PPG Industries Inc. (PPG) announced that its optical products manufacturing and distribution operations in Thailand have been severely disrupted by the worst floods that hit the nation in more than half a century.
The company declared a ‘force majeure’ for certain products as a result of the flooding. The term is a provision that frees companies from liability when an extraordinary event occurs that could significantly disrupt business. The decision was based on production suspension at PPG's facilities in Bang Pa-In and Lat Krabang districts.
The company was unable to provide a time frame when the company's operations will return to normal.
The significant flooding has severely affected the company's ability to provide products to customers.
Recently, the company released its third quarter 2011 results. The company posted net income of $311 million or $1.96 per share for the third quarter of 2011 compared with $262 million or $1.58 in the year-ago quarter. The results exceeded the Zacks Consensus Estimate by 3 cents.
Net sales for the quarter were $3.8 billion, up 11% from $3.5 billion in the third quarter of 2010. It was almost in line with the Zacks Consensus Estimate of $3.89 billion. The improvement is attributable to demand improvements, higher pricing in each of its coatings businesses, successful cost reduction initiatives and a gradual industrial recovery worldwide, partly offset by rising raw material costs.
During the quarter, the company announced its agreement to acquire Dyrup A/S.
Looking ahead, the company expects current macro and regional economic trends to continue, supported by October activity levels in many of its businesses. In general, the company anticipates a normal seasonal fourth quarter.
The company also anticipates further pricing gains in every segment. PPG continues to work on initiatives to deploy its cash to grow earnings. PPG is continuing to utilize its strong cash position. In the second half of 2011, it expects to deploy $500 million to $1 billion of cash for earnings accretion, and will continue its tradition of returning cash to its shareholders.
The resumption of automotive OEM production and its position in high-growth businesses and regions, such as aerospace and Asia/Pacific, will supplement PPG’s growth in the remainder of the year. Although inflation has moderated somewhat, PPG intends to achieve better pricing in businesses, where it has been unable to fully offset inflation despite aggressive cost management and further pricing actions this quarter.
The strong third-quarter performance, along with the successful adoption of growth strategies and their meaningful implementation, instill confidence in the company. In addition, the macro economy and the concerned industry are also showing signs of recovery.
PPG Industries has a Zacks #3 Rank ('Hold') in the short term and we hold a long-term Neutral recommendation on the stock.
EI DuPont de Nemours & Co. (DD) is also major player in the industry.
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