The company said these items will likely affect its third quarter aftertax earnings negatively by between $35 million and $40 million, or 20 cents and 25 cents per share.
During the quarter, PPG declared force majeure twice for chlor-alkali products due to shutdowns at its Lake Charles, La., chemicals complex from hurricanes Gustav and Ike. PPG completed a facility shutdown Aug. 30, in preparation for Hurricane Gustav and returned to normal operations Sept. 8, but it remained under force majeure for several major products, including caustic soda, due in part to low inventory. The path of Hurricane Ike prompted a second shutdown of the facility Sept. 11, and while weather damage at the facility was minimal, production startup and operating rates were notably impacted due to customer facility startup and logistics issues stemming from the hurricane plus availability of key raw materials. Production recently reached rates slightly below normal.
The company also declared force majeure on architectural, residential and specialty glass manufactured at its Wichita Falls, Texas, facility. Heavy rains caused significant flooding at the plant and damaged one of the two flat glass production lines, which requires repairs anticipated to take several months. Weather issues also resulted in the shutdown of the company’s La Porte, Texas, facility, which resulted in a force majeure declaration for phosgene derivative products. That force majeure declaration was recently rescinded.
In addition, The Boeing Company, a PPG aerospace products customer, is currently experiencing an employee work stoppage that began Sept. 6. This is resulting in delayed orders for coatings and transparencies.
“Several non-recurring items, including the effect from two hurricanes in the U.S. Gulf Coast, combined with softness in the automotive OEM market will negatively impact our third quarter financial results,” said William H. Hernandez, PPG senior vice president, finance, and chief financial officer. “Our restructuring initiative detailed today will, in part, enable our automotive coatings business to lower its cost structure in response to fundamental shifts in the industry. We expect the majority of the financial impact stemming from the non-recurring items to be isolated to our third quarter results, and we remain satisfied with the expected third quarter performance of the rest of our portfolio.”
PPG will report third quarter earnings Oct. 16.
Pittsburgh-based PPG is a global supplier of paints, coatings, chemicals, optical products, specialty materials, glass and fiber glass. The company has more than 150 manufacturing facilities and equity affiliates and operates in more than 60 countries. PPG shares are traded on the New York Stock Exchange (symbol: PPG). For more information, visit www.ppg.com.