PPG Industries To Focus More On Core Businesses


Shutterstock photo

Part of success is playing to strengths.

For companies, that can mean selling off units that aren't part of the core business.

PPG Industries ( PPG ), primarily a paints and coatings maker, had been trying to unload its chlorine and caustic soda business for years. Recently, PPG found a buyer.

Georgia Gulf ( GGC ) will acquire the business in a complicated $2.1 billion deal. The commodity chemicals business -- about 11% of PPG's total sales -- will be spun off and then merged with Georgia Gulf. PPG shareholders will get 50.5% of the new company, and Georgia Gulf shareholders will get 49.5%.

Most analysts see this deal as a win-win. PPG is free to focus more on its core business, and Georgia Gulf's core business is chemicals.

PPG's products also include Transition eyeglasses, a big part of PPG's Optical and Specialty Materials segment. The segment accounts for about 9% of total revenue.

PPG Industries has paid dividends since 1899. In June, the company nudged the quarterly payout from 57 cents a share to 59 cents, payable to shareholders of record Aug. 10.

While the company has raised the dividend for 40 consecutive years, the increases tend to be modest. The three- to five-year dividend growth rate is 3%.

The annualized yield is 2.2%.

Earnings in the second quarter rose 11% from the year-ago period, missing the Street's consensus estimate by a penny a share. Revenue fell 1%, also a slight miss. The sales miss was due to currency exchange. Currency reduced sales by 5%, according to the company.

PPG's fundamentals are mixed.

On the plus side, return on equity was 31% last year, the best in at least nine years. Pretax margin was almost 11%, the highest in the past four years. Operating cash flow per share was 52% greater than EPS.

PPG's Chemicals-Paints industry group was No. 6 of 197 groups, as of Tuesday's IBD. PPG's building sector was No. 2 of 33 sectors.

However, there are negatives. Sales growth has ranged from lackluster to nonexistent the past three quarters. And the five-year EPS Stability rating is 35 on a scale from 1 (calm) to 99 (erratic).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Investing Ideas
Referenced Stocks: GGC , PPG

More from Investor's Business Daily


Investor's Business Daily

Investor's Business Daily

Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by BankRate.com