PPG Industries Inc. PPG has agreed to transfer $1.6 billion of pension liabilities and obligations to Massachusetts Mutual Life Insurance Company (MassMutual) and MetLife, Inc. MET.
The paint and coatings giant’s pension plans will purchase group annuity contracts from MassMutual and MetLife for roughly 13,400 U.S. personnel who started receiving payments on or before Apr 1, 2016. Personnel under the scheme include salaried and non-union hourly retirees, or their survivors. Other participants will remain part of PPG’s plans.
With the signing of this agreement, PPG Industries looks to offload some of its pension risk and debt. The company faces the risk of low interest along with the possibility of a longer-than-expected life span.
These high-rated insurance companies, on the other hand, have a long history of efficiently providing group annuity benefits. This decision to transfer the pension benefits and annuity administration is in line with PPG Industries’ previous attempts to better manage the pension process.
Retirees or surviving beneficiaries of PPG Industries do not have to take any action for this change. The monthly retirement benefit payments received by them will also remain unchanged and the value of the pension benefits earned will not be impacted either. Going forward, all financial and administrative responsibility will be borne by both the insurance companies, including the obligation to undertake all future annuity payments.
PPG Industries performed well in the first quarter of 2016. Its adjusted earnings rose 11% year over year in the quarter that marked the thirteenth consecutive quarter of double-digit growth in earnings. The bottom line also beat the Zacks Consensus Estimate by a penny. Results were aided by higher sales volume, cost management and acquisition-related gains. However, sales of $3.7 billion lagged the Zacks Consensus Estimate. The company’s long term debt was $4.23 billion at the end of the quarter, up 5.5% year over year.
The company is working on developing as well as commercializing new consumer-driven technology. It is also improvising branding strategies. As in the past, management is focused on reducing costs and completing the previously announced restructuring program. PPG Industries has also reaffirmed its plans to deploy $2–$2.5 billion cash in the 2015–2016 period toward acquisitions and share repurchases.
PPG Industries currently holds a Zacks Rank #2 (Buy).
Some other favorably ranked companies in the chemical space include Albemarle Corporation ALB and Innospec Inc. IOSP, both sporting a Zacks Rank #1 (Strong Buy).
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