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PPG sinks on profit warning, sees first quarterly loss since 2009

A PPG quality assurance technician examines a paint formula at one of PPG’s coatings manufacturing facilities.
Source: PPG Industries

PPG Industries shares fell sharply Friday after the company warned it expects to post a third-quarter loss, its first in 30 quarters, due to charges related to a pension settlement.

Shares slid 9 percent to a more than seven-month low, wiping out more than $2.2 billion of market value in early trading Friday. The stock was on track for its worst day since December 2008.

For the third quarter ended September, PPG expects to post a per-share loss between 74 cents and 77 cents, hurt by previously-disclosed pension settlement charges totaling $2.31 a share. Adjusting for the charges, the company expects per-share earnings between $1.54 and $1.57, compared with $1.54 a year ago.

Analysts expected earnings of $1.71 a share, according to Thomson Reuters. The company is slated to report full results later this month.

In a June SEC filing, PPG said it would transfer pension benefits and annuity administration to Massachusetts Mutual Life Insurance and Metropolitan Life Insurance, and expected to take non-cash settlement charges of about $500 million-$600 million after-tax in the third quarter.

CEO Michael McGarry said PPG is "disappointed with this quarter's EPS-growth rate as we continue to operate in a sluggish economic environment with no clear near-term catalyst for improving global GDP growth."

The company, which sells paints, coatings and materials, is considering additional cost-cutting through global operating improvements and " targeted regional actions where economic conditions are weakest." The company said volumes grew more than 1.5 percent in the latest period, hurt in part by slower-than-expected growth in Europe.

PPG also said its board approved a $2 billion share buyback program. This is in addition to about $520 million remaining under an existing program.

Jim Sheehan, an analyst at SunTrust Robinson Humphrey maintains his "buy" rating and $125 price target on the stock. In a note to investors, he said "While sluggish global GDP and soft European coatings demand are constraining EPS, we note two positives: 1.5 percent volume growth in third quarter accelerated from 0 percent in the second quarter validating the early success of PPG's growth initiatives; Aggressive cash deployment continues, with PPG's board authorizing a new $2 billion buyback."

The company has been cutting costs following its acquisition of REVOCOAT, a global supplier of sealants, adhesives and damper products for the automotive industry, in April 2015.

PPG has since cut about 1,700 jobs and has also sold its flat glass unit to Mexican glass manufacturer Vitro for about $750 million.

PPG shares are down 6 percent so far this year.

PPG year to date

Source: FactSet

Reuters contributed to this report.