On April 23, PPG reported first quarter 2019 net sales of approximately US$3.6 billion, down about 4 percent versus the prior year. Net sales in constant currencies were flat with the prior year aided by higher selling prices of 2.6 percent. Sales volumes were down about 3 percent versus the prior year in aggregate. Approximately half of this volume decrease was related to the previously announced architectural coatings customer-assortment changes in the national retail do-it-yourself (DIY) channel. Unfavorable foreign currency translation impacted net sales by more than 4 percent, or about US$165 million, and acquisition-related sales, net of divestitures, added less than 1 percent to sales growth.
First quarter 2019 reported net income from continuing operations was US$312 million, or US$1.31 per diluted share, and adjusted net income from continuing operations was US$330 million, or US$1.38 per diluted share. First quarter 2018 reported net income from continuing operations was US$328 million, or US$1.31 per diluted share, and adjusted net income from continuing operations was US$357 million, or US$1.42 per diluted share. For the first quarter 2019, the reported and adjusted effective tax rate was about 24 percent, higher than the first quarter 2018 reported and adjusted effective tax rate of approximately 21 percent. Reconciliations of the reported to adjusted figures are included below.
“First quarter operating margins were higher than the prior year, despite a challenging global macro-economic environment and industry demand declines in certain markets. We achieved improved margins through continued selling-price initiatives. This marks the eighth consecutive quarter with improved sequential pricing,” said Michael H. McGarry, PPG chairman and chief executive officer. “We continued to experience cost inflation in raw materials, logistics and wages, and have additional initiatives under way to offset the cumulative impacts from this inflationary cycle. During the first quarter, we achieved strong double-digit percentage sales volume growth in our aerospace and protective and marine coatings businesses. However, our aggregate sales volumes were lower due to weaker industry demand in automotive OEM and in certain segments of general industrial coatings. In addition, our focus on margin recovery resulted in us passing on certain, modest levels of business during the quarter.”
“We are happy to welcome SEM, Whitford and Hemmelrath to the PPG family, having now closed all three recently announced acquisitions. Our pipeline for acquisitions remains active and we continue to focus our cash deployment on maximizing long-term shareholder value,” said McGarry.
“As we look ahead to the second quarter compared with the prior year, we expect industry demand in several of our markets to remain mixed, but anticipate gradual improvement over the first quarter of this year. We will continue to aggressively manage our cost structure, work to secure additional pricing to reflect the value of products we sell, and integrate our recent acquisitions. We currently expect second quarter earnings per diluted share to be in the range of US$1.76 to US$1.86, including unfavorable currency translation impacts similar to those realized in the first quarter,” McGarry added.
“More broadly, we remain optimistic that economic activity will improve in the second half of the year, particularly in China. We will continue to monitor the macro environment and be prepared to implement further cost-savings initiatives, if warranted. We are still targeting full-year sales growth of 3 to 5 percent and adjusted earnings-per-share growth of 7 to 10 percent, both excluding currency translation impacts,” McGarry concluded.
