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What Caused PPG’s Q4 2018 Revenue to Fall?


Jan. 22 2019, Published 4:26 p.m. ET

PPG’s fourth-quarter revenue misses estimates marginally

For the fourth quarter, PPG Industries (PPG) reported revenue of $3.64 billion, a fall of 1.0% YoY (year-over-year). PPG’s revenue may not be able to continue the upward trajectory it achieved in the fourth quarter of 2017.

PPG’s fourth-quarter revenue has remained more or less within the range of $3.50 billion–$3.70 billion for the past five years. In the fourth quarter, PPG’s revenue narrowly missed analysts’ estimate of $3.65 billion.

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The fall in PPG’s revenue was primarily led by unfavorable foreign currency rates due to the strong US dollar, which had an adverse effect on PPG’s revenue to the extent of ~3.0%. At the same time, its sales volumes fell ~1.0% driven by a slowdown in its Industrial Coatings segment. We’ll look into the segment’s performance a little later.

Some of these declines were offset by higher selling prices, which pushed the company’s sales ~2.0%, while its acquisition revenue net of divestitures helped its revenue rise less than ~1.0%.

Management’s comments

Michael McGarry, PPG’s chair and CEO, said, “In the fourth quarter, we delivered net sales growth in local currencies of about 2 percent, led by higher selling prices marking seven consecutive quarters of improved pricing. These price increases, along with our ongoing cost management efforts, remain focused on offsetting continued input cost inflation, as we made further progress on recovering our operating margins toward prior-year levels. Also impacting our sales were softening global economic growth and demand declines in certain end-use markets.”

In the next article, we’ll look at the performances of PPG’s reporting segments.

The iShares U.S. Basic Materials ETF (IYM) has invested 4.2% of its portfolio in PPG Industries. The fund also provides exposure to Linde (LIN), Air Products & Chemicals (APD), and LyondellBasell (LYB) with weights of 14.8%, 5.8%, and 4.6%, respectively, as of January 18.


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