PPG Industries Inc. (PPG) entered into an agreement with Equa-Chlor Inc. to acquire some of its assets for an undisclosed amount. PPG plans to acquire Equa-Chlor’s manufacturing operations that produce about 220 tons of chlorine per day. The deal is expected to close in the first half of 2011.
The acquisition will not only fortify PPG’s chlor-alkali and derivatives business in the Western United States but also allow PPG access to Equa-Chlor’s railcars, which will help it cut logistics costs. Equa-Chlor’s advantageous geographic location will also enable PPG to realize administrative synergies and reduce transportation costs in the U.S. The deal is expected to be accretive to earnings and generate positive cash flow from operations in 2011.
Headquartered in Longview, Washington, Equa-Chlor is a privately-held company producing chlorine, caustic soda and muriatic acid, and employs about 65 people.
Headquartered in Pittsburgh, PPG Industries serves 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 fourth quarter results for 2010 in January. The company’s adjusted net income was $207 million or $1.25 per share in the fourth quarter of 2010 versus $144 million or 86 cents per share during the fourth quarter of 2009 and it surpassed the Zacks Consensus Estimate of $1.13 per share.
Net sales for the quarter were $3.4 billion, up 9.7% year over year thus outperforming the Zacks Consensus Estimate of $3.3 billion. The improvement in the results was attributed to the company’s expansion in high-growth emerging markets, successful cost reduction initiatives and 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 expects the global economic recovery to strengthen, driving volume increase for PPG, which should leverage into higher earnings through a continued cost focus.
Strong fourth quarter performance along with successful adoption of growth strategies and their meaningful implementation keep us confident about the company. In addition, the macro economy and the concerned industry are also showing signs of recovery
PPG Industries, however, faces stiff competition from privately held Akzo Nobel N.V and EI DuPont de Nemours & Co. (DD).
PPG Industries has a Zacks #3 Rank (Hold) in the short-term and a long-term Neutral recommendation on the stock.
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