PPG reported third quarter 2016 net sales of $3.8 billion, up almost 2 percent versus the prior-year figure of $3.7 billion. Sales volumes grew 1.6 percent and acquisition-related sales contributed more than 2 percent, partly offset by a slight decline in selling prices. Unfavorable foreign currency translation impacted net sales by nearly 2 percent, or about $65 million.
Third quarter 2016 reported net loss from continuing operations was $201 million, or 75 cents per share. Third quarter 2016 adjusted net income from continuing operations was $415 million, or $1.56 per share. Adjusted net income excludes an after-tax charge totaling $616 million, or $2.31 per share, for previously disclosed pension settlement charges. The effective tax rate was 52.5 percent for the third quarter and the adjusted effective tax rate was 24.4 percent.
Third quarter 2015 reported net income and earnings per diluted share from continuing operations were $415 million and $1.52, respectively. Adjusted net income was $421 million, or $1.54 per diluted share, including after-tax charges for pension settlement and transaction-related costs totaling $6 million, or 2 cents per diluted share. The effective and adjusted tax rates were 24.0 percent for the third quarter 2015.
All figures for both reporting periods exclude financial results for the recently divested flat glass business, which are now reported as discontinued operations.
“We grew adjusted earnings per share by 1 percent versus the prior year, which is well below our expectations but reflective of the sluggish global economy,” said Michael McGarry, PPG chairman and CEO. “Our third quarter global sales volumes grew 1.6 percent despite a noticeable and broad deceleration of volume growth trends in Europe, where most of our coatings businesses experienced lower growth rates compared to the second quarter.
“Year-over-year volumes improved across both of our coatings reporting segments, led by growth in our Industrial Coatings segment, where general industrial and packaging coatings continued to outpace their respective markets. Volumes grew modestly in the Performance Coatings segment, as architectural coatings growth both in the U.S. and Canada region and in Mexico was partially offset by slight declines in architectural coatings – Europe, Middle East and Africa and persistently weak demand for marine coatings,” McGarry continued.
“Versus our expectations at the beginning of the quarter, our third quarter earnings were impacted by slower-than-expected volume growth rates in Europe and higher-than-anticipated unfavorable foreign currency translation stemming from weakening in the Mexican peso and British pound. In addition, we had higher spending on growth-related initiatives primarily to support new product launches,” said McGarry.
“We continued to execute on our strategic objectives during the quarter, including annuitizing about $1.8 billion of pension obligations and announcing the sale of our ownership interest in two Asian fiber glass joint ventures. Also, on Oct. 1, we finalized the sale of both the European fiber glass and flat glass businesses,” commented McGarry.
“Looking ahead to the fourth quarter, we expect a continuation of only modest improvements in global demand and expect our year-over-year earnings growth rates to be comparable to or slightly higher than the third quarter,” McGarry said. “As a result, we are reviewing various restructuring scenarios to reduce our structural operating and functional costs, with an emphasis in regions or end-use markets where conditions are the weakest. We will, however, continue appropriate investments on growth-related initiatives. Additionally, we expect to deploy at least $650 million of cash in the fourth quarter, which will put us at the top end of our earnings-accretion-focused cash deployment target,” concluded McGarry.
Automotive refinish coatings sales growth continued at a low-single-digit percentage rate in constant currencies, reflecting higher end-use demand in the Asia Pacific region that was partly offset by modest European demand declines.
Automotive OEM coatings sales volumes grew by a low- to mid-single-digit percentage versus the prior-year period, consistent with global industry growth rates.
Third quarter financial results for the Glass segment comprise PPG’s global fiberglass operations. Results for the flat glass business are presented as discontinued operations for current and all prior periods. The sale of both the flat glass and European fiber glass businesses were finalized Oct. 1, 2016, and the sale of PPG’s 50 percent ownership interest in its two Asian fiber glass joint ventures was announced during the third quarter and is expected to close by the end of 2016.
