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Letter to the Editor
Friday October 20
PPG Posts Record Q3 Sales
PPG Industries has reported record sales for the third quarter of $2.8 billion, surpassing third quarter 2005 record sales by ten percent. The performance marks the second-highest sales for any quarter in the company's history. Third quarter 2006 net income was $90 million. Net income includes aftertax charges of $106 million for estimated environmental remediation costs at sites in New Jersey and Louisiana; $21 million for legal settlements, including a settlement charge for a federal class-action lawsuit related to alleged antitrust violations in the U.S. automotive refinish industry; and $4 million to reflect the net increase in the current value of the company's obligation under its 2002 asbestos settlement agreement. Net income also includes aftertax earnings of $7 million for an insurance recovery. That compares with third quarter 2005 net income of $157 million. Sales for third quarter 2005 were $2.55 billion.For the first nine months of 2006, PPG recorded net income of $554 million. Sales for the first three quarters of 2006 were $8.26 billion. For the first nine months of 2005, PPG recorded net income of $483 million. Sales for the first nine months of 2005 were $7.7 billion.
"Our record third quarter financial results demonstrate our ability to consistently deliver profitable growth in today's changing global economy," said Charles E. Bunch, chairman and CEO. "This marks the fourteenth consecutive quarter of year-over-year sales records for PPG. The third quarter's double-digit sales growth is driven by our recent acquisitions and strong performance in Europe and Asia. Our results also reflect our continued efforts to reduce costs.
"Looking ahead," Bunch continued, "even with growth moderating in North America, we anticipate solid global economic growth and expect our excellent financial performance and cash generation to continue."
Bunch said that the cash generated will continue to reward shareholders and remain balanced between investing in PPG's businesses to generate future earnings growth and funding dividends and share buybacks. Bunch added that PPG expects an increased level of share buybacks in the next quarter versus the previous quarters this year.
Coatings sales increased $209 million, or 15 percent, due to the impact of acquisitions, improved selling prices across all businesses, the positive impact of stronger foreign currencies and improved sales volumes, particularly in Asia and Europe. Operating earnings were down $25 million as a result of a pretax charge of $23 million for a legal settlement and the absence of a pretax $18 million insurance recovery received in 2005. Earnings benefited from the higher sales volumes, while price gains offset the negative impact of inflation.
Glass sales increased $10 million, or two percent, as a result of higher volumes in several businesses. Also contributing were strong manufacturing efficiencies and increased equity earnings, which more than offset inflation and lower selling prices.
Chemicals sales increased $36 million, or six percent. Earnings were aided by an insurance recovery for damage caused by Hurricane Rita and the absence of 2005 direct costs related to hurricanes.
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