PPG Industries (NYSE:PPG) recently outlined the financial and operating strategy the company will use in 2012 to generate profits amidst sluggish global economic growth. The company also reviewed current business trends in many of its end markets.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Vision and Strategy
PPG Industries believes that the coatings area is an attractive business and has worked to redirect the company to focus on coatings and specialty products. The coatings market has historically grown at a faster rate than GDP and the company expects this growth to continue through 2014. (For more on GDP, see High GDP Means Economic Prosperity, Or Does It?)

The coatings industry has also become more consolidated over the last decade. The top 10 producers control 59% of the market, compared to 52% in 2002, PPG Industries and Akzo Nobel (OTCBB:AKZOY) together control 20% of the global $92 billion coatings market.

Other companies that compete with PPG in coatings and other areas include DuPont (NYSE:DD) and The Sherwin Williams Company (NYSE:SHW).

PPG Industries has made selective acquisitions to increase the company's presence outside North America and expand into higher margin businesses. The company expects to continue looking for these types of acquisitions in 2012, as wells as maintain margins through strong cost management across its lines of business.

Current Business Conditions
PPG Industries commented on current business conditions that the company is facing in its end markets. This is important because of recent investor concern on the strength of global economic growth.

PPG Industries is experiencing weakness in the company's marine and architectural businesses, offset by strength in the aerospace and automotive end markets. Europe is a focus of concern for many investors due to the issues involving sovereign debt, and PPG Industries is seeing a slight softening in end markets here, as customers get defensive due to uncertainty in 2012.

Raw Material Inflation
Cost inflation for raw materials has been a problem for many companies in the industrial and materials sector over the last few years and this trend has historically impacted the company as well. PPG Industries is currently seeing an easing of the cost inflation on some of the raw materials that the company uses in its products. The company is still experiencing rising cost pressure for titanium dioxide and other pigments.

PPG Industries has a long tradition of share repurchases and has repurchased 18 million shares, or 10% of the company's float, over the last two years. The company will continue with this practice in 2012 and recently authorized the repurchase of an additional 10 million shares of company stock.

PPG Industries has increased dividends for 40 consecutive years, including during the recent recession. The company last raised its dividend in June 2011 to an annual rate of $2.28, providing a 2.8% yield for shareholders. (For related reading on dividends, see The Power Of Dividend Growth.)

The Bottom Line
PPG Industries and most other businesses face an uncertain 2012, as concerns about the potency of global economic growth continue to plague customers and investors. The company plans to maintain its strategy of focusing on faster-growing and higher-margin end markets, along with shareholder-friendly actions on dividends and stock repurchases.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  2. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  3. Investing News

    Glencore Shares Surge in Hong Kong

    Shares of Glencore International, a leading multinational commodities and mining company, jumped by around 15% on London Stock Exchange, after the shares had gained about 71% earlier on the Hong ...
  4. Investing

    Have Commodities Bottomed?

    Commodity prices have been heading lower for more than four years, being the worst performing asset class of 2015 with more losses in cyclical commodities.
  5. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  6. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  7. Investing

    The Quinoa Quandary for Bolivian Farmers

    Growing global demand for quinoa has impacted Bolivian farmers' way of life. Should the American consumer be wary of buying this product?
  8. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  9. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  10. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  1. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  2. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!