PPG Update May 21, 2019
Forward-looking statements and other notes The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. This presentation contains forward- looking statements that reflect the Company’s current views with respect to future events and financial performance. Yo u can identify forward-looking statements by the fact that they do not relate strictly to current or historic facts. Forward-looking statements are identified by the use of the words “aim,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast” and other expressions that indicate future events and trends. Any forw ard-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward looking statement, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our reports to the Securities and Exchange Commission. Also, note the following cautionary statements: Many factors could cause actual results to differ materially from the Company’s forward -looking statements. Such factors include global economic conditions, increasing price and product competition by foreign and domestic competitors, fluctuations in cost and availability of raw materials, the ability to achieve selling price increases, the ability to recover margins, the ability to maintain favorable supplier relationships and arrangements, the timing of and the realization of anticipated cost savings from restructuring initiatives, difficulties in integrating acquired businesses and achieving expected synergies therefrom, economic and political conditions in international markets, the ability to penetrate existing, developing and emerging foreign and domestic 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, the effectiveness of our internal control over financial reporting, the unpredictability of existing and possible future litigation, including asbestos litigation, and governmental investigations. However, it is not possible to predict or identify all such factors. Consequently, while the list of factors presented here and under Item 1A of PPG’s 2018 Form 10 -K 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 the results compared with those anticipated in the forward-looking statements could include, among other things, lower sales or earnings, business disruption, operational problems, financial loss, legal liability to third parties, other factors set forth in Item 1A of PPG’s 2018 Form 10 -K and similar risks, any of which could have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity. All of this information speaks only as of May 21, 2019, and any distribution of this presentation after that date is not intended and will not be construed as updating or confirming such information. PPG undertakes no obligation to update any forward-looking statement, except as otherwise required by applicable law. For purposes of the analyses described in this presentation, PPG’s architectural coatings businesses refers to PPG’s architectural coatings Americas and Asia Pacific and architectural coatings EMEA strategic business units, which are included in PPG’s Performance Coatings reportable segment. PPG’s industrial coatings businesses refer to all of PPG’s other (non -architectural) strategic business units, which make up the remainder of the Performance Coatings reportable segment and the Industrial Coatings reportable segment.” 1
Reiterating our 2019 t argets and initiatives FY2019 Target / Initiative Sales Growth 3-5% in constant currencies Adjusted EPS Growth 7-10% excluding currency translation impacts, including improvement toward pre-inflationary operating margins Cost Savings $70 million from cost savings programs Incentive Maintain 10% EPS growth as the earnings-related metric for management variable long-term incentive compensation Compensation Capital Return Increase annual dividend (on a per share basis) Governance Engaged proxy solicitor and undertook extensive efforts to eliminate classified board and remove supermajority voting Portfolio Review Strategic and operational review of the business and implications for shareholder value creation In addition PPG enhanced its Board with the addition of two highly-qualified independent directors 2
PPG actions taken to optimize portfolio and improve operations Acquisitions: Q3 2016: MetoKote Q1 2019: Whitford Worldwide Q4 2016: Remaining interest in Q2 2019: Hemmelrath Q3 2014: Homax, Masterwork PPG Univer Q4 2014: Comex, Q1 2018: ProCoatings Westmoreland Supply Q4 2018: SEM Products, Inc. Q2 2015: REVOCOAT Q3 2015: Majority interest in LJF, Cuming Microwave and IVC Q1 2017: Deutek, Futian Q4 2015: Remaining interest in Q3 2017: Crown Chemfil Canada 2014 2015 2016 2017 2018 2019 Q2 2016: 40% stake in Pittsburgh Q2 2017: Mexican Q1 2018: Packaging Divestitures: deco ink business Glass Works plasterboard & cement- board business Q4 2016: European fiber glass business, NA flat glass manufacturing Q3 2017: US fiber and glass coatings operations; and glass business 50% stake in PFG Fiber Glass JVs Global Cost Q2 2019: Expected Q2 2018: Target of Q4 2016: Target of $125MM in $85MM in annual target ~$125MM in Savings Initiatives: annual savings annual savings savings PPG continues to evolve its portfolio and strengthen operations to deliver shareholder value 3
Comprehensive evaluation of PPG value creation opportunities Independent third party reviews in parallel with comprehensive internal assessment – under direction of PPG’s Board of Directors 1. Robust evaluation of portfolio and balance sheet opportunities conducted by independent financial 1 advisors • Morgan Stanley and Goldman Sachs separately analyzed potential separation transactions and capital allocation alternatives 2 2. Separate review of US / Canada architectural coatings conducted by globally-recognized independent consulting firm • Assessed opportunities to recover earnings related to 2018 customer assortment changes 3. Comprehensive internal operational and organizational analysis 3 • Deep dive review of competitiveness and profitability across regions, businesses and products Focus on creating the most value for our shareholders – “nothing is sacred” 4
Portfolio Evaluation: Scope and key considerations 1 Scope of Independent Reviews Key Considerations • • Alternatives to separate architectural and Value maximization for PPG shareholders industrial coatings businesses • Equity market valuation estimates under • Other broad-ranging portfolio and strategic various scenarios options • Implications on business competitiveness, • Balance sheet and related cash deployment customers and future growth potential value creation opportunities • Value of synergies or dis-synergies and other financial impacts resulting from portfolio adjustments • Tax implications, if any, of various potential transactions • Balance sheet effects, liability assignment and cash deployment considerations In depth independent reviews of portfolio and value creation opportunities 5
Portfolio Evaluation: Assessment Summary 1 Review Topic Summary of Assessment Based on Independent Review • Unlikely to result in value uplift for PPG shareholders • Reduces PPG’s strategic flexibility Separate architectural • Unlikely to result in multiple re-rating coatings from • Meaningful cost and commercial dis-synergies and incremental functional costs expected remainder of PPG • Even with no assumed dis-synergies a separation is unlikely to result in a material value uplift portfolio; other • Lowers synergy capability for future strategic actions business portfolio • Potential tax leakage in sale options • No observations of other global coatings players separating architectural from industrial coatings; only evidence of increasing participation in both • PPG track record of acquisitions viewed positively by equity markets • Companies reinvesting capital into their businesses at returns in excess of their cost of capital tend to outperform return of capital strategies • Cash deployment Share repurchases • priorities Require significantly more balance sheet usage for same impact as acquisitions • Limit balance sheet flexibility to pursue other strategic options • Typically net market positive, but not value creating without a multiple re-rating • Maintaining flexibility to pursue strategic options is prudent in current environment 6
Recommend
More recommend
