PPG discusses improved performance, outlines strategies for continued growth
Company highlights focused portfolio, geographic reach and cost discipline
NEW YORK, Dec. 14, 2010 – During PPG Industries’ (NYSE: PPG) 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.
The meeting was webcast and accessible through the Investor Center of PPG’s website. A replay of the webcast will be available for 12 months following the presentation on PPG’s Investor Center at www.ppg.com. The teleconference will be available for replay beginning Dec. 14 after 6:30 p.m. ET and ending Dec. 28 using the following dial-in numbers:
U.S.: (888) 286-8010
International: (617) 801-6888
Access code for replay: 41799132
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 within the meaning of the Private Securities Litigation Reform Act of 1995 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 (SEC). 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, the ability to maintain favorable supplier relationships and arrangements, the realization of anticipated cost savings from restructuring initiatives, difficulties in integrating acquired businesses and achieving expected synergies therefrom, the ability to penetrate existing, developing or emerging foreign and domestic markets, and economic and political conditions in international 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, results of operations or liquidity.
Forward-looking statements speak only as of the date of their 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.
Regulation G Reconciliation
PPG Industries believes investors' understanding of the company's operating performance is enhanced by the disclosure of net income and earnings per common share (attributable to PPG) adjusted for nonrecurring charges. PPG's management considers this information useful in providing insight into the company’s ongoing operating performance because it excludes the impact of items that cannot reasonably be expected to recur on a quarterly basis. Net income and earnings per common share (attributable to PPG) adjusted for these items are not recognized financial measures determined in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered a substitute for net income or earnings per common share (attributable to PPG) or other financial measures as computed in accordance with U.S. GAAP. In addition, adjusted net income and earnings per share may not be comparable to similarly titled measures as reported by other companies. The following are reconciliations of reported and adjusted net income and earnings per share for the third quarter 2010:
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