Corporations heavy with cash eye acquisitions as a way to use it
By Thomas Olson
Published: Friday, Dec. 7, 2012, 12:01 a.m.
Cash is building to record levels in the coffers of corporations in Pittsburgh and nationwide, according to reports on Thursday.
Some local companies plan to use it for acquisitions in 2013, said executives in presentations to investors at the InvestPennsylvania Equity Conference in the David L. Lawrence Convention Center, Downtown.
PPG Industries Inc., for instance, had $2.01 billion as of Sept. 30, or more than double year-ago levels. The company is building to a record level of cash of about $3 billion by January, said Vincent Morales, vice president of investor relations.
The company's “first priority” for spending some of it will be acquisitions, Morales said. One possible target could be a coatings business, partly because they tend to be affordable to operate, he said.
A strategy dominated by its coatings business has produced excellent results for Downtown-based PPG. Coatings sales increased to 73 percent of the company's $14.9 billion total in 2011, up from 54 percent in 2001. Since 2008, PPG has acquired coatings companies with operations in Europe, Asia and South America. The largest was the $3.1 billion purchase of SigmaKalon Group, a Dutch coatings producer.
PPG coatings are used on appliances, agricultural and construction equipment, consumer electronics, automotive parts, wood flooring, residential and commercial construction and many other finished products.
U.S. corporations, in fact, built up cash on hand of more than $1.73 trillion as of Sept. 30, the Federal Reserve said on Thursday. That's 2.5 percent more than a year earlier.
In the last four years, cash levels at corporations have increased more than 20 percent, or $304 billion, according to the Fed.
II-VI Inc., the optics and advanced materials company based in Saxonburg, generated a record $88 million in cash during the fiscal year ended June 30, said CEO Francis Kramer.
The company is likely to deploy some of that cash for acquisitions in the coming year, which would fit II-VI's style lately, Kramer said. The company completed two acquisitions for cash since Oct. 30: An advanced ceramic materials company for about $71 million, and a telecommunications/life sciences product company for $27 million.
L.B. Foster Co., the rail, construction and tubular industry supplier, is in a “strong” cash position, said CEO Robert Bauer. Based in Green Tree, it had about $101 million in cash as of Sept. 30.
The company has no immediate plans for acquisitions but fully expects to acquire businesses as part of its five-year plan to boost sales, said Bauer.
More companies might take to the acquisition trail were it not for the current “uncertainty period,” said Yahoo! finance senior columnist Michael Santoli, keynote speaker for the event, which drew more than 100 people.
Perhaps the main uncertainty vexing companies is the approaching “fiscal cliff,” in which automatic tax hikes and deep government spending cuts begin Jan. 1 if Congress does not change course.
Santoli said “too much brinksmanship” by Democrats and Republicans over taxes is keeping equity markets and companies “on edge.”
Thomas Olson is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or firstname.lastname@example.org.
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