PPG chairman reviews strategy shift, response to economy at annual meeting
PITTSBURGH, April 15, 2010 – PPG Industries’ (NYSE: PPG) Chairman and Chief Executive Officer Charles E. Bunch reviewed steps the company took in 2009 to respond to the global financial crisis that began at the end of 2008 and continued through the year in 2009.
“The strategic vision we have established is to continue to be the world’s leading coatings and specialty products company,” Bunch said. “We have continued to make progress toward achieving that vision. Yet, in 2009, we were clearly challenged with an uncertain and difficult global economy. At PPG, we responded quickly and decisively.”
Bunch said that during 2009, PPG shifted its priorities to respond to the difficult economic conditions. “We placed greater emphasis on operating discipline. We worked on restoring margin leadership, especially in the coatings industry. We focused more on profitability than pure growth. We took steps to improve our cost structure, and we worked to leverage our global technological and manufacturing capabilities to the most efficient use of the entire company. We keyed in on costs, margins, working capital and cash flow,” he said. Bunch also noted two restructuring initiatives – one announced in September 2008 and one in March 2009 – that are expected to result in approximately $250 million in annual cost savings once completed.
“In addition to our cost-cutting measures,” Bunch said, “PPG benefited from actions it has taken over the past several years to grow the coatings and optical and specialty material components of our portfolio.” He said that the proportion of PPG’s sales in these businesses has grown substantially over the past few years. “These businesses saw continuously improving positive momentum throughout the year, and by the end of 2009 were delivering higher year-over-year earnings,” he said.
Bunch commented that the company also benefited from efforts to broaden the geographic reach of its business, and specifically its expanding footprint in the Asia/Pacific region, which posted record earnings for the year and now represents about 15 percent of the company. “Overall, our efforts to transform PPG have served us well in this downturn,” Bunch said.
In 2009, PPG posted sales of $12.2 billion, a decrease of about 23 percent versus the prior year. This was largely attributable to the contraction of demand in many of PPG’s key end-use markets, which in turn was driven by the global recession. Segment earnings for the year decreased by 25 percent. Again, lower demand negatively impacted the company’s earnings performance. Bunch said that while both sales and earnings were down versus the prior year, he believes these results are admirable given the circumstances.
Bunch told shareholders that one bright spot for PPG in 2009 and continuing in 2010 is its cash generation and cash on hand. “We began the year with approximately $1 billion in cash. During 2009, PPG generated about $1.3 billion of cash from operations.” Bunch said that PPG ended the year in the same solid cash position that it was in last year, with approximately $1 billion of cash on hand.
“We expect the business environment to improve gradually in 2010,” Bunch said. “Yet, it is critical that we remain vigilant in maintaining the operating discipline we displayed in 2009 in order to capitalize on gradual demand improvements as they occur this year.” He added, “We haven’t lost sight of our goal to grow, but we need to ensure that we’re growing profitably. We’ll adapt to market conditions as we did in 2009. And perhaps most importantly, we will continue to execute our transformational strategy.”
PPG shareholders elected three incumbent directors: James G. Berges, partner, Clayton, Dubilier & Rice; Victoria F. Haynes, president and chief executive officer of RTI International; and Martin H. Richenhagen, chairman, president and chief executive officer, AGCO Corp. Shareholders endorsed the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for 2010. Also, shareholders rejected a shareholder proposal requesting a report about the company’s community environmental accountability.
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. PPG shares are traded on the New York Stock Exchange (symbol: PPG). For more information, visit www.ppg.com.
Statements in this news release relating to matters that are not historical facts are forward-looking statements reflecting the company's current view with respect to future events or objectives and financial or operational performance or results. These matters involve risks and uncertainties as discussed in PPG Industries' periodic reports on Form 10-K and Form 10-Q, and its current reports on Form 8-K, filed with the Securities and Exchange Commission. Accordingly, many factors could cause actual results to differ materially from the company's forward-looking statements.
Among these factors are global economic conditions, increasing price and product competition by foreign and domestic competitors, fluctuations in cost and availability of raw materials and energy, the ability to maintain favorable supplier relationships and arrangements, difficulties in integrating acquired businesses and achieving expected synergies therefrom, the realization of anticipated cost savings from restructuring initiatives, economic and political conditions in international markets, the ability to penetrate existing, developing or emerging foreign and domestic markets, foreign exchange rates and fluctuations in such rates, the impact of future legislation, the impact of environmental regulations, unexpected business disruptions and the unpredictability of possible future litigation, including litigation that could result if the asbestos settlement discussed in PPG's filings with the SEC does not become effective. However, it is not possible to predict or identify all such factors. Consequently, while the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.
Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on PPG's consolidated financial condition, operations or liquidity. Forward-looking statements speak only as of their date of initial issuance, and PPG does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.
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