First quarter sales increased 4 percent on a constant currency basis versus the same quarter a year ago. This was led by European volume growth.
The company also saw record first quarter adjusted earnings per diluted share of $1.31, up 11 percent year-over-year despite unfavorable foreign currency translation. This was the 13th consecutive quarter of double-digit percentage growth in adjusted earnings-per-share.
PPG also repurchased $150 worth of shares in the quarter, as the company continues to return money to shareholders. This will likely continue; PPG has $1.0 billion in cash and short-term investments on its books.
In the report, Michael H. McGarry, PPG president and chief executive officer, said:
“We delivered record first quarter adjusted earnings per diluted share, which represented an 11 percent year-over-year increase, marking our 13th consecutive quarter with a double-digit percentage increase. Our record first quarter results benefited from the strong earnings leverage we achieved on sales volume gains along with acquisition-related income and continued cost discipline. We realized this improvement despite ongoing, but moderating, unfavorable foreign currency translation.”
PPG Industries has three primary business segments: Performance Coatings, Industrial Coatings, and Glass. Segment net sales and income for the first quarter of 2016 are shown in the chart below.
Source: company’s report
On its outlook, PPG expects volume growth to remain subdued as moderating European recovery and global economic growth offset incremental year-over-year demand improvement in the U.S. and Canada.
According to the company, PPG remains focused on aggressive cost actions. Cost reduction efforts are expected to yield annual savings of about $100 million by 2017.
PPG’s Key Growth Drivers
I see continued high growth prospects for the company.
PPG is a global leader in the growing coating industry, and it is a leader in a range of high-growth, high-margin coatings businesses. These include architectural, aerospace, automotive OEM, automotive refinish, protective & marine, and packaging among others.
The company has been growing both organically and by acquisitions. Recently PPG acquired IVC Industrial and Cuming Microwave, as well as REVOCOAT, a global supplier of sealants, adhesives and damper products for the automotive industry.
While demand growth in the U.S. and Canada has been modest, PPG growth accelerated in Europe, where volumes have improved for five consecutive quarters.
According to the company, it anticipates further expansion of the European economic recovery, resulting in higher demand that will enable it to continue to capitalize on its ongoing actions to reduce its cost base in that region. That trend can be seen in the chart below, while almost all of the company’s sales were in the U.S. and Canada in 2006, sales to this region are expected to be less than a half in 2016.
What’s more, while the industry’s average annual growth rate has been 3% in the last ten years, PPG’s average annual growth rate has been 20%.
Source: Goldman Sachs Chemical Intensity Day
PPG is the top coatings producer in France, Poland and Denmark, and the second top producer in the United Kingdom and Belgium, as shown in the chart below.
Source: Goldman Sachs Chemical Intensity Day
