PITTSBURGH — PPG Industries Chairman and Chief Executive Officer Charles Bunch discussed the state of the global economy with members of the media in New York yesterday. PPG recently reported record revenue of $15.8 billion for 2008.
Bunch said that deterioration in industrial end-use markets has spread from the United States to other regions, such as Europe and Asia/Pacific. Regarding the Asia/Pacific region, Bunch said that while the company has seen some slowdown in the economy, it has seen some positive signs in the automotive market in China during January.
Bunch also discussed PPG’s January 2008 acquisition of former Netherlands-based coatings manufacturer SigmaKalon. He noted that SigmaKalon had record performance in 2008 and said the acquisition has “exceeded our expectations.” The SigmaKalon acquisition greatly expanded and strengthened PPG’s presence in Western Europe and certain emerging regions, and it has positioned PPG for further improvements in productivity, according to Bunch.
During the second half of last year, PPG experienced dramatic and continued weakness in demand from certain end-markets, particularly automotive and construction. As such, PPG announced in September 2008 a restructuring initiative aimed at saving approximately $100 million on an annual basis by closing certain plants and idling assets in North America and Western Europe.
Citing continued weakness in the North American housing and automotive markets, Bunch said the first two quarters of 2009 are likely to continue to be marked by difficult market conditions. In recent weeks, the company indicated it would monitor business conditions to determine if further restructuring might be necessary. When asked if potential job losses at PPG as a result of 2008 and potential 2009 restructuring initiatives could reach 10 percent of the total work force, Bunch said that estimate “would be at the high end.” While no restructuring plans have been announced this year, Bunch indicated that PPG will continue to evaluate various options and measures for reducing costs in 2009 to address the declining economic conditions in North America and Western Europe.
The company released fourth quarter and full-year earnings Jan. 16, reporting record sales for the fourth quarter of $3.2 billion and net income of $71 million, or 43 cents per share. Fourth quarter 2007 sales were $3.1 billion and net income was $200 million, or $1.21 per share.
Commenting on the company’s 2008 performance, Bunch said, “We delivered solid earnings despite rapidly rising energy and material costs and substantial demand declines, and our cash from operations was approximately $1.4 billion, which surpassed the prior year by nearly 40 percent.
“We ended the year with $1 billion of cash on hand, which was up from approximately $500 million at the end of 2007. This gives us tremendous financial flexibility, which is critical in today’s business climate. Our performance this past year under intensely difficult market conditions continues to demonstrate our strengthened business portfolio and the success of our strategic direction,” he said.