Volume 36, Issue 11, November 2001

FinancialFlash

September 11 Tragedy Takes a Financial Toll on Glass Manufacturers
Not unlike other industries, glass companies reporting financial results in the third quarter noted drops in sales, as well as lay offs and cut backs. Pittsburgh’s PPG Industries, for example, said its results decreased compared to the same period in 2000. Raymond LeBoeuf, PPG chairman and chief executive officer, had previously announced that he expected the company’s third-quarter earnings per share to be 50 cents to 60 cents, compared to 88 cents a year ago. 

PPG reported net income of $93 million, or 55 cents a share on sales of $2 billion, compared with 2000’s third-quarter net income of $150 million. This includes one-time, after-tax charges of $3 million, or 2 cents per share, to “rationalize the PPG Auto Glass automotive replacement glass distribution venture.” Excluding charges, net income was $153 million, while sales were $2.14 billion.
In an e-mail sent to employees prior to the release of the company’s financial results, LeBoeuf said PPG announced last year it faced a challenging global business environment. “And the events of the past 12 months have only confirmed this view,” he said. “This disappointing news supports our belief that meaningful improvement in the global economy this year is unlikely. And the tragic events of September 11 only add to that uncertainty.” 

Likewise, fearful that further weakening in the automotive and construction industries could hurt PPG’s earnings, the brokerage firm Lehman Bros. cut the company’s rating earnings per share view and its 12-month price target. According to a news release, Lehman cut PPG’s rating to market perform from buy “in anticipation of a continuing slowdown in industrial production, especially the automotive sector and construction.” 

Visteon Corp. of Dearborn, Mich., announced a loss of $95 million or 74 cents per share. Excluding restructuring actions, the company says the loss was $74 million or 57 cents per share. Visteon reported it earned $48 million or 37 cents per share in the third quarter of 2000. In its glass segment specifically, third-quarter sales dropped from $180 million in 2000 to $144 million in 2001.

“Our results reflected unexpected and sharp production cuts late in the quarter, accompanied by an unfavorable vehicle production mix,” said Peter J. Pestillo, chairperson and CEO. 

In Mexico, Grupo Vitro said it had seen a 31.7-percent decrease in profits during the third quarter compared to its results for the same period of 2000. During the same quarter, it reduced its debt by $31 million to $1.6 billion.

Vitro attributes its third-quarter financial slump to the economic downturn in Mexico and the United States, exacerbated by the September 11 terrorist attacks, along with the strong peso. All of these led to higher costs and lower operating profits of $590 million in the quarter.

In addition, in a bid to meet its target of $40 million reduction in expenses in 2001, Vitro cut 1,000 jobs in the third quarter. According to the company, the losses required indemnities totaling $17 million.

Standard & Poor (S&P) said it was confident that Vitro could refinance and pay off some $514 million of its debt in the short term. S&P said Vitro’s third-quarter results meet expectations and will not affect the company’s outlook.

Belgium-based Glaverbel announ-ced its plans to scale down production as well. According to a news release, “it has seen demand for clear glass fall as markets and the world economy enter a period of uncertainty.” 

According to Marie-Ange Dhondt, a spokesperson for the company, no jobs will be affected by the downsizing, but if the situation continues to deteriorate there may be temporary lay offs.

Pilkington, however, said its first half-year performance for the six months ending September 30, was the best it has had in a decade. The company reported turnover in the first half of the year to be 1.47 billion pounds, an 8-percent increase. Operating profits before goodwill amortization were 156 million pounds, up 10 percent. Profit before goodwill amortization, exceptional items and taxation was 120 million pounds. Deducting goodwill by 5 million equaled a profit of 115 million pounds before exceptional items and taxation, a 13-percent increase over 2000.

Despite its increases, Pilkington says it does recognize the remainder of the year as “challenging.” Paolo Scaroni, group chief executive, said the market for building products could decline in the United States, South America and Europe, and its automotive products unit is likely to suffer a 7-percent decrease in the second half. 

The economic slowdown in some European markets has prompted St. Gobain’s materials and packaging group and Pilkington to postpone plans to build a flat-glass factory in Poland. The plant would have begun production in 2003. 


USG

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