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PPG Discusses Improved Performance, Outlines Strategies for Continued Growth

Published on 2010-12-21. Author : SpecialChem

NEW YORK -- During PPG Industries' 2010 Capital Markets Day, Chairman and CEO Charles E. Bunch and other senior management described how the company's strategy has created a leaner, stronger, more global company sharply focused on coatings, specialty products and emerging regions. They also discussed PPG's recent actions to weather the recession and position the company for continued growth in 2011 and beyond.

"PPG today is well positioned to capitalize on the continued recovery in the global economy," Bunch said. "During the recession, we hunkered down, took significant restructuring actions, focused on reducing costs and generating cash, and also selectively invested for growth. We succeeded in each of these areas. Our efforts delivered resilient financial performance and superior returns to shareholders."

In its most recent quarter, the company reported record adjusted earnings of $1.59 per share, despite overall volumes that were nearly 10 percent below pre-recession levels.

"Looking ahead, we plan to continue our strategy to grow and strengthen our coatings and specialty products businesses through innovation and expansion in emerging regions," Bunch said. "We also intend to leverage our global capabilities and make selective investments."

Bunch said that PPG is the only major company in the $90 billion coatings industry to have sizable market positions in all of the major coatings end-use markets. "About 70 percent of PPG's coatings sales are from special-purpose coatings, which typically require higher technical competency and stronger customer partnerships," he said.

Bunch singled out PPG's optical products, automotive refinish and aerospace businesses as earnings growth drivers, and said that he believes that excellent organic growth prospects remain in 2011 for most of the company's businesses. "In addition, PPG's expanding presence in emerging regions continues to reap benefits as we grow with higher overall industrial activity and capture a greater share of the growing aftermarkets in these regions," he said.

PPG's sales in emerging regions have grown by more than $2.5 billion in the past decade and today account for more than 25 percent of the company's sales, Bunch said. "Asia is now the world's largest coatings region, and we have become the second-largest coatings company there with a full complement of offerings and ample room to grow," he said. A key driver in the emerging regions growth story is Asia, where PPG's annual sales have grown from $600 million to more than $2 billion since 2005. In October, PPG announced that it would acquire the Chinese packaging coatings company Bairun.

"We intend to remain disciplined in our approach to bolt-on acquisitions and are currently reviewing a number of potential acquisitions primarily in emerging regions," Bunch said.

Regarding the company's outlook for 2011 economic conditions, company executives said that they anticipate continued sluggish demand in construction markets in developed regions, as well as inflationary pressures resulting from generally higher raw material costs for key coatings inputs. However, PPG expects to benefit from lower natural gas prices and pricing initiatives to offset inflating costs, as has been done successfully in the past. Bunch said that the company's Commodity Chemicals segment's profitability will likely be higher in 2011 versus 2010. The company continues to benefit from a lower tax rate, which has declined due to the geographic mix of earnings.

Bunch noted that PPG's track record of strong cash generation continued through the recession. The company currently has a cash balance of about $2 billion, including proceeds from a recent $1 billion debt issuance. PPG's priorities for cash deployment are focused on debt repayment, growing earnings and returning cash to shareholders.

Bunch said that year-to-date, PPG has returned nearly 80 percent of cash from operations to shareholders in the form of dividends or share repurchases. He also said that share repurchases would likely be a more consistent use of the company's cash going forward. "Even during the depth of the recession, PPG did not waiver in its commitment to increase its annual dividend payment," he noted. PPG has paid uninterrupted dividends since 1899 and has increased its annual dividend payment for the past 39 years.

About PPG

PPG Industries' vision is to continue to be the world's leading coatings and specialty products company. Founded in 1883, the company serves customers in industrial, transportation, consumer products, and construction markets and aftermarkets. With headquarters in Pittsburgh, PPG operates in more than 60 countries around the globe. Sales in 2009 were $12.2 billion.

Source: PPG


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