PPG Industries (PPG) Tops Q4 EPS by 2c, Revenues Beat

PPG Industries (NYSE: PPG) reported Q4 EPS of $1.59, $0.02 better than the analyst estimate of $1.57. Revenue for the quarter came in at $3.8 billion versus the consensus estimate of $3.57 billion.

• Fourth quarter net sales of approximately $3.8 billion, more than 2% higher than the prior year, despite continued negative impacts of the COVID-19 pandemic
• Reported earnings per diluted share (EPS) of $1.14 and adjusted EPS of $1.59
• Strong operating margin momentum led by higher year-over-year sales volumes in the Industrial Coatings reportable segment and continued strong cost management
• Completed Ennis-Flint acquisition and recently announced additional acquisition agreements
• Record full-year operating cash flow of about $2.1 billion, despite lower full-year sales

“Our strong earnings momentum continued in the fourth quarter as we delivered a second consecutive quarter of record operating margins,” said Michael H. McGarry, PPG chairman and chief executive officer. “The more than 20% increase in our adjusted EPS was the result of strengthening year-over-year sales growth in our Industrial Coatings reportable segment, led by the automotive original equipment manufacturer (OEM), general industrial and packaging coatings businesses. In addition, the global architectural coatings business continued its excellent execution as we leveraged higher year-over-year sales into strong earnings growth. Consistent with the third quarter, we achieved improved operating results despite continued weakness in several key end-use markets, including aerospace and automotive refinish coatings, which are still being heavily impacted by the ongoing pandemic.

“In addition to improving sales performance, we delivered nearly $40 million of incremental structural cost savings from business restructuring programs, bringing full-year savings to about $115 million. These permanent cost reductions will enable higher operating earnings leverage in future quarters as we experience further volume recovery from the pandemic. We also finished the year by generating record fourth quarter operating cash flow, bringing our full year total to $2.1 billion, driven by a 180 basis-point reduction in operating working capital as a percent of sales. Finally, in the past several months, we have announced several value-creating acquisitions, with each bringing differing strategic values to our portfolio.

“We continue to prioritize the health and safety of our employees while providing excellent support to our customers. I am proud of our global PPG team, and I want to thank our employees for their continued focus during these challenging times. To recognize our front-line and field workers for their outstanding commitment throughout the year, we accrued in the fourth quarter and are in the process of distributing about $6 million in bonuses in appreciation of their efforts. In addition, during the quarter, the PPG Foundation continued to provide relief support by donating about $2 million to communities in which we call home,” McGarry added.

“Looking ahead, overall global coatings demand continues to improve in many of the end-use markets we serve and across all our major regions, and we expect overall global economic activity to strengthen in the first half of 2021. However, due to increasing pandemic-related restrictions and certain supply chain disruptions, there is uncertainty regarding when this coatings demand growth will fully materialize. Regardless of timing, PPG is well positioned to benefit from a number of positives that are anticipated to occur in the coming quarters. These include sales volume recovery in our technology-advantaged automotive refinish and aerospace coatings businesses, an eventual inventory restocking in certain industrial end-use markets, and synergy realization and earnings accretion as we integrate recently announced acquisitions,” McGarry said.

“The performance we achieved in 2020 is a testament to our company’s capabilities and is truly the result of the fortitude of PPG’s global team as we work together to make it happen. I am looking forward to welcoming the employees from our acquisitions, and together I have no doubt that we are beginning 2021 as a stronger company,” concluded McGarry.

For earnings history and earnings-related data on PPG Industries (PPG) click here.

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