PPG Industries (PPG) Q4 2010 earnings summary

Executive summary

• FY10 sales rose 10% to $13.423B as volumes recovered across most segments; net income attributable to PPG was $769M and diluted EPS was $4.63.

• Recovery and higher volumes lifted segment income in five of six segments; Architectural Coatings–EMEA income declined.

• FY11 outlook called for higher demand and broader recovery, with ongoing raw-material inflation and pricing actions to protect earnings.

Financial highlights

• Net sales were $13.423B vs. $12.239B in 2009, up 10%; volume contributed 8%, pricing 1%, with the balance from currency and acquisitions.

• Net income attributable to PPG was $769M vs. $336M; diluted EPS was $4.63 vs. $2.03. FY10 included an $85M after-tax tax-law charge, or $0.51/share.

• Q4 sales were $3.379B; net income was $205M and diluted EPS was $1.24.

• Operating cash flow was $1.310B vs. $1.345B; higher earnings were more than offset by lower cash contribution from working capital.

• R&D expense was $408M, ~3% of sales; coatings raw-material inflation added $210M of cost in FY10.

Outlook and guidance

• FY11 demand expected to rise vs. FY10 as recovery broadens; emerging-market growth expected to moderate but remain ahead of developed regions.

• Ongoing tax rate expected at 26%–27%; pension and postretirement costs forecast to decline $20M–$30M.

• Coatings raw-material inflation expected to persist early in FY11; pricing actions across segments and cost controls intended to offset inflation.

• FY11 capital spending projected at $375M–$425M; pension contributions expected at $100M–$125M.

• Environmental remediation cash outlays expected at $80M in FY11 and $50M–$70M annually through 2014.