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PPG Announces Global Cost-Cutting Plan

Tuesday, December 13, 2016

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In an effort to recognize $125 million in savings in the coming year, paints and coatings manufacturer PPG announced Friday (Dec. 9) the planned implementation of a “significant and broad” global restructuring program for 2017.

Having been approved by its board, the restructuring will target certain regions and end-use markets where business conditions are considered weakest, the Pittsburgh-based company said.

As many as 1,700 jobs, about 3.6 percent of its 44,700 member workforce, are expected to be affected by the process. The actions will be focused on operating, functional and administrative expenses, according to Friday’s statement.

© / JoeCollver

PPG announced that its board of directors approved significant and broad restructuring actions to reduce its global cost structure. The actions are reportedly focused on certain regions and end-use markets where business conditions are weakest.

“Because of continued slow overall growth in global demand, we are taking decisive action to adjust our cost structure,” PPG Chairman and Chief Executive Officer Michael H. McGarry explained.

“These measures will better align our resources with anticipated ongoing business conditions and will keep PPG competitive in the end-markets in which we participate,” he added.

Third Quarter Alert

The news follows a net loss of $201 million in the company's third quarter, reported in October.

At that time, McGarry acknowledged that the company was reviewing potential actions to reduce its overall cost structure, both through broad global operating-cost improvements and targeted regional actions where economic conditions are weakest. He noted that the cost actions would be in addition to the restructuring program announced in 2015.

Now, as then, however, McGarry emphasized that, despite these cost-reduction efforts, the company remains committed to continued investment in growth-related initiatives and in geographies with continued growth potential.

1,700 Positions, $125M Savings

Although PPG has not shared details of the impact these actions will have on specific locations, spokesman Mark Silvey told PaintSquare News that PPG anticipates its restructuring efforts “will result in the net reduction of approximately 1,700 positions spread across the global reach of the company.

“So there is expected to be minimal overall impact to any one specific region,” he noted.

PPG CEO Matthew McGarry

"Even with this broad effort to reduce our total costs, we remain committed to continued investment in growth-related initiatives and in geographies with continued growth potential,” said Michael H. McGarry, PPG chairman and CEO.

When completed, the company anticipates the restructuring will generate $120 million to $130 million in annual savings. It projects between $40 million to $50 million of savings to be realized in 2017, with the balance to be substantially realized by year-end 2018.

Financial Details

PPG said the restructuring will result in Q4 2016 pre-tax charge of $190 million to $200 million, or 53 to 58 cents per diluted share. Of that, approximately $140 million represents cash costs and $50 million to $60 million is related to the write-down of certain assets and other non-cash costs.

Of the approximately $140 million total cash outlay, the company expects about $110 million in 2017, with the balance to occur in 2018.

Additionally, approximately $15 million of incremental restructuring-related cash costs are expected during 2017, for certain items that are required to be expensed on an as-incurred basis, the company said.


Tagged categories: Asia Pacific; Business matters; Business operations; Coating Materials; Coatings manufacturers; Earnings reports; EMEA (Europe, Middle East and Africa); Latin America; Layoffs; North America; PPG

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