PPG reported second-quarter net income of $231 million, or $1.34 per common share, one of its best quarterly earnings performances. That includes an after-tax charge of $12 million, or 7 cents a share, for debt refinancing, and $2 million, or one cent a share, to reflect the net increase in the value of the PPG's obligations under a settlement of asbestos lawsuits.
CEO Charles E. Bunch said in an interview that the chemical segment is approaching 20 to 25 percent of PPG's total revenues. The company said it sees continued strength in its coatings (paint) and chemical segments, which achieved record sales in each of the past two quarters, he said.
One of the reasons the chemical segment is growing is its optical segment, which produces plastics and chemical coatings for its line of Transitions photochromic lenses, and its chlor-akalai business, a commodity chemical business unit, Bunch said.
For the past 18 months, chlor-alkali (chlorine and caustic soda) has been growing at rates faster than the rest of the company's businesses. The optical business is producing more than 5 percent of total sales and earnings, and Bunch hopes that will increase to 10 percent, or about $1 billion in revenue, within the next five years .
"The optical business has seen strong growth for over 10 years and the biggest reason for the growth is (its) combination of technology and new product development," Bunch said.
The coatings business remained PPG's number one segment in revenue, posting $1.45 billion in sales, compared to $1.35 billion in the second quarter last year. The chemical segment surpassed glass in the second quarter, recording $625 million in sales compared to $581 million in glass. For the first six months of the year, chemicals outperformed glass $1.232 billion to $1.135 billion.
In the second quarter of 2004, PPG had posted a net income of $187 million, or $1.08 per share, on sales of $2.43 billion. That earnings report included an after-tax charge of $6 million, or three cents per share, because of charges related to the asbestos lawsuits.
The fact that PPG's chemical business surpassed its glass business did not surprise Wlliam Selesky, an analyst with Argus Research of New York City. Selesky said that segment has been doing well for a long time, in part because of price increases in Europe, which he believes will continue.
Selesky shares Bunch's optimism about its optical business. "They've had a great track record in that segment," Selesky said.