PPG results take hit on foreign currency rates
Pittsburgh Post-Gazette
Global coatings maker PPG said its fourth-quarter results took a $100 million hit from weak foreign currency values, and it doesn’t expect the effect of unfavorable exchange rates to improve anytime soon.
For all of 2017, PPG expects sales could dip by about $400 million due to weak currencies and a strong U.S. dollar overseas.
But Michael McGarry, chairman and chief executive, told analysts Thursday in a conference call that he is confident Downtownbased PPG will report adjusted earnings per share growth for 2017 because results will be boosted in part by a broad cost-cutting program.
PPG’s shares closed Thursday at $97.50, up 81 cents.
Earlier Thursday, PPG said net income for the fourth quarter plummeted by 74 percent because of foreign exchange rates and charges that included costs for the global restructuring initiative. That plan, which is expected to generate annual savings of approximately $125 million, includes cutting about 1,700 jobs, or about 3.6 percent of PPG’s global workforce of about 47,000.
In the fourth quarter, net income from continuing operations was $77 million, or 29 cents per share compared with $295 million, or $1.09 per share in the fourth quarter of 2015.
Sales slipped to $3.5 billion, from $3.7 billion a year ago.
But adjusted net income rose by 3 percent to $313 million, or $1.19 per share, beating Wall Street analysts’ estimates by a penny.
Adjusted net income does not include $236 million in charges including $146 million for restructuring costs and a $44 million loss on the sale of its European fiberglass business.
Sales for all of 2016 were $14.8 billion, consistent with the prior year. Full-year net income from continuing operations was $564 million, or $2.12 per share.
Counted among discontinued operations was the European fiberglass unit that PPG sold last year to Nippon Electric Glass of Japan. The company also sold its flat glass business for $750 million to Mexico’s largest glass maker, Vitro S.A.B. de C.V., and unloaded its remaining stakes in Pittsburgh Glass Works and two Asian fiberglass ventures.
For more than a decade PPG has been divesting chemicals and glass operations to focus on its strategy
of becoming a dominant global player in the paints and coatings industry. By year’s end, glass accounted for only 3 percent of total sales with the company still operating fiber glass plants in the U.S.
Performance coatings, including house paints, generated 58 percent of total sales with industrial coatings accounting for the rest.
PPG continues to scout for more coatings operations to add to its portfolio, Mr. McGarry said. The company is targeting deployment of $2.5 billion to $3.5 billion in cash over the next two years for acquisitions and share repurchases.
Earlier this month it closed on the purchase of Romanian paints maker Deutek; last year it acquired Ohio-based coatings firm MetoKote Corp. and the 50 percent stake it didn’t already own in Italian coatings maker Univer Italiana.
Also Thursday, PPG said Vincent Morales, vice president, finance, will become senior vice president and chief financial officer effective March. 1. He succeeds Frank Sklarsky, who is retiring.
Joyce Gannon: jgannon@post-gazette.com or 412-263-1580.