PPG Industries Inc. PPG announced that it approved substantial restructuring actions to lower its global cost structure. The plan includes a voluntary separation program that was offered in the United States and Canada.
The company cited weakened global economic conditions due to the coronavirus pandemic and related recovery pace in a few end-use markets coupled with other opportunities to optimize supply-chain and functional costs.
Upon completion, PPG Industries anticipates the planned actions to offer $160-$170 million in annual pre-tax cost savings, with roughly $25-$35 million of savings forecasted in 2020. Moreover, the remainder of the annual cost savings is expected to be realized by the end of 2021.
The company stated that it is taking prudent steps to adjust its cost base, given the broad economic impact associated with the coronavirus pandemic and the recovery timeline in a few end-use markets. Notably, the measures will allow it to come out of the crisis with reduced structural costs. On account of the actions along with sustained discretionary cost controls, the company anticipates strong operating margin leverage as economic activity continues to improve.
PPG Industries will also record pre-tax restructuring charges of $160-$180 million (before tax) in the second quarter of 2020. The company is also expected to incur an additional $10 million in restructuring costs over future quarters. The overall cash outlay is around $180 million to complete these actions.
PPG Industries also noted that its sales volume in April was down roughly 35% year over year. Moreover, its sales volume in May was down less than 30% year over year. The company’s sales volume results in both months were slightly better than expected. The results include a year-over-year rise in sales volume in China, and sequential monthly improvement of net sales in the United States and Europe.
Shares of PPG Industries have declined 0.9% in the past year compared with a 8.2% decline of the industry.
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On its first-quarter earnings call, the company stated that it expects customer demand levels to remain significantly impacted, with declines continuing in the automotive original equipment manufacturer, automotive refinish and aerospace coatings businesses.
PPG Industries also withdrew all of its earlier-communicated sales and earnings guidance for 2020 due to increased level of uncertainties related to the global economic demand.
PPG Industries, Inc. Price and Consensus
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked companies in the basic materials space are Agnico Eagle Mines Limited AEM, Franco-Nevada Corporation FNV and Barrick Gold Corporation GOLD.
Agnico Eagle currently sports a Zacks Rank #1 (Strong Buy) and has a projected earnings growth rate of 74.2% for 2020. The company’s shares have gained 25.9% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Franco-Nevada has an expected earnings growth rate of 19.2% for 2020. The company’s shares have surged 67.3% in the past year. It currently has a Zacks Rank #2 (Buy).
Barrick has a projected earnings growth rate of 64.7% for the current year. The company’s shares have rallied around 75% in a year. It currently has a Zacks Rank #2.
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