PPG Industries Inc.(PPG) acquired South African distribution company Ducol Coatings South Africa Ltd. for an undisclosed amount.
With this transaction, PPG will be able to directly serve customers in the region with its automotive refinish products and customer services, technical support and training programs.
PPG will continue to use the Ducol brand, as well as Ducol Coatings’ former franchisee and distributor network, giving PPG access to a solid, proven distribution network in the growing South African and surrounding markets. PPG expects that population growth and higher purchasing power in South Africa will drive vehicle sales and create more demand for refinish products.
Krugersdorp, South Africa-based Ducol started in 1990 and is active in South Africa and Namibia and has been a distributor of PPG automotive refinishing products since 2003.
In May 2011, PPG also completed the acquisition of certain assets of Equa-Chlor Inc. a Longview, Washington based chlor-alkali manufacturer, in an effort to expand its footprint westward. PPG bought the assets for approximately $27 million.
Headquartered in Pittsburgh, PPG Industries serves its customers in industrial, transportation, consumer products, and construction markets and after markets. The company’s objective is to continue to be the world’s leading coatings and specialty products company.
PPG released its first quarter results in April 2011, and posted a net income of $228 million or $1.40 per share for the first quarter of 2011, compared with $115 million or 69 cents in the year-ago quarter. The results surpassed the Zacks Consensus Estimate of $1.34 per share.
Net sales for the quarter were $3.5 billion, up 13% from $3.1 billion in the first quarter of 2010. It also outperformed the Zacks Consensus Estimate of $3.3 billion.
The company witnessed double-digit percentage sales across all its major regions. The improvement was attributed to demand improvements, higher pricing in each of its coating businesses, successful cost reduction initiatives and a gradual industrial recovery worldwide, partly offset by rising raw material costs and disappointing trends in the construction markets in the developed economies.
Looking ahead, the company anticipates further pricing gains in every segment, driving volume increase for PPG; an advantage that it expects to leverage into higher earnings through continued cost focus. PPG carries on working on initiatives to deploy its cash to grow earnings.
The company will persistently apply its disciplined approach toward evaluating acquisitions, and expects to announce several small- to medium-sized bolt-on acquisitions over the next six to nine months.
The strong first quarter performance along with a successful adoption of growth strategies and their meaningful implementation inspires confidence in the company. In addition, the macro economy and the concerned industry are also showing signs of recovery.
Therefore, PPG Industries has a Zacks #1 Rank (Strong Buy) in the short term and we hold a long-term Neutral recommendation on the stock.
PPG faces stiff competition from the DuPont Performance Coatings segment of EI DuPont de Nemours & Co. (DD) and BASF Coatings AG.
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