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    Home > Coatings News > Paints and Coatings Market > Coatings giant PPG Q1 sales fell 7%, Q2 sales are expected to drop by more than 30%

    Coatings giant PPG Q1 sales fell 7%, Q2 sales are expected to drop by more than 30%

    • Last Update: 2021-07-20
    • Source: Internet
    • Author: User
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    On April 27, PPG announced its financial results for the first quarter of 2020.
    Net sales in the first quarter were approximately US$3.
    377 billion, a year-on-year decrease of approximately 7%

    .
    The sales price rose by more than 1%

    .
    Overall sales fell by 8% compared to the same period last year, including a loss of US$225 million caused by the new coronavirus, which is about 6%

    .
    The impact of unfavorable foreign currency translation on net sales was more than 2%, or approximately $75 million, while acquisition-related sales (excluding divestitures) contributed approximately 2% to sales growth

    .


    Net profit for the first quarter of 2020 fell 22% year-on-year to US$243 million, and diluted earnings per share was US$1.
    02, which was US$0.
    02 lower than expected; net profit for the same period last year was US$312 million, and diluted earnings per share was US$1.
    31, adjusted After the net profit was 282 million U.
    S.
    dollars, the adjusted diluted earnings per share was 1.
    19 U.
    S.
    dollars, exceeding expectations by 0.
    03 U.
    S.
    dollars; the same period last year were respectively 330 million U.
    S.
    dollars and 1.
    38 U.
    S.
    dollars

    .


    Net sales of the high-performance coatings business in the first quarter were approximately US$2.
    008 billion, a year-on-year decrease of nearly 5%

    .
    Net sales in constant currency fell by approximately 3%

    .
    Sales prices increased by more than 2%, and sales related to acquisitions increased by about 1% to approximately US$20 million, mainly from the acquisitions of Dexmet, Texstars and ICR

    .
    These gains were offset by lower sales of 6% (approximately US$125 million) and poor foreign currency translation of 2% (approximately US$40 million)

    .
    The impact of the new coronavirus pandemic has reduced sales by approximately US$90 million

    .


    Sales of aerospace coatings for the quarter fell by a single-digit percentage.
    This was due to an increase in sales in the first two months of the quarter, but a decline in March due to customer shutdowns and weak commercial aftermarket demand

    .
    Net sales of automotive refinish coatings fell by 11% because higher selling prices and acquisition-related sales were offset by lower sales, which reflected a sharp decline in global mileage

    .
    Excluding the impact of exchange rates and acquisitions (organic sales) of architectural coatings in the Americas and Asia Pacific, net sales increased by single-digit lows year-on-year, depending on the channel and region

    .
    The organic sales of PPG Comex business in Mexico increased by single-digit percentage points, while DIY sales in the United States and Canada increased by single-digit percentage points

    .
    Sales of the protective and marine coatings business fell in the low single digits due to the decline in sales in China due to mandatory production shutdowns

    .
    Architectural coatings-Europe/Middle East and Africa (EMEA) organic sales fell by single-digit lows because the positive trend in the first two months of the quarter was offset by the decline in demand in Southern Europe, which declined.
    It is the closing of retail paint shops in March that the business in southern European countries stipulates

    .


    High-performance coatings segment profit in the first quarter was 272 million US dollars, a year-on-year decrease of approximately 8%, including the adverse foreign exchange impact of 7 million US dollars

    .
    The profit of the sector was partially offset by the decline in sales related to the novel coronavirus pandemic and unfavorable foreign exchange exchanges, which partially offset the higher sales prices, implementing cost reduction efforts and restructuring plans

    .
    The impact of the novel coronavirus pandemic on departmental profits is estimated at 35 million U.
    S.
    dollars, excluding foreign currency translation

    .


    Net sales of industrial coatings in the first quarter were approximately US$1.
    369 billion, a year-on-year decrease of nearly 10%

    .
    The acquisition-related sales were approximately US$60 million, an increase of approximately 4% in net sales, mainly from Whitford and Hemmelrath

    .
    Sales prices rose slightly during the quarter

    .
    After converting into unfavorable foreign currencies, net sales fell by 2% from the previous year

    .
    Sales volume fell by 11%, mainly due to the sharp drop in demand caused by the novel coronavirus pandemic

    .
    The impact of the COVID-19 pandemic has reduced segment sales by approximately US$135 million

    .


    Affected by the sharp decline in global automotive industry production, sales of automotive OEM coatings fell by 10% year-on-year

    .
    For the industrial coatings business, net sales fell by a single-digit percentage.
    This was due to the decline in industrial production related to customer shutdowns in most regions, but was partially offset by acquisition-related sales

    .
    Organic sales of packaging coatings fell by low single digits year-on-year, as moderately high prices were offset by the decline in sales caused by the closure of pandemic disease-related Chinese customers

    .
    Sales of packaging coatings in the United States, Canada, and Latin America are relatively high

    .


    Industrial coatings' first-quarter profit was US$181 million, a year-on-year decrease of approximately 17%, including a foreign exchange loss of approximately US$5 million

    .
    Divisional profits were also affected by the decline in sales caused by customer closures related to the pandemic, partially offset by cost reduction measures, restructuring cost savings, and a small increase in sales prices

    .
    The impact of the novel coronavirus pandemic on departmental profits is estimated at $55 million, excluding foreign currency translation

    .


    "Our first-quarter results reflect the sudden overall deterioration in global demand in March and the impact of the Chinese economic shutdown in February

    .
    With the spread of the novel coronavirus pandemic, we prioritize the protection of our employees, customers and all stakeholders.
    , And will continue to work to protect them

    .
    " PPG Chairman and CEO Michael H.
    McGarry said

    .


    "From a financial point of view, except for our business in China, our business basically reached or exceeded the financial target set at the beginning of March at the beginning of March, and we are moving towards a lower double-digit earnings per share growth rate

    .
    We have performed steadily in the global architectural and packaging coatings business and continued to grow in the aerospace coatings business

    .
    However, in the last two weeks of March, many of our larger original equipment manufacturer (OEM) customers were forced to close; Some architectural coatings stores in some countries have been forcibly closed; because many countries require people to stay at home, the number of driving and flying miles around the world has dropped significantly

    .
    " McGarry said

    .


    “We have taken swift and extensive measures to adapt to the current business environment, including decisive cost actions and increased attention to cash generation and liquidity

    .
    These measures include announcing cuts in senior leadership’s wages, closing some factories and distribution operations, We implemented temporary staff vacations for the companies most affected by demand, reduced expenditures for all businesses and functions, and deferred capital expenditures

    .
    In addition, we continued to implement the previously announced restructuring plan, saving approximately $20 million in the first quarter

    .
    We Other measures are being accelerated, and it is currently expected to save US$80 million to US$90 million in restructuring funds throughout the year

    .
    We will continue to evaluate and manage the entire crisis, and will determine whether further costs or restructuring actions are required

    .
    ” McGarry said

    .


    McGarry added, “Looking forward, we expect that the level of customer demand will continue to be severely affected, and the automotive OEM coatings, automotive refinish and aerospace coatings businesses will continue to decline sharply

    .
    In certain other industries, including packaging coatings, DIY architectural coatings, The demand for long-term protective coatings and military products is limited by the crisis

    .
    In addition, our business in China is now in full swing, and regional economic activities are returning to pre-crisis levels

    .
    We are still focusing on the careful management of our cash and assets and liabilities Table

    .
    As of the end of the quarter, we have approximately $1.
    9 billion in cash on hand and continue to optimize our overall liquidity

    .
    "


    Earnings per share for the first quarter of 2020 include the adverse business impact of approximately $0.
    35 from the novel coronavirus pandemic

    .
    From the perspective of the reporting department, the impact of the industrial coatings sector is greater because the sales of Chinese companies are more concentrated in this sector

    .
    In addition, the company excluded a provision for bad debts from adjusted diluted earnings per share, which increased by $0.
    10, which is related to the increase in global bad debt provisions related to the pandemic

    .


    The company has approximately $1.
    3 billion in cash and short-term investments by the end of 2019

    .
    Since then, the company has completed a series of strategic actions to enhance financial flexibility

    .
    In mid-March of this year, the company borrowed US$800 million from its revolving credit facility, reflecting the high level of caution in the market and the uncertainty in debt capital market expectations

    .
    As of the end of March, the company held $1.
    9 billion in cash and short-term investments

    .
    Subsequently, in April, the company signed a $1.
    5 billion 364-day credit loan agreement and used part of the proceeds to repay the revolving loan in full and the remaining proceeds to supplement cash

    .
    The company's $2.
    2 billion revolving credit line has not yet been used

    .


    The company expects total sales in the second quarter to fall by 30% to 35%, depending on the business and region, and assumes that demand begins to improve in June

    .
    The company’s spending in the second quarter is expected to be between US$45-50 million and approximately US$60 million in the first quarter

    .
    Based on the additional borrowings, the net interest expense for the second quarter is expected to be 35-40 million U.
    S.
    dollars

    .
    It is expected that in the second quarter of 2020, the company's global effective tax rate will be between 22% and 24%

    .
    Due to increasing uncertainties in global economic demand, the company withdrew all its full-year sales and earnings guidance previously communicated

    .
    (Tu Jie)

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