Ppg Industries, Inc. · NYSE:PPG
Ppg Industries — Investor Presentation (March 2017)
67 slides from Ppg Industries's investor presentation, March 2017
Slide 1: PPG Investor Overview
PPG Investor Overview
Slide 2: Notes
Notes 2
Slide 3: Forward looking statement
Forward looking statement The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. This presentation contains forward-looking statements that reflect the Company’s current views with respect to future events and f
Slide 4: We are a global leader in paints and coatings
We are a global leader in paints and coatings 4
Slide 5: PPG: Our employees protect and beautify the world
PPG: Our employees protect and beautify the world A global maker of A leader in all Headquartered Founded in 1883 Fortune 500: paints, coatings, our markets: in Pittsburgh, Ranked 182 and materials, with construction, Pennsylvania, with full-year net sales consumer products, operations in more of $1
Slide 6: 2016 key achievements
2016 key achievements Strategic Portfolio Actions • Divested flat glass, European fiber glass, & 2 Asian fiber glass joint ventures • 2 bolt-on acquisitions totaling $350 million Strong Financial & Operational Performance • Adjusted EPS up 7% vs. prior year despite unfavorable foreign currency trans
Slide 7: Significant portfolio transformation
Significant portfolio transformation • Separation of commodity chemicals business via Reverse Morris Trust ($1.7 billion annual sales) 2013 • Acquisition of North America architectural coatings business from AkzoNobel ($1.5 billion annual sales) • Sale of PPG’s majority interest in Transitions Optic
Slide 8: Our portfolio transformation
Our portfolio transformation 2005 – $10.2B Net Sales* 2016 – $14.8B 3% 22% 55% 23% Paint and Coatings 97% Chemicals Glass Paints and Coatings = $5.6B Paints and Coatings = $14.3B Significant transactions accelerate portfolio optimization Acquisitions: SigmaKalon (2008), AkzoNobel N.A. Architectural
Slide 9: Notable PPG acquisitions
Notable PPG acquisitions 1997 - 2000 2005 - 2008 2010 - Present Acquired From Business Acquired From Business Acquired From Business Akzo Nobel Auto OEM Int’l Polarizer Optical Bairun (Asia) Packaging Man-Gill Industrial Crown Coatings Industrial Dyrup Architectural BASF Packaging Iowa Paint Archite
Slide 10: Acquisitions contribute to sales growth
Acquisitions contribute to sales growth Acquisition Sales Growth $4,000 Over Prior Year Notable acquisitions: 2008 – SigmaKalon $3,500 2013 – AkzoNobel NA 2014/5 – Comex (partial years) $3,000 $2,500 $2,000 +6% average sales growth from acquisitions $1,500 $1,000 $500 $0 (USD MM) 2007 2008 2009 2010
Slide 11: Strengthened business portfolio
Strengthened business portfolio PPG Segment Net Sales* Coatings Segments Earnings Growth (Indexed to 2005)** 100% 97% 3.0 90% CAGR = 10% 80% 2.8 70% 2.6 60% 2.4 50% 55% 2.2 40% Index 2.0 30% 20% 1.8 10% 1.6 0% 1.4 2005 2007 2010 2016 ~$10.2B ~$14.8B 1.2 Coatings Optical & Specialty Commodity Chemica
Slide 12: PPG’s transformation
PPG’s transformation Net Sales* 2005 – $10.2B 2016 - $14.8B 2% 6% 10% U.S. & Canada 16% 20% EMEA 45% Asia/Pacific Latin America 72% 29% Emerging Regions = 8% Emerging Regions = 26% Sales in USD, EMEA includes Europe, Middle East, and Africa Improved geographic profile with growing emerging regions *
Slide 13: Global paint and coatings industry (~$130B)
Global paint and coatings industry (~$130B) Recent Notable Coatings Competitive Landscape Transaction/Consolidation Activity: PPG – SigmaKalon (2008) PPG – AkzoNobel N.A. Architectural Coatings (2013) PPG – Comex Mexico (2014) AkzoNobel – ICI (2008), BASF Industrial Other Europe (2016) Axalta – Form
Slide 14: Coatings geographic mix
Coatings geographic mix Coatings Industry PPG Coatings Geographic Sales Mix Geographic Net Sales Mix Latin Latin America America 8% U.S. & 10% Canada 17% Asia/Pacific U.S & 17% Canada Asia Pacific 44% 43% EMEA 32% EMEA 29% PPG - Opportunities to expand in Asia and globally Source: Kusumgar, Nerlfi,
Slide 15: PPG end-use markets
PPG end-use markets Approximate % of Total PPG Net Sales Aerospace and Marine (New & Aftermarket), 9% General Industrial, 15% Construction - New & Maintenance, 43% Automotive OEM, Parts, & Aftermarket, 33% Diverse end-use markets globally 15
Slide 16: PPG coatings overview
PPG coatings overview Why coatings? Aggregate Coatings Segment Earnings ($MM) +140% 2,500 • Stable earnings/cash 2,000 • Growth potential 1,500 • Low capital intensity 1,000 • Technology & service 500 0 • Consolidating industry 2007 '08 '09 '10 '11 '12 '13 '14 15 2016 Good Growth; Rapid Recovery Fro
Slide 17: PPG global market positions
PPG global market positions Position by Coatings Vertical Lower <---- Level of Consolidation ----> Higher General Protective Refinish / Global Arch Auto OEM Packaging Aerospace Industrial & Marine Collision Position ~$56B ~$10B ~$3B ~$1B ~$36B ~$16B ~$8B PPG #1 ---------- Participation in all end-us
Slide 18: Coatings end-use markets
Coatings end-use markets Industry End-Market Demand PPG Coatings End-Use Net Sales Mix (~$130B Sales Value) Aerospace 1% Packaging Architectural 2% Coatings Protective & Marine 12% Refinish ~40% 6% Architectural 43% Auto OEM ~60% 8% General Industrial Special-Purpose Coatings: 28% • Aerospace • Gene
Slide 19: Coatings Peers EBITDA %
Coatings Peers EBITDA % 2016 Full Year EBITDA as % of Net Sales 22.0% 20.5% 20.0% 19.4% 17.9% 18.0% 16.4% 16.0% 15.4% 15.2% 14.7% 14.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% PPG remains a margin leader across coatings sector end-use markets EBITDA from continuing operations as percent of sales
Slide 20: PPG business segments
PPG business segments Performance Coatings 2016 PPG Net Sales Mix • Automotive Refinish • Aerospace 3% • Protective & Marine • Architectural Coatings Americas & Asia • Architectural Coatings EMEA (Europe, Middle-East and Africa) 39% Industrial Coatings • Automotive OEM 58% • Industrial Coatings • Pa
Slide 21: Performance coatings segment
Performance coatings segment Strategic Business Units: Segment Traits: • Automotive Refinish • Distribution focus • Aerospace • Solid operating margins • Architectural Americas & Asia Pacific • Architectural EMEA • Consistent cash generation • Protective & Marine • Stable industries EMEA includes Eu
Slide 22: Automotive refinish coatings
Automotive refinish coatings Net Sales in USD (incl. acquisition and currency impacts) Key Industry Trends CAGR = 2% • Color complexity • Emerging regions growth • Technology shift to waterbase • Value added programs and training 2007 '08 '09 '10 '11 '12 '13 '14 '15 2016 PPG Refinish Latin America P
Slide 23: Aerospace
Aerospace Net Sales in USD Aerospace Products (incl. acquisition and currency impacts) • Coatings CAGR = 5% • Sealants • Transparencies • Chemical Management • Packaging Recent Acquisitions 2007 '08 '09 '10 '11 '12 '13 '14 '15 2016 • Deft Coatings • Waterborne Aerospace Net Sales Mix • Military mark
Slide 24: Protective & Marine Coatings (PMC)
Protective & Marine Coatings (PMC) Net Sales in USD PPG PMC Net Sales 2016 (incl. acquisition and currency impacts) Latin America Asia U.S. & Canada EMEA 2007 '08 '09 '10 '11 '12 '13 '14 '15 2016 EMEA includes Europe, Middle East, and Africa PMC Industry Segments ($B) PPG Net Sales Mix 15.0 100% OEM
Slide 25: Architectural Coatings (Americas & Asia)
Architectural Coatings (Americas & Asia) Net Sales in USD PPG U.S. & Canada (incl. acquisition and currency impacts) Architectural Store Count 1,000 900 CAGR = 11% 800 700 600 500 400 300 200 100 1999 2004 2006 2009 2012 Current 2007 2010 2013 2016 PPG U.S. Architectural Net Sales Mixes PPG Architec
Slide 26: PPG architectural store network has room to grow
PPG architectural store network has room to grow Acquired 2013 PPG store expansion opportunities without cannibalization 26
Slide 27: Architectural Coatings Latin America
Architectural Coatings Latin America Comex Overview • Founded in 1952 • ~4,200 independently owned/operated concessionaire locations in Mexico • Opening 1 new store approximately every other day • Targeted growth rate 2 times Mexican GDP growth rate • Over 300 points-of-sale across Central America (
Slide 28: Architectural Coatings EMEA
Architectural Coatings EMEA Net Sales in Euro End-Use Market Demand (incl. acquisitions) New Construction, 20% More Stability Maintenance, 80% in End- Market 2008 2009 2010 2011 2012 2013 2014 2015 2016 EMEA includes Europe, Middle East, and Africa Source: Company Estimates Strong Market Positions C
Slide 29: Industrial Coatings Segment
Industrial Coatings Segment Strategic Businesses Segment Net Sales Mix • Automotive OEM • Industrial Asia LA • Packaging EMEA • Specialty Coatings & Materials U.S. & Canada • Coatings Services EMEA includes Europe, Middle East, and Africa Net Sales (US$B) Segment Operating Margins (incl. acquisition
Slide 30: Automotive OEM Coatings
Automotive OEM Coatings Net Sales in USD PPG Automotive OEM Coatings (incl. acquisition and currency impacts) CAGR = 4% LA U.S. & Canada Asia EMEA 2007 '08 '09 '10 '11 '12 '13 '14 '15 2016 EMEA includes Europe, Middle East, and Africa Global Auto OEM Production PPG Auto OEM Coatings 90 Customer Mix
Slide 31: Industrial Coatings SBU
Industrial Coatings SBU Net Sales in USD Industrial Coatings SBU Net Sales Mix (incl. acquisition and currency impacts) CAGR = 5% LA Asia U.S. & Canada EMEA 2007 '08 '09 '10 '11 '12 '13 '14 '15 2016 EMEA includes Europe, Middle East, and Africa Fragmented but PPG Asian Industrial Consolidating Coati
Slide 32: Packaging Coatings
Packaging Coatings Net Sales in USD BPA-NI technologies (incl. acquisition and currency impacts) CAGR = 2% '07 '08 '09 '10 '11 '12 '13 '14 '15 2016 Industry Container Use Key Trends • Beverage can industry remains strong with growth of +3% globally Other Beverage Other Interior • Conversion to BPA-N
Slide 33: Specialty Coatings & Materials
Specialty Coatings & Materials Net Sales in USD (incl. acquisition and currency impacts) CAGR = 5% Silica TESLIN® substrate 2007 '08 '09 '10 '11 '12 '13 '14 '15 2016 Key PPG Products / End-Use Markets • Silica –Tires, battery separators, coatings, various industrial uses Optical Monomers and Dyes •
Slide 34: Innovation Drives Success
Innovation Drives Success R & D Expenditures ($MM) Automotive OEM Compact Process 2012 436 • “Wet-on-wet” auto coating process 471 • Customer benefits: 2013 499 • Lower capital costs (greenfield sites) 2014 • Less energy required (greenfield and 2015 494 brown sites) 2016 487 • PPG is the global lea
Slide 35: PPG adjusted earnings per diluted share trend
PPG adjusted earnings per diluted share trend $6.00 $5.82 Key Drivers $5.43 • Global business $5.50 expansion $5.00 $4.75 • Innovation-led organic growth $4.50 • Ongoing, aggressive cost management $4.00 $3.78 +19% CAGR • Ongoing and disciplined $3.50 cash deployment $3.00 $2.88 • Acquisitions & syn
Slide 36: Coatings cost comparison
Coatings cost comparison Raw material basket and manufacturing/distribution costs are different Average Architectural Coatings Average Industrial Coatings Industry estimates – figures vary greatly by end-use and application Distribution - final Distribution - final Packaging Distribution - intermedi
Slide 37: Coatings Peers EBITDA %
Coatings Peers EBITDA % Full Year EBITDA as % of Net Sales 23.0% 20.5% 21.0% 19.4% 19.0% 19.0% 17.9% 18.4% 17.0% 17.2% 16.3% 16.4% 17.0% 16.2% 15.4% 16.0% 15.0% 15.4% 15.0% 14.7% 15.0% 13.9% 14.3%14.5% 14.0% 13.8% 13.6% 12.9% 12.7% 12.4% 13.0% 11.9% 12.2% 12.4% 11.0% 9.0% 7.0% 5.0% 3.0% 1.0% N/A -1.
Slide 38: PPG Europe, Middle East and Africa
PPG Europe, Middle East and Africa Broad regional footprint to supply future demand growth 38
Slide 39: Earnings
Total PPG Europe, Middle East and Africa PPG Net Sales Mix (MM €) Earnings (MM €) 4,500 600 15% 14% 4,000 500 13% 3,500 12% 3,000 400 EBIT Margin on Sales 11% Earnings Sales 2,500 10% 300 2,000 9% 8% 1,500 200 7% 1,000 100 6% 500 5% 0 0 4% 2009 '10 '11 '12 '13 '14 '15 2016 2009 '10 '11 '12 '13 '14 '
Slide 40: PPG Asia Pacific Manufacturing Footprint
PPG Asia Pacific Manufacturing Footprint Korea Cheonan Busan Ulsan** China India Tianjin Sriperumbudur** X Japan X X Nagoya Suzhou Moraiya** Foshan X X X Wuhu X Zhangjiagang Taiwan Songjiang Alltech Jiading Taoyuan Kunshan Thailand Chia Yi** Wuhan Bangplee Nansha Philipines Vietnam Malaysia Petaling
Slide 41: PPG Asia Pacific financials
PPG Asia Pacific financials Consolidated Net Sales* 5% CAGR $3,000 2,408 2,431 $2,500 $2,000 1,679 $1,500 $1,000 $500 $0 $MM - USD 2008 2012 2016 Segment Income* 12% CAGR $500 387 $400 280 $300 $200 151 $100 $0 $MM - USD 2008 2012 2016 Significant profitable growth over time 41 * Recast for disconti
Slide 42: Strong and growing Asian presence (excl. Japan)
Strong and growing Asian presence (excl. Japan) Industry Coatings Demand for Asia PPG Asia Net Sales Mix (2016) Industrial China Automotive OEM 5% General Industrial 7% India Performance Packaging 12% Industrial Performance Southeast Auto Refinish Asia Protective & Marine 12% Korea Aerospace 64% Arc
Slide 43: PPG cash trends
PPG cash trends Cash From Operations* Cash & Short Term $2,000 Investments $3,000 $2,500 $2,393 $1,750 Adjusted + $1,978 $2,000 $1,863 $1,745 $1,482 $1,455 $1,500 $1,500 $1,183 $1,000 $1,250 $500 $1,000 $0 2010 '11 '12 '13 '14 '15 2016 YE'10 '11 '12 '13 '14 '15 YE'16 Millions USD Robust cash generat
Slide 44: Balanced cash deployment
Balanced cash deployment Approximate 2016 Cash Uses Past 10 Years (~$20B) (2007 – 2016) $400 Capital Spending 20% 26% Acquisitions $1,050 $350 Dividends Share 17% Repurchases 37% $415 Cash Use Summary: Grow Business ~60% Return to Shareholders ~40% Millions of USD – As reported, not adjusted for bus
Slide 45: PPG return on capital (adjusted)
PPG return on capital (adjusted)* 20.0% 10,000 18.3% 18.0% 17.2% 17.2% 16.7% 9,000 16.6% 16.1% 16.0% 16.0% 8,000 14.0% 14.0% 7,000 Return on Capital Capital ($MM) 12.0% 11.3% 6,000 10.0% 5,000 8.5% 8.0% 4,000 6.0% 3,000 4.0% 2,000 2.0% 1,000 0.0% 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 C
Slide 46: PPG financial hallmarks
PPG financial hallmarks Capital Spending as % of Sales Long-Term Debt Maturity (As originally reported, not adjusted for business divestitures) 700 Schedule 14% 13% 600 12% 500 10% Last 5 years Average = 8% 400 7% ~3.0% USD Notes 300 EUR Notes 6% 4% 4% 3% 3% 3% 3% 3% 200 2% 2% 2% 100 0% 0 1980 || 19
Slide 47: PPG shared services centers
PPG shared services centers Brno, Czech Republic Ohio, USA Tianjin, China Mexico City, Mexico Kuala Lumpur, Malaysia 47
Slide 48: Additional Materials and Appendix
www.ppg.com Additional Materials and Appendix
Slide 49: 2016 EBITDA Reconciliation
2016 EBITDA Reconciliation EBITDA as % of Sales (excluding specials): PPG Total Akzo Axalta Total Total Total Total Coatings Sherwin Paints & Coatings PPG Valspar RPM Akzo Segments Williams Coatings Systems Currency USD USD USD USD USD Euro Euro USD Sales 14,751 14,270 11,856 4,191 4,814 14,197 9,43
Slide 50: 2015 EBITDA Reconciliation
2015 EBITDA Reconciliation EBITDA as % of Sales (excluding specials): PPG Total Akzo Axalta Total Total Total Total Coatings Sherwin Paints & Coatings PPG Valspar RPM Akzo Segments Williams Coatings Systems Currency USD USD USD USD USD Euro Euro USD Sales 14,766 14,241 11,339 4,392 4,595 14,859 9,89
Slide 51: 2014 EBITDA Reconciliation
2014 EBITDA Reconciliation EBITDA as % of Sales (excluding specials): PPG Total Akzo Axalta Total Total Total Total Coatings Sherwin Paints & Coatings PPG Valspar RPM Akzo Segments Williams Coatings Systems Currency USD USD USD USD USD Euro Euro USD Sales 15,360 14,250 11,130 4,522 4,376 14,296 9,42
Slide 52: 2013 EBITDA Reconciliation
2013 EBITDA Reconciliation EBITDA as % of Sales (excluding specials): PPG Total Total Total Total Total Akzo Paints Coatings Sherwin PPG Valspar RPM Akzo & Coatings Segments Williams Currency USD USD USD USD USD Euro Euro Sales 14,265 13,198 10,186 4,104 4,079 14,590 9,663 Segment 950 1,867 753 289
Slide 53: 2012 EBITDA Reconciliation
2012 EBITDA Reconciliation EBITDA as % of Sales (excluding specials): PPG Total Total Total Total Total Akzo Paints Coatings Sherwin PPG Valspar RPM Akzo & Coatings Segments Williams Currency USD USD USD USD USD Euro Euro Sales 12,686 11,654 9,534 4,021 3,777 15,390 9,881 Segment 663 1,567 631 292 2
Slide 54: Adjusted EPS Reconciliation
Adjusted EPS Reconciliation 1st Quarter Reporting Period Continuing Operations Discontinued Operations Total PPG Net Income EPS Net Income EPS Net Income EPS First Quarter 2016 Net Income Attributable to PPG as Reported $ 337 $ 1.25 $ 10 $ 0.04 $ 347 $ 1.29 Transaction-related costs 1 0.01 -- -- 1 0
Slide 55: Adjusted EPS Reconciliation
Adjusted EPS Reconciliation 2nd Quarter Reporting Period Continuing Operations Discontinued Operations Total PPG Net Income EPS Net Income EPS Net Income EPS Second Quarter 2016 Net Income Attributable to PPG as Reported $ 351 $ 1.30 $ 19 $ 0.07 $ 370 $ 1.37 Transaction-related costs 5 0.02 -- -- 5
Slide 56: Adjusted EPS Reconciliation
Adjusted EPS Reconciliation 3rd Quarter Reporting Period Continuing Operations Discontinued Operations Total PPG Net Income EPS Net Income EPS Net Income EPS Third Quarter 2016 Net (Loss)/Income Attributable to PPG as Reported $ (201) $ (0.75) $ 17 $ 0.06 $ (184) $ (0.69) Pension settlement charges
Slide 57: Adjusted EPS Reconciliation
Adjusted EPS Reconciliation 4th Quarter Reporting Period Continued Operations Discontinued Operations Total PPG Net Income EPS Net Income EPS Net Income EPS Fourth Quarter 2016 Net Income Attributable to PPG as Reported $ 77 $ 0.29 $ 265 $ 1.01 $ 342 $ 1.30 Business restructuring charge 146 0.55 - -
Slide 58: PPG Adjusted Earnings Per Share Trend Reconciliation
PPG Adjusted Earnings Per Share Trend Reconciliation Y-O-Y Change in Adjusted EPS from Continuing Adjusted EPS from Continuing Operations Operations Period 2012 2013 2014 2015 2016 2013 vs. 2012 2014 vs. 2013 2015 vs. 2014 2016 vs. 2015 1Q $ 0.64 $ 0.69 $ 1.00 $ 1.13 $ 1.27 $ 0.05 $ 0.31 $ 0.13 $ 0.
Slide 59: Adjusted Net Earnings
Adjusted Net Earnings FULL YEAR 2016 2015 2014 2013 2012 2011 Net Earnings as Reported $564 $1,405 $1,133 $1,034 $941 $1,095 Adjustments: Debt refinancing charge - - 200 - - - Business restructuring charges 146 106 - 73 163 - Equity affiliate debt refinancing charge - 7 - - - - Transaction-related c
Slide 60: Adjusted Net Earnings
Adjusted Net Earnings FULL YEAR 2010 2009 2008 2007 2006 2005 Net Earnings as Reported $769 $336 $538 $834 $711 $596 Adjustments: Business restructuring charge - 141 110 - 23 - Pension settlement charge 85 - - - - - Divestiture-related costs - - 9 30 - - Acquisition-related costs - - 100 4 - - Envir
Slide 61: Adjusted Return on Capital
Adjusted Return on Capital FULL YEAR 2016 2015 2014 2013 2012 Adjusted Net Earnings $1,548 $1,555 $1,364 $1,202 $1,230 Net Interest Expense (after-tax) 94 95 143 149 157 Adjusted Net Earnings + Net Interest $1,642 $1,650 $1,507 $1,351 $1,387 Expense Capital (Average Debt & Average Equity) $9,334 $9,
Slide 62: Adjusted Return on Capital
Adjusted Return on Capital FULL YEAR 2011 2010 2009 2008 2007 Adjusted Net Earnings $1,095 $854 $477 $757 $868 Net Interest Expense (after-tax) 158 140 135 175 66 Adjusted Net Earnings + Net Interest $1,253 $994 $612 $932 $934 Expense Capital (Average Debt & Average Equity) $7,526 $6,685 $7,088 $8,0
Slide 63: 2016 Quarterly Financial Results by Reportable Segment
2016 Quarterly Financial Results by Reportable Segment PPG INDUSTRIES AND CONSOLIDATED SUBSIDIARIES (Continuing Operations) BUSINESS SEGMENT INFORMATION (unaudited) Q1 Q2 Q3 Q4 Full Year 2016 2016 2016 2016 2016 Net sales Performance Coatings $ 2,039 $ 2,338 $ 2,223 $ 1,980 $ 8,580 Industrial Coatin
Slide 64: www.ppg.com
www.ppg.com Thank you for your interest in PPG Industries, Inc. Contact Information: Investors: Scott Minder (412) 434-3466 64
Slide 65: We protect and beautify the world
PPc We protect and beautify the world”
Slide 66: Notes
Notes 66
Slide 67: Notes
Notes 67