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A robotic arm sprays red paint onto an automobile body at PPG Industries Inc.’s automotive coating’s technical center in Ingersheim, Germany.
Industrial coating manufacturer PPG warned Monday it is getting hurt by rising costs from raw materials and oil at the same time that global demand is softening.
PPG gave guidance for its upcoming third quarter earnings report that was about 10 cents a share weaker than expected, according Wall Street analysts polled by Thomson Reuters.
The 135-year old PPG is one of the world’s largest manufacturers and distributors of coatings and specialty materials, with a market capitalization of about $26 billion. Due to PPG’s size and the breadth of other sectors it supports, the company is seen as a corporate barometer for the health and direction of the global economy.
“During the quarter, we saw overall demand in China soften, and we experienced weaker automotive refinish sales as several of our U.S. and European customers are carrying high inventory levels due to lower end-use market demand,” Michael McGarry, PPG chairman and CEO, said in a statement.
PPG shares plummeted more than 8 percent on Tuesday for their biggest drop in nine years.
McGarry said PPG is “disappointed with the third quarter earnings results,” which the company now expects to be in the range of $1.47 a share to $1.51 a share. PPG is expected to report its final third-quarter earnings on Oct. 18.
Rising materials, freight and oil costs were all listed as contributing factors for PPG’s weak quarter.
“We experienced the highest level of cost inflation since the cycle began two years ago,” McGarry said.
PPG expects to increase the average global price by 10 percent on products it sells to automotive equipment manufactures, beginning Nov. 1. The company said this price change is a response to the rising costs.
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