) has forged a global technology license deal with China-based
Henan Billions Chemicals Co., Ltd., which will provide the latter
the rights to use the company's technology for making
chloride-grade titanium dioxide (TiO2), a key raw material used
in the paint and coatings industry. The terms of the deal were
DU PONT (EI) DE (DD): Free Stock Analysis
PPG INDS INC (PPG): Free Stock Analysis
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Henan Billions, which has annual sales of roughly $300 million,
makes and distributes TiO2, zirconium and aluminum sulfate. It
currently supplies sulfate-grade TiO2 to PPG Industries.
The agreement concludes the license of PPG Industries'
chloride-based technologies as announced by both the companies in
June 2012. The deal is expected to boost the supply of
chloride-grade TiO2 globally and offer a commercial opportunity
for PPG Industries' technologies. Earlier, the company
manufactured TiO2 using the chloride process at its chemicals
facility in West Virginia.
PPG Industries has a diversified business, both in terms of
products offered and geographical presence. It has a leading
position in several paints and coatings end markets. The company
is seeing strength in the North American automotive OEM market
and looks to grow its businesses strategically along with
PPG Industries is also taking steps to grow its business
inorganically by making a number of acquisitions. Moreover, it is
pursuing restructuring of its European operation, which is
expected to fetch meaningful cost savings this year and beyond.
However, PPG Industries is expected to continue to face
macroeconomic challenges going ahead. The company expects
continued weakness in Europe, inconsistent performance in the
overseas markets and softness across most of its end markets in
the fourth quarter.
Moreover, raw material costs have been a matter of concern. While
prices of key raw materials including TiO2 have stabilized of
late, they are still higher on a year-over-year basis.
In addition, PPG Industries' significant presence in the U.S.
construction, European architectural and industrial coating
markets exposes it to substantial headwinds. Construction markets
in the U.S. are expected to remain sluggish in the near future.
PPG Industries, which competes with the DuPont Performance
Coatings segment of
EI DuPont de Nemours & Co.
), retains a short-term Zacks #3 Rank (Hold). We currently have a
long-term Neutral recommendation on the stock.