PPG Industries’ Industrial Coatings segment in 1Q17
PPG Industries’ (PPG) Industrial Coatings segment is the second-largest revenue contributor for the company with a revenue share of 41% in 1Q17. The segment reported revenues of $1.5 billion in 1Q17, a 7% increase YoY (year-over-year).
The strong performance of the segment was primarily driven by the solid increase in sales volume along with the robust increase in acquisition-related sales. The sales volumes increased due to the continued growth in the automotive original equipment manufacturer coatings business.
On the other hand, foreign exchange translations adversely impacted the segment’s revenue by $20 million in 1Q17.
Net income and margin
The Industrial Coatings segment reported a net income of $273 million in 1Q17 as compared to $265 million in 1Q16, implying a 3% increase YoY. The segment reported a net income margin of 18.6% in 1Q17, a decrease of 70 basis points over the 1Q16 net income margin of 19.3%. The segment’s margin fell primarily due to lower margins from acquisition-related sales.
The Industrial Coatings segment outlook remains positive for 2Q17 due to possible price increases across various businesses and regions. Plus, the expansion of the waterborne automotive coatings production line in Wuhu, China, is expected to begin operation in 2Q17 and contribute to the segment’s revenue. Acquisition-related sales are expected to rise $60 million–$70 million, while the foreign currency translations will likely continue to be a challenge.
PPG Industries’ third reporting segment is its Glass segment. In order to focus on its core coatings business, PPG divested its non-core European glass business in 2016. Presently, PPG’s glass segment operates only the North American fiberglass business. The segment reported revenue of $83 million for the quarter.
Investors can indirectly hold PPG Industries by investing in the ProShares Ultra Basic Materials (UYM), which had 3.4% of its total portfolio in PPG Industries on April 21, 2017. The top holdings of UYM include Dow Chemical (DOW), DuPont (DD), and Monsanto (MON) with weights of 8.5%, 8.3%, and 6.2%, respectively, on April 21, 2017.
In the next part, we’ll look into PPG Industries’ analyst recommendations.