Bunch described the company’s initiatives in strengthening its portfolio, driving profitable organic growth and targeting growth in emerging regions of the world, as well as the company’s utilization of its strong financial position to leverage PPG’s full potential.
“Many of the strategic steps we’ve taken over the past 18 months have been critical to our solid organic growth and continued solid financial success this year, despite what has been a challenging economic backdrop,” Bunch said. He later added that PPG’s “quarterly volumes this year represent some of the best and most consistent” that PPG has had in the past several years, and that "although it is only one month into the quarter, our October results came in better than we had estimated.”
Last month, the company reported record sales for the third quarter from continuing operations of $2.8 billion, including its highest organic growth rate of the past three years. The sales level surpassed the prior year’s third quarter results by 13 percent. PPG also delivered a 16 percent increase in adjusted earnings per share for the quarter.
Bunch recapped the acquisitions made in 2006 and stated that those acquisitions are on track to deliver full year 2007 sales of approximately $750 million with year-to-date margins in the high single-digit percentages. He also noted the recent announcement to divest the company’s two automotive glass businesses, and said that the divestiture is proceeding on a schedule to close by year-end. The company also announced today that it had closed on the sale of its fine chemicals business. “We have been successful in strengthening our portfolio and concentrating on higher growth, specialty, technology-driven businesses,” Bunch said. “Moving forward, we will continue to aggressively evaluate our portfolio.”
Bunch provided perspectives on the company’s success in emerging regions of the world. “Our sales in both Asia and Latin America have both grown by at least 40 percent year-to-date, and through September these regions have already exceeded our full year sales from last year. Also, our Eastern European region is one that has not received as much fanfare, but its sales have also grown more than 40 percent year-to-date.” Bunch added that the company is targeting $2 billion in sales in Asia by 2010.
Bunch also reviewed PPG’s pending acquisition of SigmaKalon Group, in Uithoorn, Netherlands, as a key strategy to applying PPG’s strong financial resources to grow the company and future shareholder returns. The second-largest coatings company in Europe, SigmaKalon is a global producer of architectural, protective, marine and industrial coatings. PPG’s presentation to investment analysts indicated that the SigmaKalon acquisition may be dilutive to PPG’s earnings in 2008. However, Bunch noted that the company’s goal “remains for this acquisition to be accretive to our ongoing earnings per share, including all required accounting adjustments, no later than 12 months following the closing of the deal.” Bunch also stated that “we believe today, more than ever, that the acquisition of SigmaKalon will be very beneficial for PPG and our shareholders. The quality of SigmaKalon’s management, people and brands give us significant reason to be very excited and optimistic.”
Bunch said that, on a pro-forma basis, with the portfolio actions PPG has executed, including the pending SigmaKalon deal, PPG’s business mix has “significantly changed from just one year ago. Based on full-year pro-forma projections, we estimate that over 80 percent of our sales will be comprised of coatings and optical and specialty materials. This is a significant shift, as this figure was 66 percent just last year.”
Bunch said that from a geographic perspective, the company expects that less than 50 percent of its pro-forma sales will be in the United States and Canada, with emerging regions representing more than 20 percent.
“All in all, it has been a very active year at PPG,” Bunch said. “And we know we have a full plate in 2008. The successful integration of SigmaKalon will be the primary focus, while at the same time we will continue our efforts to meet our aggressive targets in other areas.
“By divesting some non-core businesses, by making the company’s largest acquisition to date, by fueling our organic growth and broadening our geographic presence, this is indeed a ‘new’ PPG,” Bunch concluded. “We’re leveraging our 125-year experience and forging a company that is adapting and growing profitably throughout the world. And in so doing, PPG continues to be a company that seeks out opportunities to create additional shareholder value and provide for growing shareholder returns.”