PPG Industries Inc
) met earnings expectations in the fourth quarter of 2012 while
continued momentum across automotive OEM and aerospace markets
helped it to post better-than-expected sales in the quarter.
The company posted earnings of $1.53 a share in the fourth
quarter, excluding one-time charges, which matched the Zacks
Consensus Estimate. The adjusted earnings exclude charges (of $11
million) associated with acquisitions and the spin off of the
company's commodity chemicals business to
Georgia Gulf Corp.
) for $2.1 billion.
Profit (as reported) rose roughly 5% year over year to $227
million or $1.46 a share, aided by the savings from the
Pennsylvania-based company's cost containment and restructuring
For full-year 2012, profit fell 14% year over year to $941
million or $6.06 per share. Adjusted earnings for the year were
$7.94 per share, just ahead of the Zacks Consensus Estimate of
Separately, the company said that it is in talks with Essilor
International regarding the future of their joint venture,
Transitions Optical. PPG Industries holds a 51% stake in the
joint venture with Essilor owning the balance. The company hinted
that the ongoing discussions may lead to a structural change in
the joint venture or possible stake sale.
Shares of PPG Industries, which gained 59% last year, fell 1.5%
in pre-market trading.
Revenues rose 3.7% year over year to $3,648 million, beating the
Zacks Consensus Estimate of $3,589 million. PPG Industries saw
growth across all business segments except the Glass division in
Unfavorable currency exchange translation weighed on sales.
The company's North American automotive OEM coatings business
recorded strong growth in the quarter.
DU PONT (EI) DE (DD): Free Stock Analysis
GEORGIA GULF (GGC): Free Stock Analysis
PPG INDS INC (PPG): Free Stock Analysis
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Revenues for the full year were $15,200 million, up 2% year over
year, beating the Zacks Consensus Estimate of $15,143 million.
Revenues from the Performance Coatings division edged up 1% year
over year to $1.2 billion in the fourth quarter. Strength across
aerospace, automotive refinish and architectural coatings markets
aided the division's sales. Acquisitions provided marginal
Industrial Coatings segment sales jumped 9% year over year to
$1.1 billion driven by strong volume growth in the automotive OEM
coatings business. Weakness in Europe was more than offset by
volume gains across North America and emerging markets. Demand in
the industrial coatings business was mixed in the quarter.
Revenues from the Architectural Coatings (Europe, Middle East and
Africa) division rose 4% to $465 million as contributions of
Dyrup acquisition and better pricing more than offset unfavorable
currency exchange impact and lower sales volume.
Optical and Specialty Materials sales rose 5% to $272 million in
the quarter as gain in optical products led to higher volumes.
The division benefited from customer inventory build-ups
associated with the February 2013 launch of Generation VII
Revenues from the Commodity Chemicals segment inched up 2% to
$405 million on account of higher caustic pricing and improved
Sales from the Glass segment, however, slipped 6% to $241 million
as lower fiber glass volume and pricing offset an increase in
flat glass sales.
The company exited 2012 with cash and cash equivalents and
short-term investments of roughly $2.4 billion, up 60% year over
year. Total debt increased 9% year over year to around $4
billion. Operating cash flow for the year was roughly $1.8
billion, up 25% year over year.
The company, in July 2012, agreed to split its commodity
chemicals unit and merge it with Georgia Gulf. The deal value of
roughly $2.1 billion includes $95 million of debt. The
transaction is expected to consummate in late January 2013. PPG
Industries expects to incur additional charges associated with
the deal in first-quarter 2013.
Moreover, the company, in December 2012, struck a deal with
AkzoNobel, N.V., to buy the latter's North American architectural
coatings business for $1.05 billion. The transaction is expected
to close in second-quarter 2013.
Outlook and Recommendation
Moving ahead, the company envisions mixed economic trends in 2013
with continued strong growth in North America, improvements in
Asia and persistent weakness in Europe. It will continue to
execute restructuring measures, which are expected to fetch cost
savings of $70 million-$80 million this year. Moreover, the
company will continue to implement the appropriate pricing
strategy to offset higher input costs.
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, which competes with DuPont Performance Coatings
), retains a short-term Zacks Rank #3 (Hold). Currently, we have
a long-term Neutral recommendation on the stock.