PPG Industries Profit Falls 13% on Restructuring Expenses -- Update

By Tess Stynes 

PPG Industries said its second-quarter earnings fell 13% on charges related to the paint manufacturer's cost-cutting efforts, while negative currency impacts took a bigger bite out of sales.

Shares fell 3.7% to $113.30 in recent trading.

Separately, the company also named Chief Operating Officer Michael McGarry as its new chief executive starting in September. Mr. McGarry has been chief operating officer for nearly a year, adding the title of president in March. He will succeed Charles Bunch, who will continue as executive chairman.

Mr. McGarry, 57 years old, is a 34-year veteran of the company who in recent years helped lead efforts to increase its focus on its paint and coatings, including the acquisition of coatings maker SigmaKalon; the separation of PPG's former commodity chemicals business; the acquisition of AkzoNobel's North American house-paint business; and most recently PPG's $2.3 billion deal for Mexico's Consorcio Comex SA, one of the largest paint manufacturers in North America.

Mr. Bunch, who joined the company in 1979, has been CEO since March of 2005, adding the role of chairman that July.

While its international expansion has boosted overall sales, like other big U.S. companies seeking growth abroad, PPG has seen a stronger U.S. currency weigh on its revenue growth.

In the latest quarter, negative currency fluctuations cut PPG's sales by $320 million, compared with $260 million in the first quarter and about $130 million during the fourth quarter of last year.

PPG, whose paint brands include Olympic and Glidden, also has been aiming to rein in costs. In April the company unveiled a restructuring plan that aims for annual pretax savings of $100 million to $105 million by 2017, including partial-year savings of $15 million to $20 million this year.

Overall, PPG reported a profit of $337 million, or $1.23 a share, down from $386 million, or $1.38 a share, a year earlier. Excluding restructuring-related charges and other items, per-share earnings from continuing operations rose to $1.67 from $1.42.

Revenue edged up 0.4% to $4.1 billion. Excluding currency fluctuations, sales rose 8%. Acquisitions contributed most of the growth, while sales volume grew 1%.

Analysts polled by Thomson Reuters expected per-share profit of $1.64 and revenue of $4.16 billion.

Mr. Bunch said that "based on current foreign exchange rates and the seasonality of our businesses, we expect negative foreign currency translation impacts to remain sizable but to moderate in the second half of the year."

Earlier on Thursday, rival Sherwin-Williams Co. cut its earnings outlook for the year and provided a disappointing third-quarter forecast, as the stronger dollar has hurt demand for the company's paints in certain markets.

For PPG, its performance coatings segment sales increased roughly 3% to $2.41 billion, mostly thanks to the Comex acquisition. Organic sales growth continued in the aerospace and automotive refinish coatings businesses. Architectural coatings volumes in the U.S. and Canada grew by low-single-digit percentages.

Industrial coatings sales dropped 3% to $1.41 billion, as growth in sales volume and a boost from acquisitions was offset by negative currency impacts.

Write to Tess Stynes at [e-mail]

Access Investor Kit for Akzo Nobel NV

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=NL0000009132

Access Investor Kit for Akzo Nobel NV

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US0101993055

Access Investor Kit for PPG Industries, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US6935061076

Subscribe to WSJ: http://online.wsj.com?mod=djnwires