01.25.16
PPG Industries has reported fourth quarter 2015 net sales from continuing operations of $3.7 billion, consistent with the prior-year. Net sales in local currencies grew 7 percent year-over-year, with acquisition-related sales adding 5 percent and sales volume growth contributing nearly 2 percent. Unfavorable foreign currency translation impacted net sales by 7 percent, or about $250 million.
Fourth quarter 2015 reported net income from continuing operations was $314 million, or $1.16 per diluted share. Fourth quarter 2015 adjusted net income from continuing operations was $332 million, or $1.23 per diluted share. Adjusted net income excludes an after-tax charge for transaction-related costs totaling $11 million, or 4 cents per diluted share, and an equity affiliate debt-refinancing charge of $7 million, or 3 cents per diluted share. The adjusted effective tax rate for the quarter was 24.5 percent.
Fourth quarter 2014 reported net income and earnings per diluted share from continuing operations were $86 million and 31 cents, respectively. Fourth quarter 2014 adjusted net income from continuing operations of $293 million, or $1.05 per diluted share, excluded after-tax charges of $200 million, or 72 cents per diluted share for debt refinancing, $36 million or 13 cents per diluted share for transaction-related costs, primarily for the Comex acquisition, partially offset by a tax benefit of $29 million, or 11 cents per diluted share from a favorable ruling on a prior-year tax matter. The adjusted effective tax rate for the prior year quarter was 23.5 percent.
“We once again delivered strong financial performance in the fourth quarter and for the full year of 2015,” said Michael H. McGarry, PPG president and chief executive officer. “Results improved despite the persistent, unfavorable impact of weaker foreign currencies, which were more than offset by benefits from our earnings-accretive cash deployment, improving sales volumes and our unwavering focus on costs.
“For the fourth quarter, our adjusted earnings per diluted share from continuing operations increased 17 percent, supported by higher earnings in each reporting segment,” McGarry said. “While overall global economic demand remained mixed in the quarter, our sales volumes grew about 2 percent, which is our highest year-over-year volume growth in any quarter of 2015.
“This solid volume growth stemmed from our ability to continue to grow share of wallet through customers’ adoption of new or leading PPG technologies. In addition, we benefited from broadening improvement in European demand, as our volumes in this region steadily improved each quarter during the year. We also returned to a solid mid-single-digit percentage growth rate in Asia, while in the Americas results were mixed by country but consistent with the prior year,” McGarry said.
“Our Industrial Coatings segment led the sales volume growth with a mid-single-digit percentage improvement. This included continued above-market performance in automotive OEM and packaging coatings, supplemented by gains in our general industrial and our specialty coatings and materials businesses, which had experienced volume declines in the previous two quarters. In the Performance Coatings segment, sales volumes grew in automotive refinish, protective and marine coatings, and architectural coatings EMEA, while we experienced weaker architectural coatings demand in Canada and lower aerospace coatings volumes in relation to strong growth in the prior year period,” McGarry said.
“Over the course of the year, we continued to execute on our strategic objectives, including accretive expansion of our coatings portfolio with synergies realized from the successful integration of our Comex acquisition, along with the completion of six other acquisitions,” McGarry said. “Additionally, we maintained our heritage of returning cash to shareholders, with $1.1 billion returned during the year through dividends and share repurchases.”
In April, the company raised the per-share dividend by 7 percent. PPG has paid annual dividends for 116 consecutive years, including 44 consecutive years of increased annual per-share payouts.
“As we enter 2016, we anticipate global economic growth will continue, but at a varied pace and mixed by major economy. In the Asia Pacific region, growth will likely remain uneven through the year but solid on a full-year basis. The primary driver for this growth is increased consumer spending, which is beneficial to PPG as this affects the majority of our products sold in the region,” McGarry said.
“Economic expansion in North America is likely to continue at a modest pace, comparable to this past year, supported by multiple sectors,” McGarry said. “Also, we expect the European economies to build on the broadening growth rates achieved in 2015, which will be favorable to PPG given about 30 percent of our sales are in that region and we have substantially reduced our cost structure there.”
“From a PPG perspective, we remain focused on delivering higher organic growth, including continued commercialization of our innovative, industry-leading coatings technologies. Also, we will continue to be aggressive on cost and productivity initiatives. Finally, our balance sheet remains strong, and we intend to continue to create shareholder value through earnings-accretive cash deployment,” McGarry concluded.
PPG reiterated that it is on pace to deploy $2.0 billion to $2.5 billion of cash, in years 2015 and 2016 combined, on acquisitions and share repurchases. The company reported that it generated over $1.8 billion of cash from continuing operations in 2015 and that its cash and short-term investments totaled $1.5 billion at year-end. PPG also reported approximate full-year 2015 cash uses as follows: $475 million for capital spending, $385 million for dividends paid, over $400 million for acquisitions (purchase price), and $750 million for share repurchases totaling approximately 7.0 million shares.
Fourth Quarter 2015 Reportable Segment Financial Results
· Performance Coatings segment fourth quarter net sales were $2.06 billion, down $31 million, or about 2 percent, versus the prior-year period. Sales in local currencies were up 6 percent, excluding an unfavorable foreign currency translation impact of 8 percent. Acquisition-related sales totaled about $120 million, including one month of Comex sales stemming from the November 2014 acquisition. Organic growth continued in automotive refinish coatings, reflecting increased end-use market demand, particularly in Asia. Excluding the impact of foreign currency translation and acquisitions, architectural coatings Americas and Asia Pacific sales were flat, with higher organic sales in Mexico and the U.S. offset by weaker demand in Canada, Brazil and China. Architectural coatings EMEA (Europe, Middle East and Africa) sales volumes increased by a low-single-digit percentage versus the prior-year period, as demand in the region continued to improve but remained uneven by country. Aggregate protective and marine coatings sales volumes improved by a mid-single-digit percentage, aided by protective coatings, which included the benefit of Comex-related sales synergies. Aerospace coatings sales volumes declined primarily due to strong growth in the prior-year period and customer order patterns. Segment income of $250 million was up $11 million, or 5 percent. Segment income benefited from acquisition-related earnings, primarily from Comex, and lower costs, including benefits from acquisition-related synergies. Unfavorable foreign currency translation impacted segment income by about $15 million.
· Industrial Coatings segment fourth quarter net sales were $1.37 billion, increasing $27 million, or 2 percent, over the prior year. Results included sales volume growth of 4 percent and acquisition-related sales growth of 6 percent partially offset by an unfavorable foreign currency translation impact of 7 percent. Automotive original equipment manufacturer (OEM) coatings delivered higher sales volumes, growing in aggregate by a mid-single-digit percentage, which exceeded the global industry growth rate of about 4 percent. The industrial coatings and specialty coatings and materials businesses delivered higher year-over-year growth following two consecutive quarters of sales volume declines, with contributions across all major regions led by Europe and Asia. Packaging coatings sales volumes grew by a mid-single-digit percentage, aided by new-technology-related customer conversions. Total segment income for the quarter was $240 million, up $17 million, or 8 percent, year-over-year as a result of the increased sales and lower costs, including initial benefits from business restructuring. Unfavorable foreign currency translation impacted segment income by approximately $10 million.
· Glass segment net sales were $265 million for the quarter, down $7 million, or 3 percent, year-over-year as higher sales volumes and improved selling prices were offset by unfavorable foreign currency translation and reduced sales stemming from the 2014 sale of a flat glass production facility. Solid flat glass demand continued for value-added products serving residential and non-residential end-use markets. Fiber glass sales volumes also increased, as higher U.S. demand offset lower activity in Europe. Segment income was $38 million, up $5 million versus the prior year, driven by improved organic sales, that were partially offset by weak manufacturing cost performance related to the Fresno, California, flat glass facility, which is scheduled to undergo a major repair project in the first quarter 2016.
Full-Year 2015 Financial Results
Full-year 2015 net sales from continuing operations were $15.3 billion, consistent with the prior year. Acquisition-related sales contributed 6 percent year-over-year, supplementing sales volume growth of 1 percent, which offset an unfavorable foreign currency translation impact of 7 percent. The company’s 2015 full-year reported net income from continuing operations was $1.41 billion, or $5.14 per diluted share, versus $1.13 billion, or $4.05 per diluted share, in 2014. Full-year 2015 adjusted net income from continuing operations was $1.56 billion, or $5.69 per diluted share, versus $1.36 billion, or $4.88 per diluted share, in 2014, representing an adjusted earnings per diluted share increase of 17 percent. In 2015, foreign currency translation unfavorably impacted sales by $1.1 billion and pre-tax income by approximately $120 million. The adjusted effective tax rate for 2015 was 24.5 percent versus 23.9 percent for 2014.
Fourth quarter 2015 reported net income from continuing operations was $314 million, or $1.16 per diluted share. Fourth quarter 2015 adjusted net income from continuing operations was $332 million, or $1.23 per diluted share. Adjusted net income excludes an after-tax charge for transaction-related costs totaling $11 million, or 4 cents per diluted share, and an equity affiliate debt-refinancing charge of $7 million, or 3 cents per diluted share. The adjusted effective tax rate for the quarter was 24.5 percent.
Fourth quarter 2014 reported net income and earnings per diluted share from continuing operations were $86 million and 31 cents, respectively. Fourth quarter 2014 adjusted net income from continuing operations of $293 million, or $1.05 per diluted share, excluded after-tax charges of $200 million, or 72 cents per diluted share for debt refinancing, $36 million or 13 cents per diluted share for transaction-related costs, primarily for the Comex acquisition, partially offset by a tax benefit of $29 million, or 11 cents per diluted share from a favorable ruling on a prior-year tax matter. The adjusted effective tax rate for the prior year quarter was 23.5 percent.
“We once again delivered strong financial performance in the fourth quarter and for the full year of 2015,” said Michael H. McGarry, PPG president and chief executive officer. “Results improved despite the persistent, unfavorable impact of weaker foreign currencies, which were more than offset by benefits from our earnings-accretive cash deployment, improving sales volumes and our unwavering focus on costs.
“For the fourth quarter, our adjusted earnings per diluted share from continuing operations increased 17 percent, supported by higher earnings in each reporting segment,” McGarry said. “While overall global economic demand remained mixed in the quarter, our sales volumes grew about 2 percent, which is our highest year-over-year volume growth in any quarter of 2015.
“This solid volume growth stemmed from our ability to continue to grow share of wallet through customers’ adoption of new or leading PPG technologies. In addition, we benefited from broadening improvement in European demand, as our volumes in this region steadily improved each quarter during the year. We also returned to a solid mid-single-digit percentage growth rate in Asia, while in the Americas results were mixed by country but consistent with the prior year,” McGarry said.
“Our Industrial Coatings segment led the sales volume growth with a mid-single-digit percentage improvement. This included continued above-market performance in automotive OEM and packaging coatings, supplemented by gains in our general industrial and our specialty coatings and materials businesses, which had experienced volume declines in the previous two quarters. In the Performance Coatings segment, sales volumes grew in automotive refinish, protective and marine coatings, and architectural coatings EMEA, while we experienced weaker architectural coatings demand in Canada and lower aerospace coatings volumes in relation to strong growth in the prior year period,” McGarry said.
“Over the course of the year, we continued to execute on our strategic objectives, including accretive expansion of our coatings portfolio with synergies realized from the successful integration of our Comex acquisition, along with the completion of six other acquisitions,” McGarry said. “Additionally, we maintained our heritage of returning cash to shareholders, with $1.1 billion returned during the year through dividends and share repurchases.”
In April, the company raised the per-share dividend by 7 percent. PPG has paid annual dividends for 116 consecutive years, including 44 consecutive years of increased annual per-share payouts.
“As we enter 2016, we anticipate global economic growth will continue, but at a varied pace and mixed by major economy. In the Asia Pacific region, growth will likely remain uneven through the year but solid on a full-year basis. The primary driver for this growth is increased consumer spending, which is beneficial to PPG as this affects the majority of our products sold in the region,” McGarry said.
“Economic expansion in North America is likely to continue at a modest pace, comparable to this past year, supported by multiple sectors,” McGarry said. “Also, we expect the European economies to build on the broadening growth rates achieved in 2015, which will be favorable to PPG given about 30 percent of our sales are in that region and we have substantially reduced our cost structure there.”
“From a PPG perspective, we remain focused on delivering higher organic growth, including continued commercialization of our innovative, industry-leading coatings technologies. Also, we will continue to be aggressive on cost and productivity initiatives. Finally, our balance sheet remains strong, and we intend to continue to create shareholder value through earnings-accretive cash deployment,” McGarry concluded.
PPG reiterated that it is on pace to deploy $2.0 billion to $2.5 billion of cash, in years 2015 and 2016 combined, on acquisitions and share repurchases. The company reported that it generated over $1.8 billion of cash from continuing operations in 2015 and that its cash and short-term investments totaled $1.5 billion at year-end. PPG also reported approximate full-year 2015 cash uses as follows: $475 million for capital spending, $385 million for dividends paid, over $400 million for acquisitions (purchase price), and $750 million for share repurchases totaling approximately 7.0 million shares.
Fourth Quarter 2015 Reportable Segment Financial Results
· Performance Coatings segment fourth quarter net sales were $2.06 billion, down $31 million, or about 2 percent, versus the prior-year period. Sales in local currencies were up 6 percent, excluding an unfavorable foreign currency translation impact of 8 percent. Acquisition-related sales totaled about $120 million, including one month of Comex sales stemming from the November 2014 acquisition. Organic growth continued in automotive refinish coatings, reflecting increased end-use market demand, particularly in Asia. Excluding the impact of foreign currency translation and acquisitions, architectural coatings Americas and Asia Pacific sales were flat, with higher organic sales in Mexico and the U.S. offset by weaker demand in Canada, Brazil and China. Architectural coatings EMEA (Europe, Middle East and Africa) sales volumes increased by a low-single-digit percentage versus the prior-year period, as demand in the region continued to improve but remained uneven by country. Aggregate protective and marine coatings sales volumes improved by a mid-single-digit percentage, aided by protective coatings, which included the benefit of Comex-related sales synergies. Aerospace coatings sales volumes declined primarily due to strong growth in the prior-year period and customer order patterns. Segment income of $250 million was up $11 million, or 5 percent. Segment income benefited from acquisition-related earnings, primarily from Comex, and lower costs, including benefits from acquisition-related synergies. Unfavorable foreign currency translation impacted segment income by about $15 million.
· Industrial Coatings segment fourth quarter net sales were $1.37 billion, increasing $27 million, or 2 percent, over the prior year. Results included sales volume growth of 4 percent and acquisition-related sales growth of 6 percent partially offset by an unfavorable foreign currency translation impact of 7 percent. Automotive original equipment manufacturer (OEM) coatings delivered higher sales volumes, growing in aggregate by a mid-single-digit percentage, which exceeded the global industry growth rate of about 4 percent. The industrial coatings and specialty coatings and materials businesses delivered higher year-over-year growth following two consecutive quarters of sales volume declines, with contributions across all major regions led by Europe and Asia. Packaging coatings sales volumes grew by a mid-single-digit percentage, aided by new-technology-related customer conversions. Total segment income for the quarter was $240 million, up $17 million, or 8 percent, year-over-year as a result of the increased sales and lower costs, including initial benefits from business restructuring. Unfavorable foreign currency translation impacted segment income by approximately $10 million.
· Glass segment net sales were $265 million for the quarter, down $7 million, or 3 percent, year-over-year as higher sales volumes and improved selling prices were offset by unfavorable foreign currency translation and reduced sales stemming from the 2014 sale of a flat glass production facility. Solid flat glass demand continued for value-added products serving residential and non-residential end-use markets. Fiber glass sales volumes also increased, as higher U.S. demand offset lower activity in Europe. Segment income was $38 million, up $5 million versus the prior year, driven by improved organic sales, that were partially offset by weak manufacturing cost performance related to the Fresno, California, flat glass facility, which is scheduled to undergo a major repair project in the first quarter 2016.
Full-Year 2015 Financial Results
Full-year 2015 net sales from continuing operations were $15.3 billion, consistent with the prior year. Acquisition-related sales contributed 6 percent year-over-year, supplementing sales volume growth of 1 percent, which offset an unfavorable foreign currency translation impact of 7 percent. The company’s 2015 full-year reported net income from continuing operations was $1.41 billion, or $5.14 per diluted share, versus $1.13 billion, or $4.05 per diluted share, in 2014. Full-year 2015 adjusted net income from continuing operations was $1.56 billion, or $5.69 per diluted share, versus $1.36 billion, or $4.88 per diluted share, in 2014, representing an adjusted earnings per diluted share increase of 17 percent. In 2015, foreign currency translation unfavorably impacted sales by $1.1 billion and pre-tax income by approximately $120 million. The adjusted effective tax rate for 2015 was 24.5 percent versus 23.9 percent for 2014.
