PPG Industries (PPG), a global supplier of protective and decorative coatings, has forged a technical collaboration pact with Canada-based Argex Mining Inc. (ARGEF), which makes titanium dioxide (TiO2), iron and vanadium pentoxide.
Under the deal, the companies will develop and optimize technology intended for making TiO2 pigment for use in paints and coatings. Financial terms of the agreement were not disclosed by the parties.
TiO2 is a widely used white pigment in the paint and coatings industry because of its whiteness, brightness and durability. The TiO2 developed through the partnership will be compatible with various end-use applications for PPG Industries and will be made by Argex. Earlier, PPG Industries manufactured TiO2 using the chloride process at its Natrium, West Virginia, plant and sold TiO2 pigment for coatings and other applications.
The deal calls for the negotiation of a purchase and supply agreement between the companies based on the successful development of the treatment technologies. Both entities have agreed to specific terms of mutual exclusivity during the negotiation of the agreement.
Pennsylvania-based PPG Industries, which had sales of $14.9 billion in 2011, is a leading supplier of paints, coatings, optical products, specialty materials, chemicals and fiber glass. It competes with the DuPont Performance Coatings segment of EI DuPont de Nemours & Co. (DD).
PPG Industries’ fourth-quarter 2011 revenues and earnings beat the Zacks Consensus Estimates. The company delivered record earnings in the quarter driven by higher revenues and cost-cutting initiatives.
PPG Industries has a strong cash position, and continues to utilize cash on earnings growth initiatives. Moreover, the company has been returning cash to its shareholders in the form of uninterrupted dividend pay outs. It also expects to deploy its strong cash position for sustained growth.
However, raw material costs have been a matter of concern for PPG Industries. Although raw material costs have shown a moderating trend, the price of the company’s primary raw material TiO2 has been escalating.
We currently have a long-term Neutral recommendation on PPG Industries. The stock holds a Zacks #2 Rank, which translates into a short-term Buy rating.
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