PPG Industries (PPG) topped earnings expectations in the fourth quarter of 2014 on volume gains across major regions and synergies from acquisitions. But its profit slid in the quarter, hit by hefty debt refinancing charges.
Profit from continued operation (as reported) was $86 million or 62 cents per share in the reported quarter, a roughly 64% plunge from $237 million or $1.66 per share posted a year ago. Consolidated profit tumbled 67% year over year to $83 million or 60 cents per share.
Barring one-time items including charges of $200 million associated with debt refinancing, the Pittsburgh-based coatings giant recorded earnings from continuing operations of $2.11 per share in the quarter that topped the Zacks Consensus Estimate of $1.97.
For full-year 2014, adjusted earnings from continued operations were $9.75 per share, also surpassing the Zacks Consensus Estimate of $9.60.
Revenues went up around 6% year over year to $3,707 million in the reported quarter. It also came ahead of the Zacks Consensus Estimate of $3,571 million. Sustained sales gains across aerospace and automotive refinish contributed to higher revenues.
For the full year, revenues increased around 8% to $15,360 million from $14,265 million in 2013, also beating the Zacks Consensus Estimate of $15,254 million.
Segment Review
Revenues from the Performance Coatings division went up 10% year over year to $2.1 billion in the quarter, aided by gains from acquisitions and improved pricing. The company saw sustained gains across aerospace and automotive refinish businesses on higher demand. Architectural coatings sales rose by low to mid-single-digit clip in North America while sales volumes in EMEA (Europe, Middle East and Africa) fell 2% as demand remained mixed in that region. The company saw improved sales of protective and marine coatings in the quarter.
Industrial Coatings segment sales inched up 1% to $1.34 billion as volume gains were partly masked by unfavorable currency swings. Automotive OEM coatings volumes rose by mid to high single-digit clips in the quarter with growth witnessed across all regions. The industrial coatings and specialty coatings and materials businesses also logged sales gains in all key regions. Packaging coatings sales also increased in the quarter.
Revenues from the Glass segment moved up 3% to $272 million on pricing and volume gains. Flat glass volumes rose strongly on increased demand in both residential and non-residential end-markets. This was offset by a decline in fiber glass volumes resulting from lower volumes in the U.S. that neutralized a gain in Europe.
Financials
PPG Industries exited 2014 with cash and cash equivalents of $686 million, down around 39% year over year. Long-term debt was $3,544 million, up roughly 5% year over year.
PPG Industries bought back 1.4 million shares worth $300 million during the quarter. It spent more than $1.1 billion on dividends and share repurchases last year.
Outlook
Moving ahead, PPG Industries sees growth to remain mixed by region in 2015 with North America and Asia continuing to grow at levels that are in tandem with 2014. The company envisions overall growth in Europe to remain subdued and mixed by country.
PPG Industries also remains focused on developing new products and effectively deploying cash on further earnings-accretive opportunities. The company has an active acquisition pipeline and expects share buybacks to remain a key part of its cash allocation.
PPG Industries spent $2.5 billion on acquisitions last year. It expects to deploy $1.5 billion to $2.5 billion of cash in this year and 2016 combined on acquisitions and share buybacks.
.
PPG Industries should continue to gain from synergies from acquisitions. The acquisition of Akzo Nobel’s (AKZOY) North American architectural coatings business in 2013 has bolstered its branded paint product offerings and scale in the North American architectural paint market.
Moreover, the recent buyout of Mexico’s leading paint company Comex for $2.3 billion represents a major move by PPG Industries as it reinforces its architectural coatings business in Mexico and Central America by offering a leading architectural coatings portfolio.
The deal came after rival Sherwin-Williams (SHW) ended its pursuit of Comex’s Mexican business last year. Comex contributed around $175 million to PPG Industries’ sales in the fourth quarter.
PPG Industries is a Zacks Rank #2 (Buy).
Another company in the chemicals space Air Products & Chemicals Inc. (APD), which retains a Zacks Rank #2 (Buy), is slated to report its first-quarter fiscal 2015 results on Jan 29.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment