Blog Coverage Paint Manufacturer PPG Embarks on a Cost-Cutting Plan, Aims to Save $125 million Annually
Upcoming AWS Coverage on Valspar Corp. Post-Earnings Results
LONDON, UK / ACCESSWIRE / December 12, 2016 / Active Wall St. blog coverage looks at the headline from PPG Industries, Inc. (NYSE: PPG) as the Company announced on December 09, 2016 that its Board of Directors has approved broad-based restructuring measures with a view to reduce its costs globally. The measures are targeted at locations and markets which have recorded the lowest performance. The move will impact the Company's earnings for 4Q 2016, but is expected to result in $125 million as annual savings. Register with us now for your free membership and blog access at:
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One of PPG Industries' competitors within the Specialty Chemicals space, The Valspar Corp. (NYSE: VAL), will release its Q4 FY16 and full-year results on Tuesday, December 20, 2016. AWS will be initiating a research report on Valspar in the coming days.
Today, AWS is promoting its blog coverage on PPG; touching on VAL. Get all of our free blog coverage and more by clicking on the link below:
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PPG is a paints and coating manufacturing Company headquartered in Pittsburgh. It has presence in more than 70 countries and reported net sales of $14.8 billion in 2015.
Commenting on the announcement, Michael H. McGarry, PPG Chairman and CEO of PPG said:
"Because of continued slow overall growth in global demand, we are taking decisive action to adjust our cost structure. These measures will better align our resources with anticipated ongoing business conditions and will keep PPG competitive in the end-markets in which we participate."
The cost-cutting and restructuring plan
PPG plans to record a pretax restructuring charge of $190 million - $200 million in the fourth quarter of 2016. This translates to $0.53 to $0.58 per diluted share. Out of this amount, $140 million are towards cash costs and an amount of $110 million cash outlay is planned for 2017 and the balance for 2018. The rest of the $50 million - $60 million are towards write-offs of certain assets and non-cash costs. Apart from this, the Company also expects an additional $15 million of incremental restructuring-related cash costs during 2017.
A pretax charge is a type of booking exercise where the Company incurs costs for writing off assets when restructuring. It is usually done by companies experiencing significant problems and restructuring is an attempt to improve the business and recover financially. Though the measure affects the Company's income statement in the short run, it is a beneficial step for the long-term sustenance and growth of PPG.
PPG's restructuring plan also aims at reducing 1,700 jobs across various locations of the company. The job cuts represent approximately 3.6% of its 47,000 workers worldwide. PPG did not say how many local employees will lose their jobs.
These steps are expected to help PPG realize $125 million to $130 million in annual savings. Approximately $40 million to $50 million of savings are projected to be realized in 2017 and the remainder of the expected annual savings to be realized by end of 2018.
Recent business acquisitions and divestitures
The company had reported a loss of $201 million for 3Q2016 when it had announced its third quarter results in October 2016. It reported net sales of $3.8 billion for the third quarter.
PPG has been restructuring its businesses by selling part of those as well as updating and acquiring new ones to keep the company competitive.
In November 2016, PPG announced the acquisition of DEUTEK S.A., a leading Romanian paint and architectural coatings manufacturer from Emerging Europe Accession Fund (EEAF). In the same month, PPG announced the acquisition of the remaining 50% ownership interest in UniverSpA from its joint-venture partner, UniverItalianaSrl. UniverSpA manufactures architectural and liquid industrial coatings.
In October 2016, PPG had completed the sale of its flat glass manufacturing and glass coatings operations to Vitro S.A.B. de C.V. In the same month, it had also sold off its European fiber glass operations to glass manufacturer Nippon Electric Glass Co. Ltd.
PPG had also announced in October 2016, the completion of its capacity expansion of silica production at Delfzijl, Netherlands, wherein it adds capacity to manufacture more than 15,000 tons per year of advanced precipitated silica products.
Stock Performance
At the close of trading session on December 09, 2016, PPG Industries' stock price slightly declined 0.11% to end the day at $99.30. A total volume of 1.36 million shares were exchanged during the session. The company's share price has gained 4.21% in the past month and 2.07% on YTD basis. The stock currently has a market cap of $26.24 billion. The company's shares are trading at a PE ratio of 33.38 and have a dividend yield of 1.61%.
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