PPG Announces First Quarter 2020 Earnings

· Net sales of nearly $3.

· First-quarter diluted EPS of $1.

· The COVID-19 outbreak is estimated to have an adverse impact on both net sales and diluted earnings per share of $225 million and $0.

· Fast implementation of cash and cost control measures;

Cash and short-term investments of approximately $1.

· Completed "strengthened acquisitions" of ICR and Alpha Coating Technologies

PITTSBURGH, April 30, 2020 – PPG (NYSE: PPG) today reported first quarter 2020 earnings, reporting net sales of approximately $3.

Net income for the first quarter of 2020 was $243 million, or $1.

"Our first-quarter results showed two important phenomena: in February, the development of economic activity in China pressed the 'pause button'; in March, market demand generally fell sharply worldwide

"From the perspective of financial conditions, until the first ten days of March, most of our businesses have met or exceeded the performance development targets we set at the beginning of this year, except for some businesses in the Chinese market

"We have taken timely and effective measures to adapt to the current business development environment, including implementing cost control plans and continuing to focus on cash generation and liquidity management

“Looking ahead, we expect that customer demand levels will remain severely affected

Performance of each business unit in the first quarter of 2020

· The Performance Coatings business achieved net sales of nearly $2 billion in the first quarter, a decrease of $100 million, or nearly 5%, from the same period a year earlier

While the aerospace coatings business had maintained high volumes during the first two months of the quarter, total volume declined in the low single digits in March due to customer production line shutdowns and weak commercial aftermarket demand, which led to a decline in sales

The functional coatings business achieved a net profit of $272 million in the first quarter, a decrease of $25 million, or about 8%, from the same period last year

· Net sales of the Industrial Coatings business in the first quarter were approximately $1.

Automotive original equipment manufacturer (OEM) coatings sales posted a mid-single-digit decline from a year earlier, driven by a significant decline in global auto industry production

In the first quarter, the net profit of the coatings business in the industrial sector was US$181 million, a year-on-year decrease of US$37 million or about 17%, including the adverse impact of foreign exchange losses, which amounted to about US$5 million
.
The net profit of the coatings business in the industrial sector was also adversely affected by the decline in sales due to the shutdown of customers due to the epidemic, but these effects were offset to a certain extent by cost control measures, cost savings from business structure adjustments and higher product selling prices
.
Excluding the factors of exchange rate changes, the impact of the new crown virus epidemic on the net profit of industrial coatings was approximately US$55 million
.

Earnings per share for the first quarter of 2020 have taken into account the adverse business impact of the COVID-19 outbreak, which amounts to approximately $0.
35 per share
.
From a business perspective, as industrial coatings have a larger market share in China, the impact on this business is even more pronounced
.
In addition, the adjusted diluted earnings per share also includes an incremental provision - due to the increase in the global bad debt provision due to the epidemic, the bad debt provision has been increased by $0.
10
.

As of the end of 2019, the company's full-year cash and short-term investments were approximately $1.
3 billion
.
At present, the company has completed a number of strategic plans to help improve financial resilience
.
In mid-March, the company borrowed $800 million from a revolving line of credit, reflecting the company's high degree of caution and the foreseeable uncertainty in bond capital markets
.
The company had about $1.
9 billion in cash and short-term investments at the end of March
.
In April, the company signed a $1.
5 billion 364-day line of credit agreement, with a portion of the proceeds used to repay the revolving loan in full and the remainder to replenish cash
.
The company's $2.
2 billion revolving credit facility has not been drawn
.

In addition, the company announced today:

· The company expects total sales to decline by 30%-35% in the second quarter, depending on business and region, assuming market demand begins to improve in June
.

· Overall operating expenses for the second quarter are expected to be in the range of $45-50 million
.
Overall operating expenses for the first quarter were $60 million
.

· Net interest expense in the second quarter is expected to be between $35 million and $40 million, depending on additional borrowing
.

· The company expects a global effective tax rate range of 22%-24% in the second quarter of 2020
.

The company is withdrawing all previously issued full-year sales and earnings guidance due to the high level of uncertainty in the current global economic situation
.