PPG Industries, Inc. · NYSE:PPG
PPG Industries — Investor Presentation (March 2011)
45 slides from PPG Industries's investor presentation, March 2011
Slide 1: PPG Industries, Inc.
PPG Industries, Inc. PPG PPG Industries
Slide 2: History & Overview
History & Overview ● Founded in 1883 ● Leading supplier of paints, coatings, optical products, specialty materials, chemicals, glass and fiber glass ● Established global footprint ● Industry-leading technologies and services ● Solid financial results ● Fiscally prudent ● Shareholder friendly 2
Slide 3: 2010 Key Achievements
2010 Key Achievements ● Continued Execution Further Cost Savings ~$150MM ● Full Earnings Recovery in Combined Coatings and Optical Segments ● Partial Volume Recovery, Record Second Half Earnings-Per-Share ● Strong Year-End Balance of Cash & Short-Term Investments ($2B) ● Dividend increase (October,
Slide 4: Recent Strategic Activities
Recent Strategic Activities Optimize portfolio focused on specialty content: ● Driving profitable global expansion. ● Growing leadership in emerging regions. ● Funding organic growth in key businesses. ● Making prudent, targeted acquisitions. Continuing legacy of rewarding shareholders. 4
Slide 5: PPG’s Transformation
PPG’s Transformation 1997 - 2000 2005 - 2008 Acquisition Business Year Acquisition Business Year Akzo Auto OEM 1997 2005 - 2008 Int’l Polarizer Optical 2005 Man-Gill Industrial 1997 Sales Mix Change Crown Coatings Industrial 2005 BASF Packaging 1997 Iowa Paint Architectural 2005 Max Meyer Refinish 1
Slide 6: PPG’s Transformation
PPG’s Transformation 2001 - $8.2B 2010 - $13.4B 6% 7% 9% 11% 27% Optical Coatings Chemicals 13% 54% Glass 73% Coatings & Optical = $5B Coatings & Optical = $11B Coatings and Optical & Specialty Materials More than Doubled in Size and Now Represent over 80% of the Company’s Revenues 6 Sales in USD
Slide 7: Focus on Coatings & Specialty Products
Focus on Coatings & Specialty Products Organic Sales Growth 150% ‘01 – ‘10 ‘01 – ‘08 ‘05-’08 CAGR CAGR CAGR 140% PPG Coatings & 2.3% 4.6% 4.3% 130% Optical U.S. 120% Industrial 0.4% 1.2% 0.4% Production 110% Global 100% Industrial 1.9% 2.6% 2.6% Production 90% 2001 '02 '03 '04 '05 '06 '07 '08 '09 20
Slide 8: PPG’s Transformation
PPG’s Transformation 2001 – $8.2B 2010 - $13.4B 3% 4% 1% 5% U.S. & Canada 16% 18% W. Europe E. Europe 5% 46% Asia/Pacific Latin America 74% 28% Emerging Regions = 8% Emerging Regions = 26% Improved Geographic Profile with Growing Emerging Regions Sales in USD 8
Slide 9: Expanded European Footprint
Expanded European Footprint PPG Europe, Mid-East and Africa (EMEA) Sales 6,000 5,000 4,000 3,000 2,000 1,000 0 ($MM) 2005 2006 2007 2008 2009 2010 9
Slide 10: Global Coatings Industry
Global Coatings Industry Industry End-Market Demand Competitive Landscape by Dollar Value of Sales (~$90B) Aerospace Packaging 2% 2% Protective & Marine Akzo 9% Nobel Auto OEM 6% Others 41% PPG Architectural Refinish 44% 8% Sherwin Williams General Industrial DuPont 29% Kansai BASF Nippon RPM Valspa
Slide 11: PPG Coatings Overview
PPG Coatings Overview Segment Earnings ($MM) Why Coatings? 1,600 1,400 +24% ● Stable earnings/cash 1,200 1,000 800 ● Growth potential 600 400 ● Low capital intensity 200 0 2006 2007 2008 2009 2010 ● Technology & Service Coatings Optical & Specialty Total Good Growth; Rapid Recovery From Recession PP
Slide 12: Coatings End-Market Sales Mix
Coatings End-Market Sales Mix PPG Coatings Sales Mix; PPG Coatings Sales Mix Global Leader in 70% of End-Markets Architectural Coatings #3 Global #1 Global Position Position 30% 30% 42% 70% Special-Purpose Coatings: • Aerospace • Automotive OEM 28% • Automotive Refinish #2 Global • General Industria
Slide 13: PPG Industries Business Segments
PPG Industries Business Segments ● Performance Coatings Automotive Refinish 2010 PPG Sales Mix Aerospace Protective & Marine Architectural Coatings Americas & Asia Glass ● Industrial Coatings Commodity Automotive OEM Chemical Performance Industrial Coatings Coatings Packaging Optical & Specialty ● A
Slide 14: Performance Coatings Segment
Performance Coatings Segment Strategic Business Units Segment Traits: ● Automotive Refinish • Operating margins ● Aerospace • Consistent cash ● Architectural (Americas & Asia) • Stable industries ● Protective & Marine • Distribution focus Sales (US$B) – Includes Acquisitions Segment Operating Margin
Slide 15: Automotive Refinish Coatings
Automotive Refinish Coatings Sales – Includes Acquisitions Key Industry Trends: ’04-’08 CAGR = 8% ‘04-’10 CAGR = 4% ● Emerging regions ● Technology shift to Waterbase ● Customer service 2004 2005 2006 2007 2008 2009 2010 ● Marketplace approach PPG Refinish PPG Asian Sales 2010 Refinish Sales North ’
Slide 16: Aerospace
Aerospace Sales – Includes Acquisitions ’04-’08 CAGR = 11% ● Coatings ‘04-’10 CAGR = 10% ● Sealants ● Transparencies PPG Sales Content per Airplane 2004 2005 2006 2007 2008 2009 2010 PPG Aerospace Sales Mix Aftermarket 45% 55% OEM Current Boeing Boeing 787 16
Slide 17: Architectural Coatings (Americas & Asia)
Architectural Coatings (Americas & Asia) Sales – Includes Acquisitions PPG U.S. Architectural Store Count 500 ’04-’08 CAGR = 17% 450 ‘04-’10 CAGR = 7% 400 350 300 250 200 150 100 2004 2005 2006 2007 2008 2009 2010 1999 2004 2006 2009 Current PPG Architectural Coatings - Americas PPG U.S. Architectur
Slide 18: Protective & Marine Coatings (PMC)
Protective & Marine Coatings (PMC) Sales – Includes Acquisitions PPG PMC Sales 2010 U.S. & Canada Asia Europe 2004 2005 2006 2007 2008 2009 2010 Aerospace and Protective & PMC Industry Segments ($B) Marine Sales ($MM) $500 10.0 Other $400 8.0 Rail $300 Offshore 6.0 Sales Power $200 4.0 Petrochemical
Slide 19: Industrial Coatings Segment
Industrial Coatings Segment Segment 4Q ‘10 Sales Mix Strategic Businesses Asia ROW ● Automotive OEM E. Europe (28%) (9%) (11%) ● Industrial U.S. & Canada (27%) ● Packaging W. Europe (25%) Sales (US$B) – Includes Acquisitions Segment Results ’04-’08 CAGR = 9% $5,000 15% ‘04-’10CAGR = 5% $4.0 $4,000 1
Slide 20: Automotive OEM Coatings
Automotive OEM Coatings Sales – Includes Acquisitions PPG Automotive OEM Coating ’04-’08 CAGR = 8% ‘04-’10 CAGR = 5% ROW U.S. & Canada Asia Europe 2004 2005 2006 2007 2008 2009 2010 Global Industry Car Builds (MM) PPG Sales Growth 80 NA Europe Asia SA NA Europe Asia SA 60 MM Builds 40 20 0 2005 2010
Slide 21: Industrial Coatings SBU
Industrial Coatings SBU Industrial Coatings SBU Sales Mix Sales – Includes Acquisitions ROW ’04-’08 CAGR = 9% 8% ‘04-’10 CAGR = 4% U.S. & Canada 31% Asia 33% Europe 28% 2004 2005 2006 2007 2008 2009 2010 Fragmented but PPG Asian Industrial Consolidating Coatings SBU Sales Industry Akzo ’04-’08 CAGR
Slide 22: Packaging Coatings
Packaging Coatings Sales – Includes Acquisitions Annual Beverage Can Consumption ’04-’08 CAGR = 12% ‘04-’10 CAGR = 7% 2004 2005 2006 2007 2008 2009 2010 PPG Organic Sales Growth 15% 12% 9% 6% 3% 0% World consumption: -3% 37 cans per person -6% 2005 2006 2007 2008 2009 2010 22
Slide 23: Architectural Coatings EMEA
Architectural Coatings EMEA Segment Financial Results End-Use Market Demand $2,500 13.0% New $2,000 12.5% Construction, Sales EBITDA Margin* 12.0% 20% $1,500 11.5% More $1,000 Stability 11.0% Maintenance, in End- $500 10.5% 80% Market $0 10.0% 2008 2009 2010 $MM - USD Sales Margin * See Appendix for
Slide 24: Optical and Specialty Materials
Optical and Specialty Materials Sales ($MM)– Includes Acquisitions Transitions® N.A. Optical Lens Market 1250 ’04-’08 CAGR = 12% Penetration (~175MM lenses in market) ‘04-’10 CAGR = 8% ~20% 1000 750 500 2004 2005 2006 2007 2008 2009 2010 Segment Operating Margins Transitions® Rest-of-World Optical L
Slide 25: Commodity Chemicals
Commodity Chemicals Commodity Chemicals PPG Commodity Chemicals Segment Results Energy Sources $500 25% 25% $400 20% Natural Gas Coal/Other $300 15% 75% Margin Sales $200 10% PPG Natural Gas Hedges ** 60% ~ % of usage hedged: 50% 2009 – 55% $100 5% 2010 – 25% 40% 2011 – 12% 30% ~ Average Hedge Price
Slide 26: Glass
Glass Glass Segment Results 4,000 Headcount $300 15% 3,800 10% 3,600 3,400 5% $200 3,200 0% 3,000 Margin Sales 2007 2008 2009 Current -5% Fiber Glass Utilization Rates $100 100% -10% 90% -15% 80% 70% $0 -20% 60% 50% $MM - USD Sales ($MM) Margin 40% 1Q09 2Q 3Q 4Q 1Q10 2Q 3Q 4Q Steady Earnings Improve
Slide 27: Strong and Growing Asian Presence
Strong and Growing Asian Presence Industry Coatings Demand for Asia PPG China Sales Mix (2010) Industrial ANZ Korea Automotive OEM 8% General 12% China Industrial Performance Industrial Packaging 44% S.E. Asia Performance 16% Auto Refinish Protective & India Marine 16% Aerospace Architectural Taiwan
Slide 28: PPG Sales
PPG Sales PPG Sales Bridge Regional Sales Growth (Y-O-Y vs. 2009) (Y-O-Y vs. 2009) $14,500 $12 $50 $13,423 Latin America $13,500 $999 $17 $12,500 $12,239 Asia/Pacific $11,500 Europe $10,500 $9,500 U.S./Canada $8,500 0% 5% 10% 15% 20% 25% 30% Millions of USD Broad Recovery From 2009 Recessionary Leve
Slide 29: Restore Operating Margins
Restore Operating Margins Full Year EBIT Margin (%) 30% 2008 25% 2009 2010 20% 15% 10% 5% 0% -5% -10% Performance Industrial Arch. - EMEA Optical & Commodity Glass TOTAL PPG Coatings Coatings Specialty Chemicals Materials Solid Margin Recovery, Despite Only Partial Economic Recovery 29
Slide 30: PPG Earnings
PPG Earnings Adjusted Earnings Per Share * New Record $1.80 $1.66 $1.64 $1.59 $1.60 $1.37 $1.40 $1.22 $1.20 $1.15 $0.97 $1.00 $0.91 $0.86 $0.80 $0.70 $0.60 $0.41 $0.40 $0.19 $0.20 $0.00 Q1 Q2 Q3 Q4 2008 2009 2010 Volumes ~10% Below 2008; Record 2nd Half Performance; Cost Focus Remains * Adjusted EPS
Slide 31: Full Year 2010
Full Year 2010 Full Year 2010 Adjusted EPS* Cumulative Sales $$ Volume Decline vs. 2008 0% $6.00 $5.18 -5% -$2.2B $5.00 $4.59 -10% -8% +$1.0B -15% $4.00 -14% -20% $2.94 2008 2009 2010 $3.00 Cumulative Cost/Mfg. Improvement vs.’08 $2.00 $600 $500 $400 $1.00 $300 $200 $100 $0.00 $0 2008 2009 2010 2009
Slide 32: 2008 – 2010 Earnings Bridge
2008 – 2010 Earnings Bridge Earnings Before Interest & Taxes (excluding unusual items) * 1,600 503 -74 -7 1,462 1,500 1,440 -400 1,400 1,300 1,200 1,100 1,000 2008 Volume Cost/Mfg. Price net of Other 2010 Millions of USD Inflation 32 Continued Volume Recovery Remains a Significant Earnings Lever 32
Slide 33: PPG Sales Volume Trends (vs. ’08)
PPG Sales Volume Trends (vs. ’08) 2010 Regional Volume Trends 2010 Segment Sales Volumes (Y-O-Y vs. 2008) (Y-O-Y vs. 2008) Performance Coatings Latin America Industrial Coatings Asia/Pacific Arch. EMEA Optical Europe Commodity Chemicals U.S./Canada Glass -15% -10% -5% 0% 5% 10% 15% 20% -15% -10% -5%
Slide 34: Cash From Operations
Cash From Operations Cash From Operations Cash & Short-Term 1,750 SigmaKalon 2,000 Investments Acquisition 1,500 1,750 1,250 1,500 1,000 1,250 1,000 750 750 500 500 250 250 0 0 2007 2008 2009 2010 2007 2008 2009 2010 Cash From Operations Cash Pension Contributions Millions of USD Step-Change Improve
Slide 35: Cash & Deployment
Cash & Deployment 2010 Cash Past 10 Years (~$12B) (2000 – 2010) $1,400 16% $1,200 Total YTD Cash From 27% Operations (~$1,300) $1,000 $800 24% Share Repurchases (~$600) 33% $600 ~75% Organic Capital Spending $400 Acquisitions Dividends $200 Dividends ($360) Share Repurchases Cash Deployment Summary:
Slide 36: PPG Financial Hallmarks
PPG Financial Hallmarks Capital Spending as % of Sales Long-Term Debt Maturity Schedule 1,000 14% 13% USD Notes EUR Notes 12% 800 11/2010 Debt Issuance Targeted Early Debt Retirement 10% Last 5 Year Average = ~3.0% 600 8% 500 7% 400 250 6% 6% 400 4% 4% 3% 4% 250 4% 3% 3% 3% 2% 2% 2% 200 2% 0% 0 2011
Slide 37: Appendix
Appendix 37
Slide 38: Forward Looking Statement
Forward Looking Statement Statements contained herein relating to matters that are not historical facts are forward-looking statements reflecting PPG’s current view with respect to future events and financial performance. These matters within the meaning of section 27A of the Securities Act of 1933,
Slide 39: Adjusted EPS Reconciliation
Adjusted EPS Reconciliation 2010 2009 2008 First Quarter $$ EPS $$ EPS $$ EPS Net Loss/(Income) Attributable $30 $0.18 $(111) $(0.68) $100 $0.61 to PPG as Reported Business Restructuring - - 141 0.86 - - Acquisition-Related Costs - - - - 89 0.54 Change in U.S. Tax Law (U.S. 85 0.51 - - - - Patient P
Slide 40: Adjusted EPS Reconciliation
Adjusted EPS Reconciliation 2010 2009 2008 Second Quarter $$ EPS $$ EPS $$ EPS Net Income Attributable to $272 $1.63 $146 $0.89 $250 $1.51 PPG as Reported Auto Glass & Services - - - - 11 0.07 Depreciation catch-up Auto Glass & Services - - - - 12 0.07 Divestiture benefits costs Net Charge for Asbes
Slide 41: Adjusted EPS Reconciliation
Adjusted EPS Reconciliation 2010 2009 2008 Third Quarter $$ EPS $$ EPS $$ EPS Net Income Attributable to $262 $1.58 $159 $0.96 $117 $0.70 PPG as Reported Business Restructuring - - - - 110 0.67 Charge Gain on Divestiture of - - - - (3) (0.02) Automotive Glass and Services Business Net Charge for Asb
Slide 42: Adjusted EPS Reconciliation
Adjusted EPS Reconciliation 2010 2009 2008 Fourth Quarter $$ EPS $$ EPS $$ EPS Net Income Attributable to $205 $1.24 $142 $0.85 $71 $0.43 PPG as Reported Net Charge/(Credit) for 2 0.01 2 0.01 (3) (0.02) Asbestos Settlement Adjusted Net Income $207 $1.25 $144 $0.86 $68 $0.41 Amounts in Millions of US
Slide 43: Adjusted EPS Reconciliation
Adjusted EPS Reconciliation 2010 2009 2008 Full Year $$ EPS $$ EPS $$ EPS Net Loss/(Income) Attributable to PPG as $769 $4.63 $336 $2.03 $538 $3.25 Reported Net Charge for Asbestos Settlement 8 0.04 8 0.05 2 0.01 Change in U.S. Tax Law (U.S. Patient 85 0.51 - - - - Protection and Affordable Care Act
Slide 44: EBITDA Reconciliation
EBITDA Reconciliation PPG Architectural Coatings - EMEA: 2010 2009 2008 Sales $1,874 $1,952 $2,250 Earnings 113 128 141 Depreciation & Amortization 107 109 121 EBITDA 262 237 220 EBITDA % 11.8% 12.2% 11.7% 44 Amounts in Millions of USD, Except Percents
Slide 45: Adjusted Earnings Before Interest and Taxes Reconciliation
Adjusted Earnings Before Interest and Taxes Reconciliation 2010 2009 2008 Income Before Taxes $1,295 $617 $908 Interest Expense, net of Interest 155 166 227 Income Asbestos Settlement – Net 12 13 4 Business Restructuring 186 163 Acquisition-related costs 117 Gain on Automotive Glass and -15 Services