PPG Industries (PPG) Q4 2011 earnings summary

Executive summary

• FY 2011 net sales rose 11% to $14.885B; net income attributable to PPG increased to $1.095B from $769M, with diluted EPS of $6.87 versus $4.63.

• Higher selling prices, volume gains, currency and acquisitions supported sales growth; coatings pricing did not fully recover raw-material inflation, while stronger Commodity Chemicals results lifted earnings.

Financial highlights

• FY net sales were $14.885B, up 11% YoY; volume contributed just over 2%, pricing 5%, with the balance from currency and acquisitions.

• Net income attributable to PPG was $1.095B and diluted EPS $6.87; Q4 net sales were $3.517B, net income $216M and diluted EPS $1.39.

• Operating cash flow was $1.436B, up from $1.310B; higher earnings were partly offset by a $212M working-capital investment.

• Adjusted for the 2010 $85M one-time tax-law charge, the effective tax rate was 25% on remaining FY 2011 pretax earnings; reported rate was 24.1%, including a $12M audit-settlement benefit and the non-taxable Equa-Chlor bargain gain.

Outlook and guidance

• FY 2012 demand is expected to exceed 2011 overall; North America is forecast to strengthen, Europe to mildly contract early in the year, and emerging-market growth to moderate but outpace developed regions.

• Coatings raw-material costs were expected to be flat versus year-end 2011 early in 2012, but full-year cost direction remained difficult to project; further pricing and sourcing actions aim to recover 2011 margin erosion.

• Ongoing tax rate guidance was 25%–26%; pension and postretirement costs were expected to rise $35M–$45M, with FY 2012 pension contributions forecast at $130M–$150M.

• 2012 capital spending guidance was $450M–$550M; share repurchases were expected at $250M–$500M, subject to acquisitions and other cash needs.