PPG Industries 1Q profit up from a year ago
By John D. Oravecz
Published: Thursday, April 18, 2013, 9:15 a.m.
Change at PPG Industries Inc. will continue as it sharpens a focus on paint, optical and specialty products more than ever, CEO Charles E. Bunch said on Thursday.
The company will continue to look for “prudent” acquisitions this year “to accelerate profitable growth” in those businesses, he said, as former mainstay glass and chemical units move into the past.
“We are truly a different company today than a year ago,” Bunch told shareholders at the Pittsburgh company's annual shareholders meeting.
Recent acquisitions and divestitures were another “important step in our transformation,” Bunch said at the David L. Lawrence Convention Center. Those deals include:
• The $2.2 billion sale of PPG's commodity chemicals business, which produces chlorine, caustic soda and other chemicals, to Georgia Gulf Corp., with the combined company renamed Axiall Corp.
• The $1.05 billion acquisition of AkzoNobel N.V.'s North American architectural coatings business. With brand names like Glidden paints and Liquid Nails, it is the main supplier of paints to Wal-Mart. The purchase on April 1 was the second-largest in PPG's history.
• And last week's agreement to buy waterborne and chrome-free coating technology from Deft Inc. of Irvine, Calif., for an undisclosed price, a deal that will strengthen PPG's aerospace coatings business.
Paint, or coatings in PPG terms, now accounts for 85 percent of the company's total sales, which were $15.2 billion in 2012, up from 54 percent in 2001. Optical and specialty products account for 8 percent of sales. And glass, upon which the former Pittsburgh Plate Glass was founded in 1883, how accounts for 7 percent, down from 27 percent a decade ago. Chemicals, which a year ago accounted for 12 percent, are gone with the Axiall deal.
The company has changed “from a diversified industrial supplier to the leading coatings and specialty products company,” Bunch said.
Meanwhile, PPG reported first-quarter profit from continuing operations of $219 million, or $1.48 a share, on sales of $3.3 billion. Analysts surveyed by Thomson Reuters expected per-share earnings of $1.54 on sales of $3.44 billion.
A year ago, PPG reported net income of $13 million, or 8 cents a share, which was affected by restructuring and environmental expenses. Sales for the year-ago quarter were a reported $3.8 billion.
“During the quarter, we delivered strong performance in our coatings portfolio, as we grew aggregate coatings segment earnings by 13 percent versus last year's record level,” said Bunch.
The board of directors approved a 2 cents a share increase in PPG's quarterly dividend to 61 cents, payable June 12.
A long-standing rule that requires a super majority to make changes that govern the board likely will remain in place.
A proposal from shareholder John Chevedden of Redondo Beach, Calif., that PPG's board consider steps to change super majority — 80 percent of the outstanding common stock — to a simple majority, was approved by shareholders.
But there's a wrinkle — it will take a super majority vote to change PPG's super majority rule — if the company's board decides to place the proposal on next year's annual meeting agenda for a formal vote.
The next step, according to PPG assistant corporate secretary Greg E. Gordon, will be for the board to decide if the change is in the best interests of shareholders. Because the proposal won 78 percent of votes cast on Thursday, they “probably will” put it on next year's agenda, he said.
But getting 80 percent to pass it will be hard, Gordon said. He pointed to a New York Stock Exchange rule that says stock brokers cannot vote on “non-routine matters.” Brokers hold shares for their clients and vote when shareholders do not.
Such a non-routine matter — to change PPG's articles of incorporation to elect directors annually — was defeated on Thursday because it did not receive a super majority. Shareholders cast 68 percent of PPG's shares in favor of the change, but it needed 80 percent. Brokers' non-vote was the difference, Gordon said. Currently, PPG directors are elected to three-year terms.
John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or email@example.com.
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