PPG Industries (NYSE: PPG) Chairman and CEO Charles E. Bunch told shareholders at the company’s annual meeting in Pittsburgh today that over the past several years, PPG has successfully transformed itself into a global coatings, optical products and specialty materials company with a broader geographic presence and significantly lower cost structure.
“Our 2010 performance demonstrated that our strategic direction, as well as the significant actions we took to weather the recession, have proven successful, and PPG has emerged poised to take advantage of the continuing global economic recovery,” Bunch said. “Overall, I believe we are only now beginning to see the full earnings power of the company.”
Bunch said that the company’s shift to focus on coatings and specialty products has benefited PPG’s business portfolio. In 2010, PPG’s combined coatings and Optical and Specialty Materials segments accounted for 83 percent of the company’s total sales, and these combined businesses are more than twice the size they were a decade ago, he said.
“In addition, we have continued to pursue growth in emerging regions such as Asia/Pacific, Eastern Europe and Latin America, which has broadened our reach and reduced our exposure to weaknesses in any one region,” Bunch said. PPG’s businesses in emerging regions grew 20 percent in 2010, he said, and with sales of nearly $3.6 billion, these regions now account for 27 percent of the company’s sales. The United States and Canada now represent less than 45 percent of PPG’s sales.
Since the recession began in 2008, PPG has completed two restructuring programs and taken other actions to reduce costs, increase efficiency and improve supply chains. These efforts have resulted in significant structural cost reductions, according to Bunch.
“In 2010, we demonstrated that our continuing focus on operational excellence is a key component of delivering strong financial results throughout the business cycle,” Bunch said. “As a result of our actions, we have reduced our annual costs by more than $500 million versus 2008. We have restored margins to above pre-recession levels in nearly all of our business segments.”
PPG posted sales of $13.4 billion in 2010, an increase of almost 10 percent versus the prior year, but about 15 percent below pre-recession 2008 sales of $15.8 billion. The company’s earnings, however, recovered strongly and in 2010 exceeded pre-recession levels, Bunch said. Segment earnings were $1.7 billion, an increase of 45 percent over 2009 and an increase of 8 percent versus 2008, despite sales that were well below 2008 levels.
Bunch also said that the company continued its strong track record of cash generation in 2010 and ended the year with about $2 billion in cash and short-term investments, including the proceeds from a $1 billion debt issuance late in 2010.
“Our strong cash position presents PPG with a variety of options to continue to drive earnings growth,” Bunch said. “In 2010, we returned nearly 75 percent of cash generated from operations, or nearly $1 billion, to shareholders in the form of share repurchases and dividends. Even in the depth of the recession, we did not waiver in our commitment to increase our annual dividend payout.” PPG has paid uninterrupted annual dividends since 1899 and has increased its annual dividend payout for the past 39 years.
“This year, we expect the economic recovery to strengthen and broaden in most end-use markets and regions,” Bunch said. “Yet, we will continue to maintain our operating discipline and work to regain our margin leadership in coatings. We will address the critical issue of persistent inflation in coatings raw materials costs and continue our efforts to improve our supply chains, reduce our working capital and execute our growth strategy.”
At the annual meeting, PPG shareholders elected four incumbent directors: Stephen F. Angel, chairman, president and CEO, Praxair Inc.; Hugh Grant, chairman, president and CEO, Monsanto Co.; Michele J. Hooper, president and CEO, The Directors’ Council; and Robert Mehrabian, chairman, president and CEO, Teledyne Technologies Inc. Shareholders re-approved performance goals under the company’s omnibus incentive plan and approved an amendment and restatement of the plan. Shareholders also passed a non-binding resolution to approve the compensation of the company’s executive officers and recommended an annual frequency for future advisory votes on executive compensation. Additionally, shareholders ratified the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for 2011, and they rejected a shareholder proposal requesting reporting 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 (ppg.com) operates in more than 60 countries around the globe. Sales in 2010 were $13.4 billion. PPG shares are traded on the New York Stock Exchange (symbol: PPG).
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, fluctuations in tax 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.
Vince Morales, PPG Investor Relations
P: 412-434-3740 / E: vmorales[.]ppg.com.