PPG Declares Force Majeure

Zacks

PPG Industries Inc. (PPG) declared a force majeure on vinyl chloride monomer, which is used in a variety of building products, after a fire incident at a facility in Louisiana.

Force majeure is a clause included in contracts that eliminates liabilities for unavoidable catastrophes that disrupt normal operations and can restrict one party from fulfilling obligations to another.

The fire at the Lake Charles chemicals complex affected the vinyl chloride monomer but did not cause any off-site environmental damage. PPG stated that one employee was affected by the fire has been hospitalized. The company also said that the plant’s personnel took prompt steps to extinguish the fire and it has undertaken initiatives to fix the damage as quickly as possible.

PPG forecasts that the Commodity Chemicals segment earnings will be impacted by $5 million to $8 million in the fourth quarter 2012 and an incremental $2 million to $5 million in 2013 due to the loss caused by the fire.

In October 2012, PPG released its third quarter 2012 earnings. The company posted earnings of $2.24 a share for the quarter (excluding one-time charges), beating the Zacks Consensus Estimate by 3 cents. The adjusted earnings excluded charges of $9 million associated with the company’s move to divest its commodity chemicals business. Profit (as reported) rose 9% year over year to $339 million or $2.18 a share in the third quarter of 2012, aided by the company’s cost containment measures.

Revenue edged down 0.1% year over year to $3,845 million, missing the Zacks Consensus Estimate of $3,904 million. Sales were adversely impacted by unfavorable currency translation. PPG saw mixed results across its end markets while its North American automotive original equipment manufacturer (:OEM) coatings business recorded strong growth in the quarter.

PPG Industries, which competes with the DuPont Performance Coatings segment of E. I. DuPont de Nemours & Co. (DD), currently retains a short-term Zacks #3 Rank (Hold). We currently have a long-term Neutral recommendation on the stock.
 

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