Car-Maker Weakness Hurts PPG Sales -- WSJ

By Austen Hufford 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 19, 2019).

PPG Industries Inc. said weak demand from industrial clients is hurting sales, challenging the company's decision to keep its paint and coatings businesses joined.

Lower car production in China and Europe meant reduced paint-and-coatings sales for vehicles there, the company said, and clients in other industries bought less of PPG products too. PPG's revenue fell 2.6% in the second quarter to $4.02 billion. The company predicted weak demand would continue into the third quarter.

"We expect global economic activity to remain sluggish," Chief Executive Michael McGarry said on a call Thursday.

Shares rose near $117 as the company also raised its dividend by 3 cents to 51 cents.

Pittsburgh-based PPG is facing tough competition from consolidating rivals in its paint business at the same time that it tries to focus more on higher-margin industrial coatings.

Activist fund Trian Fund Management LP, which holds a 2.5% stake in PPG, had called for the company to explore breaking those units apart. PPG executives said in May that the company was better off stuck together.

PPG now expects revenue this year to grow by a few percentage points at most when adjusted for currency changes, down from a forecast of growth between 3% and 5% previously.

For the U.S. economy as a whole, factory production has declined this year, due in part to trade tensions and tariffs. PPG said it expected higher U.S. home and car sales, benefiting its paint business, if the Federal Reserve lowers interest rates as expected this month.

China's economic growth slowed to its lowest pace in decades as trade tensions weighed on investment and buying in the country.

Price increases in the latest quarter helped offset lower sales volumes and the impact of rising raw material costs in recent years. Mr. McGarry said PPG would continue to raise prices: "We still have some catch-up to do."

Sales to aerospace and marine-coatings customers grew in the quarter, PPG said, while rainy weather delayed some construction and home-improvement work, leading to flat same-store sales at company-owned paint stores in the U.S. and Canada.

The company also is trying to boost its U.S. buildings paint business, where volumes have declined in recent years and the company in 2018 lost a big customer, Lowe's Co.

PPG reaffirmed its goal of profit-per-share growth of at least 7% this year. Adjusted earnings per share in the second quarter fell to $1.85 from $1.90.

Write to Austen Hufford at [e-mail]

(END) Dow Jones Newswires

July 19, 2019 02:47 ET (06:47 GMT)

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