PPG reported third quarter 2017 net sales of approximately $3.8billion, up more than 3 percent versus the prior year. Sales volumes, including the unfavorable impact of several natural disasters, grew by nearly 1 percent. Prior to the natural disasters, PPG’s quarterly volume growth was tracking ahead of the growth rate for the first six months of the year. Selling prices improved modestly year-over-year for the second consecutive quarter. Favorable foreign currency translation improved net sales by nearly 2 percent, or about $65 million.

Third quarter 2017 net income from continuing operations was $392 million, or $1.52 per diluted share, which includes an unfavorable natural disaster-related impact of approximately 5 cents.  The company’s reported profit contribution margin as a percentage of sales declined 160 basis points year-over-year, and approximately 130 basis points excluding the impact of natural disasters. This compression is an improvement from the second quarter 2017 when the company’s profit contribution margin contracted by 210 basis points versus the prior year.

Third quarter 2016 reported net loss from continuing operations was $211 million, or $0.79 per share. Third quarter 2016 adjusted net income from continuing operations was $405 million, or $1.52 per share, excluding net after-tax charges totaling $616 million, or $2.31 per share, for pension settlement charges.

“While the third quarter was challenging emotionally and operationally due to the natural disasters, we achieved solid overall financial results and, more importantly, made someprogress in our initial operating margin recovery efforts,” said Michael McGarry, PPG chairman and chief executive officer.“Additionally, we were tracking toward volume growth of about 1.5 percent prior to the disasters, which was an improvement versus our sales volume growth for the first half of the year. 

“We have achieved some operating margin recovery, despite continuing raw material cost inflation driven by a variety of supply-related factors, some of which are transitory,” McGarrysaid. “We have continued to aggressively manage our costs, and have secured initial selling price increases with only a portion of these increases realized during the quarter. Also, while we still have more work to do to improve our overall organic growth rate, we are continuing to make measurable headway in several areas, including our Industrial Coatings segment which grew sales volumes by more than 3 percent year-over-year and in our U.S. architectural coatings company-owned stores where same store sales growth was trending above 6 percent prior to the hurricanes. 

“During the quarter, we made progress on our strategicinitiatives including the sale of our remaining Glass business,marking a transformational milestone for the company. Also, we remain committed to earnings-accretive cash deployment and have spent more than $700 million to date toward our $3.5 billion target, with the remaining $2.8 billion to be deployed by the end of 2018,” McGarry continued.

“Looking ahead to the fourth quarter, we expect moderate global economic growth to continue. Given the after-effects from the natural disasters, we no longer expect any notabledecline in the level of raw material cost inflation for the remainder of this year. We are continuing to work with our customers to address the inflationary environment and expect to realize additional selling price increases. Lastly, we continue to execute on our restructuring program and remain on track to deliver full-year savings of more than $45 millionas we continue to manage all aspects toward margin recovery,” McGarry commented.

The company announced today that it expects the recent natural disasters will unfavorably affect fourth quarter diluted earnings-per-share by up to $0.05.

As of Sept. 30, 2017, cash and short-term investments totaled $2.3 billion. Year-to-date, PPG has completed business acquisitions totaling more than $300 million, including The Crown Group which was finalized on Oct. 2, and more than $400 million of share repurchases.

Third Quarter 2017 Reportable Segment Financial Results

• Performance Coatings segment third quarter net sales were approximately $2.3 billion, up $67 million, or 3percent, versus the prior year. Net sales benefited fromhigher selling prices across all businesses and regions, and acquisition-related sales of approximately $25million. Sales volumes declined by about 1 percent year-over-year, primarily due to the natural disasters unfavorably impacting the architectural and protective coatings businesses in the U.S. and Mexico by approximately $25 million. Favorable foreign currency translation increased net sales by more than $45 million, or 2 percent.

Organic sales improved modestly year-over-year in automotive refinish coatings driven by growth in developed regions. Aerospace coatings sales volumes grew slightly over the prior year period aided by higher European demand. Protective and marine coatings sales volumes were flat year-over-year, and improvedsequentially versus prior quarters, despite lower U.S. protective coatings sales volumes stemming from the hurricanes. Architectural coatings – EMEA sales volumes declined by a mid-single-digit percentage as business was turned away due to either low profitability or lack of customer acceptance of selling price increases, and demand in certain countries remains sluggish. Architectural coatings – Americas and Asia Pacific sales volumes were flat year-over-year with differences by channel and region. U.S. and Canada company-owned architectural stores grew sales volumes by a mid-single-digit percentage year-over year including the unfavorable impact from the hurricanes. This increase in sales was more than offset by lower sales volumes in national retail (DIY) accounts and independent dealer networks as both of these distribution channels continue to experience soft demand. Latin American architectural coatings sales volume growth was slightly up year-over-year despite the impacts from the natural disasters, while modest organic architectural coatings sales growth continued in Asia-Pacific.

Segment income for the third quarter was $365 million, down $3 million, or about 1 percent, year-over-year, including favorable foreign currency translation of $7million primarily due to the euro and Mexican peso.Segment income was negatively impacted by continuing,significant raw material cost inflation and lower sales volumes related to the natural disasters partly offset by selling price increases and aggressive overhead and manufacturing cost reduction efforts, including benefits from business restructuring actions.

• Industrial Coatings segment third quarter net sales were about $1.5 billion, up $49 million, or more than 3 percent, versus the prior-year period. Sales volumes increased bymore than 3 percent and favorable foreign currency translation added $20 million, or about 1 percent, versus the prior year. Selling prices were modestly lower year-over-year, but improved sequentially versus the second quarter. The natural disasters had minimal impact on segment sales, but did result in higher raw material and transitory logistics costs.

Automotive original equipment manufacturer (OEM)coatings sales volumes increased by a low-single-digit percentage year-over-year, matching global auto industryproduction rates. Aggregate industrial coatings and specialty coatings and materials sales volumes increased by a mid-single-digit percentage versus the prior yearand outpaced regional industrial production growth rates for the seventh consecutive quarter, as higher volumeswere achieved in each major region and in many end-use markets. Packaging coatings sales volumes increased a mid-single-digit percentage year-over-year and were above industry growth rates in most regions, led by customer adoption of new PPG technologies.

Segment income for the third quarter was $223 million, down $26 million, or 10 percent, year-over-year.Segment income benefited from the impact of higher sales volumes and strong cost management, including the benefits from business restructuring actions. These improvements were more than offset by increases in raw material costs, higher logistics costs and lower selling prices. Favorable foreign currency translation increased segment income by $3 million.

Figures for all periods present PPG’s former Glass segment as discontinued operations.