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

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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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