Swot analysis of dulux paints

COMPANY PROFILE

PPG Industries, Inc.

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PPG Industries, Inc. TABLE OF CONTENTS

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TABLE OF CONTENTS

Company Overview ........................................................................................................3 Key Facts.........................................................................................................................3 SWOT Analysis ...............................................................................................................4

PPG Industries, Inc. Company Overview

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Company Overview

COMPANY OVERVIEW

PPG Industries, Inc. (PPG or 'the company') is chemical manufacturer that produces and sells coatings, paints, specialty materials and optical products. The company markets its products under PPG brand and through other well-known brands such as GLIDDEN, DULUX, OLYMPIC, RENNER, SIGMA, LIQUID NAILS, BRISTOL, HOMAX, PROMINENT PAINTS, GORI, BONDEX and DANKE!, among others. These products are widely used in commercial transport, military, regional jet and general aviation aircrafts, manufacturers of ships, bridges and rail cars, maintenance of residential and commercial building structures, consumers for decoration, automotive parts and accessories, transportation vehicles, e- passports, drivers’ licenses and identification cards and optical lenses and color changing products. It has business presence across North America, Asia Pacific, Latin America and Europe, the Middle East, and Africa (EMEA) regions. The company is headquartered in Pittsburgh, Pennsylvania, the US.

The company reported revenues of (US Dollars) US$15,374 million for the fiscal year ended December 2018 (FY2018), an increase of 4.2% over FY2017. In FY2018, the company’s operating margin was 11.3%, compared to an operating margin of 13.6% in FY2017. In FY2018, the company recorded a net margin of 8.7%, compared to a net margin of 10.8% in FY2017.

The company reported revenues of US$4,024.0 million for the second quarter ended June 2019, an increase of 11% over the previous quarter.

Key Facts

KEY FACTS

Head Office PPG Industries, Inc. One PPG Place Pittsburg Pennsylvania Pittsburg Pennsylvania USA

Phone 1 412 4343131 Fax Web Address corporate.ppg.com Revenue / turnover (USD Mn) 15,374.0 Financial Year End December Employees 47,300 New York Stock Exchange Ticker PPG

PPG Industries, Inc. SWOT Analysis

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SWOT Analysis

SWOT ANALYSIS

PPG Industries, Inc. (PPG or 'the company') is a manufacturer and supplier of paints, coatings, optical products and specialty materials. Sustained revenue performance, diverse end markets and well- established manufacturing and distribution network are the company's major strengths, whereas decline in profitability remains the cause for concern. Strategic acquisitions, business expansion initiatives and positive outlook for global paints and coatings market are likely to offer growth opportunities to the company. However, foreign exchange risks, intense competition and volatile raw material prices could affect its business operations.

Strength

Sustained revenue performance attracts new and potential investors Diverse end markets attracts new and potential customers Well-established manufacturing and distribution network

Weakness

Decline in profitability

Opportunity

Business expansion initiatives enhances future growth business opportunities and expansion plans Positive outlook for global paints and coatings market Strategic acquisitions to support inorganic growth strategy

Threat

Volatile raw material prices could affect PPG's operating results Intense competition may put strain on the company's margins Foreign exchange risks

Strength

Sustained revenue performance attracts new and potential investors

In FY2018, PPG reported revenue of US$15,374 million as compared to US$14,748 million in FY2017, an annual growth of 4.2%. The growth in revenue was primarily due to the increase in sales volumes, higher selling prices, increase in sales related to acquisition and favorable impact of foreign currency translation. It was also attributable to 4% increase in revenue of its Performance Coatings segment, which was driven by the higher selling prices across all its businesses. Strong revenue performance enables the company’s ability to provide higher returns to its shareholders and also increases its ability to allocate adequate funds for future growth initiatives.

Diverse end markets attracts new and potential customers

The company leverages its diversified customer base to strengthen its market presence. It primarily manufactures and distributes a broad range of paints, coatings and specialty materials and offers quality,

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innovative and sustainable solutions that in turn protect and beautify the products and surroundings. The company’s refinish coatings are used in automotive and commercial transport/fleet repair, light industrial coatings and specialty coatings markets. Its aerospace coatings are used for commercial, military, regional jet and general aviation aircraft’s. PPG’s protective and marine coatings are used by metal fabricators, heavy duty maintenance contractors and manufacturers of ships, bridges and rail cars. Its artificial coatings are used by Painting and maintenance contractors and consumers for decoration and for maintenance of residential and commercial building structures. The company’s automotive OEM and industrial coatings are used in appliances, agricultural and construction equipment, consumer electronics, automotive parts and accessories, residential and commercial construction building products, transportation vehicles and numerous other finished products. Its packaged coatings are used for the protection, performance and decoration of metal cans, closures, plastic tubes, industrial packaging, and promotional and specialty packaging. PPG’s specialty coatings and materials are used in radio frequency identification (RFID) tags and labels, e-passports, drivers’ licenses and identification cards, displays and lightings, optical lenses and color change products. The diverse end markets also help the company to expand and strengthen its presence, both in domestic and international markets.

Well-established manufacturing and distribution network

PPG has well established manufacturing and distribution capabilities across the world. As of February 2019, the company managed 128 production facilities in 39 countries across the globe. PPG’s Performance Coatings segment operates major manufacturing and distribution centers in the Netherlands, the UK, Hungary, Australia, Korea, the US, Italy, France, Canada, Poland, Denmark, and Mexico. The company’s Industrial Coatings segment operates manufacturing and distribution centers in the US, South Korea, Poland, Italy, Mexico, Brazil and China. The company offers its products to paint dealers, company-owned stores, concessionaires, home centers and other regional or national consumer retail outlets, independent distributors and company-owned distribution networks. It also sells its products directly to manufacturing companies and retail customers. Such strong manufacturing and distribution capabilities indicate the company’s extensive reach and provide significant competitive advantage.

Weakness

Decline in profitability

Though the company’s revenue increased in FY2018 over that in the last fiscal, its profitability declined. The company’s operating margin decreased from 13.6% in FY2017 to 11.2% in FY2018. Weak operating performance indicates the lack of efficiency in cost management. Its operating cost as a percentage of sales increased from 86.4% in FY2017 to 88.8% in FY2018. The company’s net profit margin decreased from 10.8% in FY2017 to 8.7% in FY2018. Declining profitability decreases the company’s ability to provide higher returns to its shareholders.

Opportunity

Business expansion initiatives enhances future growth business opportunities and expansion plans

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In November 2018, the company invested US$1.7 million in a new dispense cell at its coatings manufacturing facility in Kunshan, China. The new dispense cell would expand the company’s production capacity for protective, marine coatings with shortened delivery cycles and reduced emissions. In June 2018, the company announced its plans to open a 450,000 sq. ft. distribution center in Flower Mound, Texas. The nearly distribution center is expected to strengthen PPG’s distribution model and enable the company to offer improved and efficient services its independent retailers and company stores in the US. In May 2018, the company invested US$1.8 million 49,000 sq. ft. at a new distribution center in Chihuahua, Mexico. The new facility would help PPG to better serve its customers. In January 2018, PPG opened a wood coatings R&D center at its Springdale facility in Pennsylvania, the US. The facility will develop industrial coatings for kitchen cabinets, flooring and molding and doors used in residential and commercial structures. Such expansion initiatives would enable the company to handle various demand- supply fluctuations arising in the market.

Positive outlook for global paints and coatings market

The positive outlook for the global paints and coatings market augurs well for the company. According to in-house research, the global paints and coatings market is forecast to grow at a CAGR of 4.4% during 2017-2022 to reach US$186.8 billion by 2022 from US$150.7 billion in 2017. Architectural and decorative was the largest segment of the global paints and coatings market, which accounted for 51.6% of the market's total value in 2017, followed by industrial paints and coatings (35.5%), and special-purpose paints and coatings (12.9%). Moreover, Asia-Pacific accounted for 54.5% of the global paints and coatings market value in 2017, followed by the US (15.5%), Europe (15.3%), Japan (4.1%) and rest of the world (10.6%). Such market trend offers significant growth opportunities for the company to increase its sales.

Strategic acquisitions to support inorganic growth strategy

The company has made several acquisitions in the past year to strengthen its existing portfolio. In March 2019, the company acquired Whitford Worldwide Company, a manufacturer of low-friction and nonstick coatings for industrial applications and consumer products. The acquisition is expected to expand and strengthen the company’s coatings portfolio. In January 2019, PPG signed an agreement to acquire Hemmelrath, a manufacturer of automotive coatings. The acquisition would enhance the company’s automotive coatings offering, while adding formulating and manufacturing solutions to its portfolio. In December 2018, PPG acquired SEM Products, Inc., a company that produces specialized automotive refinish products. The acquisition is expected to expand the company’s automotive refinish coatings business. In January 2018, the company acquired ProCoatings, a wholesaler of architectural paint and coatings. The acquisition would offer greater opportunities for the company to support its customers and strengthen its presence in the Netherlands market.

Threat

Volatile raw material prices could affect PPG's operating results

PPG's financial results are significantly affected by the cost of raw materials. The company's most significant raw materials are titanium dioxide, epoxy and other resins, solvents and other pigments in the

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coatings businesses; sand, lenses, and soda ash in the optical and specialty materials segment; and sand, clay and soda ash in the glass segment. These materials accounts for 70% to 80% of its cost of goods sold in most coatings formulations and represent PPG's single largest production cost component. The company expects overall coatings raw material prices to increase modestly, with varied results by region and commodity type. Natural gas pricing remains volatile, although increased output and infrastructure development from shale gas should continue to play a role in muting long-term changes in natural gas pricing. Increase in raw material prices could affect the company's growth margins.

Intense competition may put strain on the company's margins

PPG faces intense competition across all its market segments, both from large international competitors and local players. Besides competing with smaller regional coating companies, PPG competes in its primary markets with the world's largest coatings companies, most of which have global operations with larger scale. The major competitors of the company include Benjamin Moore, Axalta Coating Systems Ltd., Masco Corporation, BASF Corporation, Nippon Paint, Tikkurila Oyj, The Jotun Group, RPM International Inc, Akzo Nobel N.V, The Sherwin-Williams Company, Hempel A/S. Intense competition could force the company to reduce prices, which could affect the bargaining power of the company and strain its margins and brand image.

Foreign exchange risks

PPG conducts its business activities in various countries across the world. The company reports financials in the US Dollars and is exposed to the volatility of the US dollars against other functional currencies such as Canadian dollar, Japanese Yen, Australian dollar, Euro and British pound. Though the company is involved in foreign exchange hedging to optimize currency fluctuations risks, there could be no assurance that these measures would limit effect on financial results.

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