PPG Announces Global Restructuring

Global coatings company PPG announced earlier this week that it has approved restructuring actions “to reduce its global cost structure,” citing weakened global economic conditions coming from the COVID-19 pandemic.

When completed, the company says it expects that the actions will deliver $160-170 million in annual pre-tax cost savings, with approximately $25-35 million of savings projected in 2020.

The remainder of the annual cost savings is anticipated to be realized by the end of 2021. The plan includes a voluntary separation program that was offered in the U.S. and Canada.

“Given the broad economic impact relating to the COVID-19 pandemic and the recovery timeline in a few end-use markets, we are taking decisive action to further adjust our cost base,” said Michael H. McGarry, PPG Chairman and Chief Executive Officer.

“These measures will enable the company to come out of the crisis with lower structural costs. As a result of these actions, along with continued discretionary cost controls, we expect strong operating margin leverage as economic activity continues to improve. Despite efforts to reduce our total costs, we remain committed to continuing our investments in growth-related initiatives, including fully funding our research and development for products, services and digital capabilities that will drive long-term growth.”

The plan includes:

A restructuring charge of $160-180 million pretax, $125-140 million after-tax, or $0.52-0.58 cents per diluted share, in the second quarter 2020;
The company will also incur other associated restructuring-related costs of approximately $10 million over future quarters; and
The total cash outlay to complete these actions is approximately $180 million, with about $110 million expected in 2020 and the remainder in 2021.
The company says that it will provide further details during its second quarter earnings update in July.