PPG launches global restructuring plan with target savings of $170 million a year

PITTSBURGH, June 10, 2020 - PPG (NYSE: PPG) has announced that it has approved a major and extensive restructuring plan to reduce its global structural costsThe plan was proposed because of the weakness of the global economy and the need for the company to further optimize its supply chain and business cost structure as a result of the development of the new crown virus outbreak and the slow pace of recovery in several end marketsUpon completion of the global restructuring plan, the company expects to save $160-170 million in pre-tax costs per year, including about $25-$35 million in 2020, with the remainder expected to be largely realized by the end of 2021The plan includes PPG's introduction of a voluntary separation measure in the United States and Canada. "Given the economic situation affected by the outbreak of the new crown virus and the slow pace of recovery in several end markets, we are actively taking decisive steps to further adjust our cost structure." Michael McGarry, PPG's chairman and chief executive, said: "These measures help the company emerge from the crisis with lower structural costsCoupled with the company's ongoing cost control, we expect leverage in operating margins to increase as the economy improves over timeDespite our efforts to reduce overall costs, we continue to invest in projects related to business development, including full commitment to product development, service improvement and digital empowering, to drive the long-term growth of our business"In the second quarter of 2020, PPG will include pre-tax restructuring expenses of $1.60-180 million, or $125-140 million after tax, equivalent to a decrease of 0.52-0.58 cents per diluted shareThese expenses are basically for employee separationPPG will also cover approximately $10 million in restructuring-related expenses in the coming quartersThe total cash expenditure required to complete the business adjustment is approximately $180 million, of which approximately $110 million is expected to be incurred in 2020 and the remainder will be incurred in 2021These cash expenditures include capital expenditures for the redeployment of certain operationsIn addition, while the new Crown virus outbreak continues to affect business needs, the overall impact and pace of recovery are in line with the company's expectations in its earnings conference call on April 28 this yearDemand for self-made architectural, military aerospace and packaging coatings remains strong, but is difficult to offset the weak demand for civil aviation coatings, automotive original equipment (OEM) coatings, automotive repair paints, specialty building coatings and some general industrial coatingsOverall, PPG's sales in April were down about 35 percent from a year earlier, while sales in May were gradually improving, with monthly sales down less than 30 percent from a year earlierSales for the two months were slightly better than the company's initial expectationsIn fact, sales in China increased from a year earlier, while net sales in the Us and Europe continued to rise month-on-monthSales are expected to improve further in June, reflecting a further resumption of global economic activity after May. PPG will release more details in its second-quarter results in July.