PPG releases its fourth quarter and full-year 2020 financial results

Despite the continued negative impact of the new coronavirus outbreak, net sales in the fourth quarter were approximately $3.8 billion, up more than 2% from a year earlier; Year-on-year growth and continued positive cost controls significantly improved operating margins; completed acquisitions of Ennis-Flint and recently announced other acquisition agreements; and despite a year-over-year decline in sales, operating cash flow for the full year 2020 reached a record level of approximately $2.1 billion; PPG recently reported net sales of about $3.8 billion in the fourth quarter of 2020, up more than 2% from a year earlier.
prices rose nearly 1.5% year-on-year.
sales fell by about 1.5% year-on-year.
decline reflects the continued economic downturn caused by the new coronavirus outbreak in some end-user markets.
positive impact of exchange rate movements over the same period last year was about 1.5 per cent, or about $60 million.
acquisition-related business contributed nearly 1% to sales growth.
net income of $272 million, or $1.14 per diluted share, for the fourth quarter of 2020.
net income was $378 million, or $1.59 per diluted share.
adjusted net profit excludes $106 million in after-tax items primarily related to impairment charges on assets.
impairment charge includes estimated sales of some small branches planned for sale in non-strategic developing country markets, costs associated with the restructuring plan, and impairment of non-cash assets such as hurricane preparedness expenses.
net income from continuing operations in the fourth quarter of 2019 was $295 million, or $1.23 per diluted share, and adjusted net income from continuing operations was $313 million, or $1.31 per diluted share.
adjusted effective tax rates for the fourth quarter of 2020 are approximately 19% and 21%, respectively, compared to approximately 24% for the fourth quarter of 2019.
" continued to maintain a strong earnings position in the fourth quarter, achieving two consecutive quarters of record operating margins.
Michael H. McGarry, Chairman and CEO of PPG, said, "Our adjusted diluted earnings per share grew by more than 20 percent as sales in the coatings business units of automotive original equipment manufacturers (OEMs), general industrial coatings and packaging coatings increased significantly from a year earlier.
addition, the global architectural coatings business has maintained a encouraging growth momentum, year-on-year sales growth also driven earnings growth.
market demand for several key end-users, including aeronautical coatings and automotive patch paint, continued to be weak due to the ongoing impact of the new coronavirus outbreak, but as in the third quarter, our operating results hit new highs.
addition to outstanding performance, we achieved incremental structural cost gains of nearly $40 million, resulting in total annual savings of approximately $115 million.
as businesses recover further from the impact of the new coronavirus outbreak, such permanent cost savings will help us achieve higher operating profitability in the future.
Addition, cash flows from operating activities reached a record level in the fourth quarter, reaching $2.1 billion for the full year, as working capital as a share of total sales revenue decreased by 180 basis points.
, over the past few months, we have also announced several value-added acquisitions, each of which will bring different strategic value to our portfolio.
"We will continue to put the health and safety of all our employees first, while committed to providing professional service support to our customers."
I'm proud of PPG's global team.
, and I would like to express my sincere gratitude to everyone who has remained highly dedicated during this very period.
In recognition of the outstanding performance of our front-line production staff and plant residents during this particular year, we included a special grant of approximately $6 million in the fourth quarter to honor the hard work of our employees.
addition, the PPG Foundation continued to contribute approximately $2 million to the communities we have always considered 'homes' during the quarter.
," McGarry added.
the future, the overall demand for the global coatings market will gradually recover in the multiple end-user markets we serve and in major business areas.
expect the global economy to recover in the first half of 2021.
, however, due to various restrictions related to the outbreak of the new coronavirus and some supply chain interruption phenomenon, the actual growth momentum of the demand for coating products at the specific time node is still unknown.
from a timing perspective, PPG is well-equipped to grow over the next few quarters from a number of promising conditions.
these strengths include a rebound in sales of technology-leading automotive finishes and aerospace coatings, inventory rebuilds in some end-user markets, and synergies and revenue growth in our business consolidation of recently announced acquisitions.
" "Our performance in 2020 fully confirms PPG's strong strength, but also PPG's global team to meet the difficulties of valuable results.
all members of the PPG to work together to overcome the difficulties and strive to make the impossible possible.
very much looking forward to welcoming all employees who have joined the PPG family after the acquisition is completed.
I firmly believe that PPG will move towards a more brilliant development path in 2021.
," McGarry concluded.
the fourth quarter of 2020, the functional coatings business achieved net sales of approximately $2.2 billion, down approximately $15 million, or nearly 1%, from a year earlier.
3 per cent, the acquisition-related business increased sales by 1 per cent to about $20 million, mainly due to acquisitions of ICR Ennis-Flint and Textstars.
In addition, sales fell by about 6 per cent, mainly due to lower demand due to the outbreak of the new coronavirus, which affected approximately $125 million, which significantly offset sales growth from product price increases and acquisitions.
excluding currency movements and acquisitions (organic sales), net sales of construction coatings in Europe, the Middle East and Africa (EMEA region) achieved low double-digit growth, boosted by continued consumer demand for PPG coatings due to residential renovations.
sales of the architectural coatings business in the Americas and Asia Pacific region increased by single digits year-on-year, with different performance across channels and regions.
the U.S. architectural coatings professional channels and the national retail (DIY) architectural coatings sales channels led to organic sales growth.
Mexico, organic sales in PPG Comex's construction coatings business grew by nearly 10 percent as consumer demand from the company's franchisees remained strong.
The negative impact was offset in part by strong demand for industrial protective coatings in the Chinese market, as demand for industrial protective coatings in the U.S. energy sector declined and sales of industrial protective coatings fell by mid-to-low digits.
sales of aviation coatings fell by more than 30 per cent as a result of declining demand from commercial equipment manufacturers (OEMs) and after-sales markets, while sales of products in the military aviation sector were essentially the same as the previous year.
sales of car repair paint increased slightly in the fourth quarter compared to the third quarter of 2020, but decreased from a year earlier due to lower mileage and reduced traffic density due to the outbreak of the new coronavirus.
fourth quarter, the company reported a net profit of $299 million, down $8 million, or about 3 percent, from a year earlier.
net profit in the automotive functional coatings business was mainly due to lower sales of aerospace coatings and automotive patch paints, which were offset to some extent by higher sales prices, cost control measures and business restructuring plans.
.6 billion U.S. dollars in the fourth quarter, up about $100 million from a year earlier and up about 7 percent from a year earlier.
demand for automotive coatings and general industrial coatings led to a 5% increase in sales, which helped the performance of coatings in the industrial sector.
addition, fourth-quarter exchange earnings boosted sales by about 2%.
sales price in the fourth quarter of 2020 was the same as in the same period a year earlier.
high single-digit increase in OEM paint sales for PPG automotive original equipment manufacturers, which vary from region to region.
thanks to our advanced product technology and customer service capabilities, sales in the quarter were significantly higher than those in the global automotive industry.
also helped by retail sales in China's auto industry, which rose about 20 percent from a year earlier, for the sixth consecutive month and about 7 percent in the fourth quarter from the previous quarter.
sales of industrial coatings also increased significantly, with a median increase from a year earlier, and monthly growth in all regions of the world in the quarter.
of packaging coatings also rose in the single digits from a year earlier and grew strongly in most regions.
net profit from its industrial coatings business was $282 million in the fourth quarter, up $79 million, or about 40 percent, from a year earlier.
sales, cost savings from restructuring plans and exchange earnings boosted net profit in the coatings business in the industrial sector.
total operating cash flow for the fourth quarter was approximately $1 billion, an increase of approximately 20% over the fourth quarter of 2019 and a record $2.1 billion for 2020.
end of 2020, the company had cash and short-term investments of about $1.9 billion and net debt of $3.9 billion.
closing balances also include cash investments arising from the acquisition of Ennis-Flint in December.
recently announced acquisitions are expected to be completed in the first half of 2021.
will finance these acquisitions through a combination of existing cash and external financing.
reported net sales of approximately $13.8 billion in continuing operations for the full year 2020, down about 9% from the previous year.
loss had a negative impact on net sales, affecting approximately 1 per cent, or approximately $150 million.
organic sales were down nearly 8 per cent from a year earlier, with acquisition-related businesses contributing 1 per cent to net sales growth.
net income from continuing operations for the full year 2020 was about $1.1 billion, or $4.44 per diluted share.
net income of $1.2 billion, or $5.22 per diluted share, for the full year 2019.
earnings per diluted share for its 2020 adjusted continuing operations were $5.70, while 2019 adjusted diluted earnings per share for continuing operations were $6.22.
effective tax rate for continuing operations will be about 21% by 2020 and about 24% in 2019.
effective tax rate for continuing operations adjusted for 2020 is about 22%, compared with about 24% in 2019.
the global effective tax band for the full year 2021 is expected to be 22%-24%, varying from quarter to quarter.
2020, the company will pay dividends of about $500 million and $1.2 billion for acquisitions.
capital expenditure was about $300 million, down from the previous year.
also benefited from the company taking decisive steps to cut unnecessary spending at the height of the outbreak.
2020, the company currently has $1.5 billion in share repurchase authorizations.
In addition, based on the current global economic situation and the short-term economic variables that may result from the impact of the outbreak, the Company today announced the following earnings expectations for the first quarter of 2021: Sales volume for the first quarter of 2021 is expected to be slightly higher than a year earlier, with differences between businesses and regions.
, and a one-day reduction in shipping days compared to the same period last year will affect many of our distribution-oriented businesses.
total incremental structural cost benefits from the restructuring plan are expected to be between $30 million and $35 million;
. . . total operating expenses for the first quarter of 2021 are expected to be approximately $60 million, similar to total operating expenses for the first and fourth quarters of 2020.
. . . net interest expense for the first quarter of 2021 is expected to be between $27 million and $29 million.
company expects the global effective tax rate to be between 24% and 25% in the first quarter of 2021.
. From 2021, excluding amortized expenses related to acquired intangible assets, the Company will report adjusted diluted earnings per share, which are expected to be between $1.55 and $1.61 per diluted share in the first quarter of 2021.
the median of this range will be more than 20 per cent higher than the adjustable adjusted diluted earnings per share of $1.31 in the first quarter of 2020.