PPG Industries (PPG) Q4 2012 earnings summary

Executive summary

• 2012 net sales rose 2% to $15.2B; diluted EPS was $6.06 reported and $7.94 adjusted for restructuring, environmental, acquisition and separation costs.

• Portfolio transformation completed with the January 2013 separation of commodity chemicals; a $1.05B North American architectural coatings acquisition remained pending.

• North American demand and industrial coatings growth offset weak European activity and mixed emerging-market trends.

Financial highlights

• Net income attributable to PPG was $941M in 2012 vs. $1.095B in 2011; adjusted net income was $1.230B and adjusted diluted EPS was $7.94.

• Q4 sales were $3.648B, net income was $227M and diluted EPS was $1.46; FY operating cash flow reached a record $1.787B.

• Sales growth reflected price +2%, volume +1% and acquisitions +2%, partially offset by currency −3%; North American volume grew nearly 5%, while European volume declined 4%.

• Cost of sales was 59.7% of sales vs. 61.0% in 2011; SG&A was 21.9% vs. 21.7%.

Outlook and guidance

• Early-2013 coatings raw-material prices were forecast flat with year-end 2012; full-year pricing was not forecastable, while targeted price increases were planned to recover inflation-affected margins.

• 2013 ongoing tax rate forecast at 23.5%–24.5%; pension and postretirement costs expected to decline ~$40M, with pension contributions of $75M–$100M.

• 2013 capital spending forecast at $350M–$450M; restructuring savings were expected to reach an annual run rate of ~$140M after completion.

• North America had the strongest growth prospects; emerging markets were expected to improve modestly, while Eurozone activity was expected to remain subdued.