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Will PPG Industries’ Glass Segment Cease to Exist in 3Q16?

Peter Neil - Author
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Dec. 4 2020, Updated 10:52 a.m. ET

Revenues from the Glass segment

In this part, we’ll look into PPG Industries (PPG) Glass segment, the lowest revenue contributor among the company’s segments. In 2Q16, this segment contributed ~7% of PPG’s total revenue. The segment reported revenue of $282 million in 2Q16, as compared to $279 million in 2Q15. This implies an increase in revenue of 1% on a YoY (year-over-year) basis. This segment posted net income of $43 million in 2Q16, as compared to $37 million in 2Q15, implying a YoY net income growth of 16%.

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2Q16 highlights

  • Foreign currency translation impacted revenues from the Glass segment negatively by 1%.
  • Flat glass volumes were low due to scheduled facility maintenance.
  • Flat glass financials will be reported as discontinued operations from 3Q16.
  • Unfavorable foreign currency translation should impact the segment in 3Q16.

How much impact will Glass business divestitures have?

In its latest earnings report, PPG Industries announced the sale of its flat glass business to Vitro and of its European fiberglass business to Nippon Electric Glass. PPG Industries expects the flat glass business sale to be completed before the end of 2016. This business saw annual sales of ~$575 million. The flat glass business will be reported as discontinued operations from 3Q16. PPG expects the sale of its European fiberglass business to be completed in 2H16. This business had annual sales of ~$150 million.

With the sale of these two businesses, PPG will be left with fiberglass business in the US in its Glass segment. With these two divestitures, PPG’s revenue will be impacted by approximately $775 million per year.

Investors can indirectly hold PPG Industries by investing in the iShares US Basic Materials ETF (IYM), which held 5.2% of its portfolio in PPG Industries on July 22, 2016. The top holdings of the ETF include Dow Chemical (DOW), Monsanto (MON), and Praxair (PX) with a weight of 10.7%, 8.4%, and 6.1%, respectively.

In the next part, we’ll look into PPG Industries’ valuations.

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