PPG Industries (PPG) Q4 2007 earnings summary

Executive summary

• 2007 net sales rose 14% to $11.206B, reflecting acquisitions (+6%), volume (+4%) and currency (+4%).

• Net income was $834M; diluted EPS was $5.03. Continuing-operations income was $815M, with $19M from discontinued operations.

• Growth across coatings and optical materials offset lower segment income in Commodity Chemicals and Glass; 2008 plans included integrating SigmaKalon and pursuing further organic growth.

Financial highlights

• Net sales were $11.206B versus $9.861B in 2006; cost of sales was 63.2% of sales versus 62.4%, and SG&A was 19.1% versus 18.6%.

• Continuing-operations income was $815M versus $653M; net income was $834M versus $711M. Diluted EPS was $5.03 versus $4.27.

• Other charges fell to $59M from $252M, primarily reflecting $195M lower environmental expenses; 2007 also included a $25M pretax loss on the fine chemicals sale.

• Cash from operating activities was $996M; capital spending was $584M, including $231M for acquisitions.

Outlook and guidance

• SigmaKalon was expected to add about $3B of 2008 sales, not be earnings-accretive in 2008 partly due to acquisition costs, and be accretive in 2009.

• 2008 coatings raw-material inflation was forecast at 2%–4% in the early part of the year; full-year inflation could vary with economic conditions and supply-demand trends.

• 2008 pension and postretirement costs were expected to decline by ~$20M; capital spending, excluding acquisitions, was projected at ~$470M.

• Natural-gas costs were expected to be higher in Q1 2008 than Q1 2007; nearly 40% of Q1 purchases and ~30% of annual requirements were hedged.

• Cost inflation in 2008 was expected to slightly exceed combined productivity, manufacturing-cost and pricing benefits overall, with outcomes differing by segment.