48 a share versus
a loss of $50 million or 32 cents per share a year ago.
Shares of PPG Industries, which gained 59% last year, rose
roughly 1.8% in pre-market trading.
Revenues were essentially flat year over year at $3,331 million,
missing the Zacks Consensus Estimate of $3,424 million. PPG
Industries' industrial coatings business delivered strong
performance in the quarter. Its automotive OEM coatings franchise
continued strong momentum with healthy volume gains. However,
weakness was seen in the architectural coatings business.
Revenues from the Performance Coatings division edged down 2%
year over year to $1.1 billion in the quarter as lower volume
more than offset gains from acquisitions and pricing. Strength
across aerospace and U.S. architectural coatings markets was
somewhat offset by weakness in automotive refinish.
Industrial Coatings segment sales climbed 10% year over year to
$1.2 billion driven by volume gains in the automotive OEM
coatings business and contributions from acquisitions. Demand in
the industrial coatings business was mixed in the quarter.
Weakness in Europe was more than offset by strong coatings demand
across North America and Asia Pacific markets.
Revenues from the Architectural Coatings (Europe, Middle East and
Africa) division dipped 12% to $454 million on lower volumes due
to economic weakness. The division's sales were hurt by
unfavorable weather conditions and lesser sales days.
Optical and Specialty Materials sales fell 6% to $314 million in
the quarter on lower volumes due to a decline in optical consumer
activity in the U.S. Moreover, sales in the year-ago quarter were
benefited by a recovery in the optical industry following a late
2011 flood in Thailand. However, the division benefited from
gains in Europe driven by the successful roll-out of Generation
VII TRANSITIONS lenses and better silica demand.
Sales from the Glass segment were flat year over year at $256
million as lower fiber pricing offset an increase in flat glass
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PPG Industries' cash and cash equivalents more than doubled year
over year to roughly $2 billion at the end of the reported
quarter. Total debt fell 7% year over year to around $3.4
billion. The company spent roughly $140 million on share buybacks
and repaid debt worth $600 million in the quarter.
PPG Industries is taking steps to grow its business inorganically
by making a number of acquisitions. It recently closed the
acquisition of the North American architectural coatings business
of Dutch paints company
) for $1.05 billion. This marked the second-largest acquisition
in the company's history.
The acquisition expanded PPG Industries' branded paint product
offerings and scale in the North American architectural paint
market. It now expects to achieve $200 million in annual
synergies from the buyout within the first three full years.
Moreover, in an effort to strengthen its position in the
aerospace industry, PPG Industries recently landed a definitive
deal to buy specific assets of privately-held specialty coatings
company Deft Incorporated. The acquisition, which is subject to
customary closing conditions, is expected to close in
Moving ahead, PPG Industries envisions mixed economic trends in
the second quarter with continued healthy momentum across North
America and Asia and persistent weakness in Europe. Moreover, it
will continue to execute cost containment through its
restructuring program, lending support to earnings.
PPG Industries has a diversified base of products and markets,
and looks to grow its businesses strategically along with
controlling costs. However, the European market is expected to
remain under pressure and raw material inflation and currency
headwinds remains concerns for the company.
PPG Industries currently holds a short-term Zacks Rank #3 (Hold).
), which also belongs to the chemical industry, carries a Zacks
Rank #2 (Buy).