PPG Closes Plaka Plasterboard Business Sale to Knauf

PPG Industries PPG has wrapped up the sale of the assets of its Mexico-based Plaka plasterboard and cement-board business to Knauf International GmbH. Financial terms of the deal were not divulged.

PPG Industries acquired the Plaka business in 2014 as part of its buyout of leading Mexican paint company - Comex S.A. de C.V. - for $2.3 billion. Plaka makes plasterboard, cement board and drywall mainly for the Mexican construction market. The business, with around $30 million of sales in 2015, employs roughly 200 people and operates a manufacturing plant in Queretaro, Mexico.

The divestment is part of PPG Industries' ongoing portfolio transformation actions. The company is divesting its non-core businesses to focus on core paints, coatings and specialty materials businesses. As part of these actions, PPG Industries, last year, completed the sale of its European fiberglass operations to leading fiberglass maker, Nippon Electric Glass Co. Ltd. ("NEG") and divested its ownership interests in two Asian fiberglass joint ventures. It also wrapped up the sale of its North American flat glass business in 2016.

Moreover, PPG Industries recently agreed to sell the remaining fiberglass operations to NEG. The transaction, which is subject to customary closing conditions, is expected to close in the second half of 2017. The transaction will mark the end of PPG's history as a manufacturer of fiberglass.

PPG Industries has outperformed the Zacks categorized Chemicals-Diversified industry over the last six months. The company's shares have gained around 14.7% over this period, compared with roughly 9.3% gain recorded by the industry.

PPG Industries is taking steps for growing organically as well as cutting costs. The company also remains committed to deploy cash on acquisitions and share repurchases. The company plans to deploy at least $2.5 billion to $3.5 billion of cash on acquisitions and share repurchases in 2017 and 2018 combined.

PPG Industries should also gain from its broad restructuring actions, particularly focused on the weaker end-markets. The restructuring actions are expected to deliver $120-$130 million in annual savings, with $40-$50 million of savings expected to be realized in 2017.

However, the company is exposed to currency headwind, which may continue to affect its top line. Moreover, PPG Industries faces macroeconomic challenges and some of its end-markets including marine still remain sluggish. The company is also exposed to volatility in raw materials and energy costs.