Europe, China, and India Sales Rose, but Not Enough Not Help PPG Industries



PPG Industries 2Q16 revenues

PPG Industries (PPG) missed its 2Q16 revenue estimates along with its earnings estimates. Wall Street analysts estimated that PPG’s revenue for 2Q16 would be $4.17 billion, but PPG Industries reported total revenue of $4.06 billion. PPG Industries 2Q15 revenue was $4.1 billion. This implies that its 2Q16 revenue fell by approximately 0.9% on YoY (year-over-year) basis.

By comparison, Sherwin-Williams (SHW) reported 2Q16 revenue of ~$3.2 billion, while Valspar (VAL) reported 2Q16 revenue of ~$1.1 billion. LyondellBasell (LYB) will report its 2Q16 earnings on July 29.

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PPG Industries’ overall sales volume remained flat. But Europe volumes grew for the sixth consecutive quarter. China and India also witnessed a rise in volumes on a sequential basis while the US and Canada witnessed a decline in volumes, offsetting gains in other regions. The other major drag was the underperformance in Korea, primarily due to the slowdown in marine newbuild activity. Foreign currency translation had a negative impact on PPG’s revenue by 2%, or $95 million, in 2Q16.

Net profit margin

PPG Industries reported a net profit margin of 12.5% and beat the analyst estimate of 11.9%. PPG Industries’ 2Q15 net profit margin was 11.2%, and its 1Q16 net profit margin was 9.7%. This implies an increase in the net profit margin of 1.3 percentage points on a YOY basis and 2.8 percentage points on a sequential basis. PPG’s net profit margin increased because it posted a higher adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $819 million, the highest in the past nine quarters.

Notably, as of July 22, the Vanguard Dividend Appreciation ETF (VIG) held 0.7% of its total holdings in PPG Industries.

In the next part, we’ll look into the segmental performance of PPG Industries in 2Q16.


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