
PPG Industries' Stock Stumbles as It Signals Times Are Changing
Just as the market was preparing to digest PPG Industries' (PPG) - Get Report lackluster second quarter earnings release, in which it reported adjusted net income of $498 million, or $1.85 per share, on $4.1 billion in sales, the Pittsburgh chemicals giant bombarded investors with the $750 million divestiture of its flat glass manufacturing business and the upcoming retirement of its longtime chairman.
There's something to be said for PPG's willingness to rip the proverbial Band-Aid off, announcing earnings, a management change-up and a $750 asset sale in rapid succession Thursday morning.
But the market has not responded well to the barrage of company news, which also included word that its dividend would remain at 40 cents for the third consecutive quarter. Shares of PPG were trading down more than $2 to below $108 apiece at 2 p.m. Thursday, a nearly 2% decline from Wednesday's $110.03 close.
Yet most of PPG's updates are not surprising. The company's earnings report came roughly in line with analysts' estimates for the second frame; it has been rapidly divesting the majority of its glass operations in recent months in an effort to focus on paints and coatings; and Charles E. Bunch (pictured), 66, stepped back from his more intensive role as president and CEO to his current position as executive chairman less than a year ago, a move than often signals an eventual departure is on the horizon.
Bunch has done more than put his fair share at PPG, having served the company in various positions for the past 37 years, including a 10-year tenure as chairman, president and CEO, in which he led the company through 30 acquisitions. And the executive isn't exactly hurting for work, as he currently serves on the boards of ConocoPhillips (COP) - Get Report, Marathon Petroleum (MPC) - Get Report and PNC Financial Services Group (PNC) - Get Report.
Still, news that Bunch, who at the helm has steered the company through a nearly 160% increase in stock value through the past 5 years, is completely exiting the company may be playing a role in PPG's poor market performance Thursday. Word that he would be stepping down as president and CEO and remaining solely as executive chairman certainly sent the stock tumbling when it broke last August.
Nevertheless, his successor, current CEO Michael H. McGarry, has been on board at PPG for a journey of nearly the same length and direction. McGarry, 58, is now in his 35th year at PPG and officially took on the role of president and CEO last September after holding various leadership roles within the company.
The newly appointed captain is steering a different ship, however, as further news coming from PPG on Thursday signals the coatings and chemicals giant is soon to be fully clear of its once prominent glass manufacturing operations.
PPG said after it reported earnings that it plans to sell the assets of its flat glass manufacturing and glass coatings operations to Mexico City-based glass producer Vitro SAB de CV for $750 million.
The asset sale appears to be the latest move in PPG's months-long effort to refocus its portfolio away from glass and toward specialty paints and coatings. The Pittsburgh-based chemicals manufacturer said following the completion of the sale to Vitro and the sale of its European fiberglass operations to Japanese glass manufacturer Nippon Electric Glass Co. Ltd., which it announced at the end of June, about 98 percent of its business portfolio will be focused on paints, coatings and specialty materials.
Fortunately for McGarry, specialty coatings and materials offer higher margin and higher growth than flat glass, according to industry bankers. Meaning if all goes according to plan with the intended asset sales, he may inherit a leaner, meaner PPG.









