PPG Industries' 2011 capital markets day
Dec. 5 in New York
City, Chairman and CEO Charles E. Bunch and other
senior leaders discussed
the company's progress and explained strategies
for future success,
including organic growth, innovation, cost and
supply chain management, as
well as continuing disciplined cash deployment.
“In each of the past five quarters, PPG has
achieved record earnings per share, averaging
nearly 30 percent above prior quarterly records,
despite elevated raw material inflation and sales
volumes that remain below pre-recession 2008
levels,” Bunch said. “Our record performance
reflects the value-added technologies we are
providing to our customers globally, our
aggressive cost management and strong operational
execution, and our earnings-focused cash
deployment.”
Bunch said that PPG’s sales in coatings and
specialty products have more than doubled since
2001 and now account for more than 80 percent of
total company revenues. In addition, he said
PPG’s overall sales in emerging regions have
grown to account for about 26 percent of the
company’s portfolio.
“In 2012, we plan to continue to pursue growth in
key technology-driven businesses, notably
aerospace, automotive refinish and optical, as
well as in faster-growing emerging regions,”
Bunch said. “In addition, we intend to maintain
our keen focus on cost and operations. PPG today
is a technology leader in the coatings sector,
and we aim to enhance our position by delivering
additional innovative solutions to our
customers.”
PPG’s portfolio and geographic growth through
bolt-on acquisitions continued in 2011, Bunch
said, as the company completed the purchases of
Equa-Chlor, a U.S.-based chlor-alkali
manufacturer, and Ducol Coatings, a South African
automotive refinish coatings company, and
announced agreements to acquire Dyrup A/S, a
European architectural coatings manufacturer, and
Colpisa, an automotive original-equipment and
refinish coatings manufacturer based in Colombia.
Bunch said that he anticipates further
consolidation in the $92 billion global coatings
industry, and that PPG plans to continue to
evaluate growth opportunities.
“Our outlook for global economic conditions in
2012 includes growth in global industrial
activity, including increased global automotive
OEM industry production, and we believe global
growth rates in the coatings industry will
outpace gross domestic product,” Bunch said. “We
expect that lower natural gas costs will continue
to be a benefit to PPG in 2012. We also
anticipate a continued slow recovery in the
developed regions in residential and non-
residential construction markets, and that
uncertainty in the European region will result in
subpar growth there.”
Regarding current business conditions, Bunch said
that most PPG businesses are performing in line
with normal, seasonal fourth-quarter trends.
Commenting on PPG’s recent declaration of force
majeure for certain optical products because of
flooding in Thailand, Bunch said that it would
likely have a negative impact of about 8 cents to
14 cents per share on fourth quarter 2011
earnings but that there would be “minimal
carryover effect into 2012.” Bunch also said that
the company’s Commodity Chemicals segment could
experience a 20 percent to 40 percent decrease in
fourth quarter 2011 earnings sequentially over
third quarter 2011 results, due in large part to
“chlorine customer inventory management.”
Bunch said that PPG’s cash generation is
typically strongest during the fourth quarter,
and that this quarter’s cash performance is
consistent with that of prior years. He also said
the company’s current cash balance remains at
historically elevated levels, and that PPG plans
to deploy cash during 2012 in ways that are
focused on earnings accretion, such as for
disciplined acquisitions, expanded organic
capital spending, and share repurchases and other
earnings initiatives.
“Cash returned to shareholders via dividends and
share repurchases has increased by nearly 100
percent the past three years versus the previous
decade average,” Bunch said, “and this remains a
hallmark for the company.” The company has paid
uninterrupted annual dividends since 1899 and
increased its dividend payment in June 2011,
marking 40 consecutive years of increasing annual
dividend payouts. In addition, PPG repurchased 18
million shares of stock over the past 24 months,
or more than 10 percent of outstanding shares. In
October 2011, PPG’s board of directors authorized
the repurchase of an additional 10 million
shares.
The meeting was webcast and accessible through
PPG's Investor Center at www.ppg.com, where a
webcast replay will be available for 12 months
following the original presentation. The
teleconference is available for replay until Dec.
22 using the following dial-in numbers: