Description
PPG Analysis
Introduction PPG Industries (NYSE: PPG) is an American manufacturer of glass and chemical products, including automotive safety glass. PPG is also the world's third largest producer of chlorine and caustic soda (used in a wide variety of industrial applications), vinyl chloride (for use in polyvinyl chloride resins), and chlorinated solvents It is headquartered in PPG Place, a popular office and retail complex known for its striking glass facade designed by Philip Johnson. Founded in 1883 by Captain John Baptiste Ford and John Pitcairn as the Pittsburgh Plate Glass Company, the company changed its name to PPG Industries, Inc. on 19 December 1968 to show its diverse offerings. It is located in downtown Pittsburgh. PPG has 125 manufacturing facilities and equity affiliates in more than 20 countries around the globe. On 2 January 2008, PPG acquired the SigmaKalon Group of companies from private investment firm Bain Capital, strongly increasing its paint and specialty coatings business
PPG's business units include:
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Aerospace: Leading supplier of sealants, coatings, aircraft maintenance chemicals, transparent armor, transparencies and application systems, serving original equipment manufacturers and maintenance providers for the commercial, military, regional jet and general aviation industries. Services include chemicals management. Architectural Coatings: Under the Pittsburgh Paints, Olympic, Porter, Monarch, Lucite and PPG HPC (High Performance Coatings) brands, this unit produces paints, stains and specialty coatings for commercial, maintenance and residential markets. PPG also has many known sales managers; the most known is probably under the name Bill Shaw. [1] - Pittsburgh Paints [2] - Porter Paints [3] - Olympic Paints and Stains
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Architectural Coatings EMEA (Europe, Middle East and Africa): Producer of Sigma, Seigneurie, Johnstone's and other brands of residential and commercial paints for Europe, the Middle East, Africa and French Overseas. Automotive Coatings: Global supplier of automotive coatings and services to auto and light truck manufacturers. Products include electro coats, primer surfacers, base coats, clear coats, pretreatment chemicals, adhesives and sealants. Automotive Refinish: Produces and markets a full line of coatings products and related services for automotive and fleet repair and refurbishing, light industrial coatings and specialty coatings for signs. Also created and manages CertifiedFirst Network, PPG’s premier collision-shop alliance. Chlor-Alkali and Derivatives: Producer of chlorine, caustic soda and related chemicals for use in chemical manufacturing, pulp and paper production, water treatment, plastics production, agricultural products and many other applications. Fiber Glass: Maker of fiber glass yarn for use in electronics, especially printed circuit boards, and specialty materials, such as insect screening, medical casting and filtration fabrics. Also maker of fiber glass chopped strands, rovings and mat products used as reinforcing agents in thermoset and thermoplastic composite applications. Industrial Coatings: Produces coatings for appliances, agricultural and construction equipment, consumer products, electronics, heavy-duty trucks, automotive parts and accessories, residential and commercial construction, coil, extrusions, wood flooring, kitchen cabinets and other finished products. Optical Products: Produces optical monomers, including CR-39 and Trivex lens materials, photochromic dyes, Transitions (http://www.transitions.com) photochromic ophthalmic plastic lenses and polarized film. For product information, visit http://corporateportal.ppg.com/NA/Chemicals/Optical. Packaging Coatings: Global supplier of coatings, inks, compounds, pretreatment chemicals and lubricants for metal, glass and plastic containers for the beverage, food, general line and specialty packaging industries. Performance Glazings: Produces glass that is fabricated into products primarily for commercial construction and residential markets, as well as the appliance, mirror and transportation industries. For commercial glass and architectural finishes, visit http://www.ppgIdeascapes.com. For residential glass products, visit http://corporateportal.ppg.com/NA/Glass/ResidentialGlass. Protective and Marine Coatings: Leading global supplier of corrosionresistant, appearance-enhancing coatings for the marine, infrastructure, chemical processing, oil and gas, and power industries.
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Silicas: Produces amorphous precipitated silicas used to improve strength and durability of tires and other rubber products, reduce gloss and viscosity of paints and varnishes, and enhance free-flow characteristics of powdered food ingredients. Products are also used in battery separator applications. Also manufactures Teslin synthetic printing sheet used in applications such as radio frequency identification (RFID) tags and labels, e-passports, driver's licenses and identification cards.
Financial Analysis:
Net Sales: Year: Net Sales: 2004 2005 2006 2007 2008
9417 10126 10938 12220 15849
The company’s Sales have been consistently increasing over the years and this trend is going on since 5 years as per the data.
Net Income: Year: Net income: 2004 683 2005 596 2006 711 2007 834 2008 538
The net income of the company as per the data given has not been consistent. There has been decline in income twice. First in the year 2005 and then in the year 2008.
Dividends Per share:
Year: Dividends/share: 2004 1.79 2005 1.86 2006 1.91 2007 2.04 2008 2.09
The company’s has been giving dividend consistently and increasing over the 5 years period. The increasing dividend would attract more of shareholders to invest in this company.
Shareholder’s equity:
Year Amount 2004 3572 2005 3053 2006 3234 2007 415 1 2008 3333
Total Debt Ratio:
Year 2004 2005 2006 2007 2008 Shareholders Equity 3572 3053 3243 4151 3333 Total Assets 8932 8681 10021 12629 14698 Ratio 60.01% 64.83% 67.73% 67.13% 77.32%
The above are the total debt ratio. It shows that company has hired total debt out of it total Assets. For Example: in 2004 company had 60% Debt while in 2005 it increased to around 65% which means the company raised or borrowed some funds from the shareholder’s or by issuing Bonds.
The Company also spent $1,673 million on acquisitions (net of cash acquired of $136 million) in 2008, including purchase price adjustments related to 2007 acquisitions. Most of this spending was related to the January 2, 2008 acquisition of SigmaKalon, a worldwide coatings producer based in Uithoorn, Netherlands, from global private investment firm Bain Capital (“the seller”). The acquired SigmaKalon business produces architectural, protective and marine and industrial coatings and is a leading coatings supplier in Europe and other key markets across the globe, with an increasing presence in Africa and Asia.
Short Term Debt:
As per the balance sheet of 2008, the company has both short term and long term debt. The total short term debt of the company is $903 millions this also includes current portion of long term debt. So the total short term debt comes out to be $784 millions.
(Snapshot from the annual Report)
Bond Price of the company:
The present value of the PPG Company as per the face value $1000 with Coupon Rate 9%, Yield to Maturity 6.764% for 12 years. Also the payment is semi-annually. Thus the present value comes to around $523.27.
90 (1-1/[(1+ 0.06764)^12x2]/0.06764 + 1000/(1 + 0.06764)^12 = $ 523.27
Market Capitalization of the company:
Market Capitalization of the company is calculated as: The current price of the company in the market x the number of shares outstanding. The company has around 164.233 million shares in the market. And the last trading price was $36.34 per Share. So the market capitalization of the company is 164.233 x $36.34= $5968.22 million.
Sources of Funds Short Term Debt Long Term Debt Equity Total
Balance sheet Value As of 31st Dec 2008. $ 784 Million $ 3009 Million $ 3333 Million $ 7126 Million
Market value $ 784 Million $ 1574.5194 $ 5968.22 Million $ 8326.73 Million
Present value of the long-term Debt: $ 3009 Million x 523.27 = $ 1574.51943 Million 1000 Debt Ratio: Total Equity Total Assets = 3333 = 0.52 6348 5968.22 = 0.940 6348
As per the current market price the Debt ratio is around 94% and the book value ratio is 52%. This means there has been an increase in the equity price of the company. Debt – equity Ratio: Total Debt Total equity = 3793 = 1.13 3333 2358.51 = 0.395 5968.22
The Debt Equity Ration as per the market price is around 40% and the book value ratio was 113%. This means there has been decrease in the value of debt and also an increase in the equity.
Beta Value (Calculated Beta on the 6 days value of the stocks and NYSE Index):
PPG: 24/3/2009 25/3/2009 26/3/2009 27/3/2009 30/3/2009 31/3/2009 Beta = 0.17697 Stock Price 36.88 38.71 36.8 36.87 36.9 36.9 NYSE Index 5064.33 5127 5230 5096.64 4899.05 4978.98
Expected Return using CAPM (Capital Asset Planning Model):
Risk Free Rate = Rf: 0.58% (Government Bond Rate for 1 year) Beta = B: 1.03 (Taking the market Beta Value) Beta = 0.001280 Risk Premium = (Rm – Rf): 7%
Expected Return
= Rf + B(Rm – Rf) = 0.0058 + 1.03(0.07) = 0.0779 or 7.79 %
(Beta Value as calculated) = 0.0058 + 0.1769(0.07) = 0.01818 or 1.818% The expected rate of return taking Beta (B) as per the market value is 7.79 % which is considerable as per the today’s conditions and the return taking the calculated beta of 6 days of the share movement with the NYSE index is 1.818% which is very low as per the conditions in the actual market. So taking the market value of the beta the expected return is good and can be considered. Also the movement of the shares goes along with the market with less of risk.
doc_866898568.doc
PPG Analysis
Introduction PPG Industries (NYSE: PPG) is an American manufacturer of glass and chemical products, including automotive safety glass. PPG is also the world's third largest producer of chlorine and caustic soda (used in a wide variety of industrial applications), vinyl chloride (for use in polyvinyl chloride resins), and chlorinated solvents It is headquartered in PPG Place, a popular office and retail complex known for its striking glass facade designed by Philip Johnson. Founded in 1883 by Captain John Baptiste Ford and John Pitcairn as the Pittsburgh Plate Glass Company, the company changed its name to PPG Industries, Inc. on 19 December 1968 to show its diverse offerings. It is located in downtown Pittsburgh. PPG has 125 manufacturing facilities and equity affiliates in more than 20 countries around the globe. On 2 January 2008, PPG acquired the SigmaKalon Group of companies from private investment firm Bain Capital, strongly increasing its paint and specialty coatings business
PPG's business units include:
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Aerospace: Leading supplier of sealants, coatings, aircraft maintenance chemicals, transparent armor, transparencies and application systems, serving original equipment manufacturers and maintenance providers for the commercial, military, regional jet and general aviation industries. Services include chemicals management. Architectural Coatings: Under the Pittsburgh Paints, Olympic, Porter, Monarch, Lucite and PPG HPC (High Performance Coatings) brands, this unit produces paints, stains and specialty coatings for commercial, maintenance and residential markets. PPG also has many known sales managers; the most known is probably under the name Bill Shaw. [1] - Pittsburgh Paints [2] - Porter Paints [3] - Olympic Paints and Stains
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Architectural Coatings EMEA (Europe, Middle East and Africa): Producer of Sigma, Seigneurie, Johnstone's and other brands of residential and commercial paints for Europe, the Middle East, Africa and French Overseas. Automotive Coatings: Global supplier of automotive coatings and services to auto and light truck manufacturers. Products include electro coats, primer surfacers, base coats, clear coats, pretreatment chemicals, adhesives and sealants. Automotive Refinish: Produces and markets a full line of coatings products and related services for automotive and fleet repair and refurbishing, light industrial coatings and specialty coatings for signs. Also created and manages CertifiedFirst Network, PPG’s premier collision-shop alliance. Chlor-Alkali and Derivatives: Producer of chlorine, caustic soda and related chemicals for use in chemical manufacturing, pulp and paper production, water treatment, plastics production, agricultural products and many other applications. Fiber Glass: Maker of fiber glass yarn for use in electronics, especially printed circuit boards, and specialty materials, such as insect screening, medical casting and filtration fabrics. Also maker of fiber glass chopped strands, rovings and mat products used as reinforcing agents in thermoset and thermoplastic composite applications. Industrial Coatings: Produces coatings for appliances, agricultural and construction equipment, consumer products, electronics, heavy-duty trucks, automotive parts and accessories, residential and commercial construction, coil, extrusions, wood flooring, kitchen cabinets and other finished products. Optical Products: Produces optical monomers, including CR-39 and Trivex lens materials, photochromic dyes, Transitions (http://www.transitions.com) photochromic ophthalmic plastic lenses and polarized film. For product information, visit http://corporateportal.ppg.com/NA/Chemicals/Optical. Packaging Coatings: Global supplier of coatings, inks, compounds, pretreatment chemicals and lubricants for metal, glass and plastic containers for the beverage, food, general line and specialty packaging industries. Performance Glazings: Produces glass that is fabricated into products primarily for commercial construction and residential markets, as well as the appliance, mirror and transportation industries. For commercial glass and architectural finishes, visit http://www.ppgIdeascapes.com. For residential glass products, visit http://corporateportal.ppg.com/NA/Glass/ResidentialGlass. Protective and Marine Coatings: Leading global supplier of corrosionresistant, appearance-enhancing coatings for the marine, infrastructure, chemical processing, oil and gas, and power industries.
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Silicas: Produces amorphous precipitated silicas used to improve strength and durability of tires and other rubber products, reduce gloss and viscosity of paints and varnishes, and enhance free-flow characteristics of powdered food ingredients. Products are also used in battery separator applications. Also manufactures Teslin synthetic printing sheet used in applications such as radio frequency identification (RFID) tags and labels, e-passports, driver's licenses and identification cards.
Financial Analysis:
Net Sales: Year: Net Sales: 2004 2005 2006 2007 2008
9417 10126 10938 12220 15849
The company’s Sales have been consistently increasing over the years and this trend is going on since 5 years as per the data.
Net Income: Year: Net income: 2004 683 2005 596 2006 711 2007 834 2008 538
The net income of the company as per the data given has not been consistent. There has been decline in income twice. First in the year 2005 and then in the year 2008.
Dividends Per share:
Year: Dividends/share: 2004 1.79 2005 1.86 2006 1.91 2007 2.04 2008 2.09
The company’s has been giving dividend consistently and increasing over the 5 years period. The increasing dividend would attract more of shareholders to invest in this company.
Shareholder’s equity:
Year Amount 2004 3572 2005 3053 2006 3234 2007 415 1 2008 3333
Total Debt Ratio:
Year 2004 2005 2006 2007 2008 Shareholders Equity 3572 3053 3243 4151 3333 Total Assets 8932 8681 10021 12629 14698 Ratio 60.01% 64.83% 67.73% 67.13% 77.32%
The above are the total debt ratio. It shows that company has hired total debt out of it total Assets. For Example: in 2004 company had 60% Debt while in 2005 it increased to around 65% which means the company raised or borrowed some funds from the shareholder’s or by issuing Bonds.
The Company also spent $1,673 million on acquisitions (net of cash acquired of $136 million) in 2008, including purchase price adjustments related to 2007 acquisitions. Most of this spending was related to the January 2, 2008 acquisition of SigmaKalon, a worldwide coatings producer based in Uithoorn, Netherlands, from global private investment firm Bain Capital (“the seller”). The acquired SigmaKalon business produces architectural, protective and marine and industrial coatings and is a leading coatings supplier in Europe and other key markets across the globe, with an increasing presence in Africa and Asia.
Short Term Debt:
As per the balance sheet of 2008, the company has both short term and long term debt. The total short term debt of the company is $903 millions this also includes current portion of long term debt. So the total short term debt comes out to be $784 millions.
(Snapshot from the annual Report)
Bond Price of the company:
The present value of the PPG Company as per the face value $1000 with Coupon Rate 9%, Yield to Maturity 6.764% for 12 years. Also the payment is semi-annually. Thus the present value comes to around $523.27.
90 (1-1/[(1+ 0.06764)^12x2]/0.06764 + 1000/(1 + 0.06764)^12 = $ 523.27
Market Capitalization of the company:
Market Capitalization of the company is calculated as: The current price of the company in the market x the number of shares outstanding. The company has around 164.233 million shares in the market. And the last trading price was $36.34 per Share. So the market capitalization of the company is 164.233 x $36.34= $5968.22 million.
Sources of Funds Short Term Debt Long Term Debt Equity Total
Balance sheet Value As of 31st Dec 2008. $ 784 Million $ 3009 Million $ 3333 Million $ 7126 Million
Market value $ 784 Million $ 1574.5194 $ 5968.22 Million $ 8326.73 Million
Present value of the long-term Debt: $ 3009 Million x 523.27 = $ 1574.51943 Million 1000 Debt Ratio: Total Equity Total Assets = 3333 = 0.52 6348 5968.22 = 0.940 6348
As per the current market price the Debt ratio is around 94% and the book value ratio is 52%. This means there has been an increase in the equity price of the company. Debt – equity Ratio: Total Debt Total equity = 3793 = 1.13 3333 2358.51 = 0.395 5968.22
The Debt Equity Ration as per the market price is around 40% and the book value ratio was 113%. This means there has been decrease in the value of debt and also an increase in the equity.
Beta Value (Calculated Beta on the 6 days value of the stocks and NYSE Index):
PPG: 24/3/2009 25/3/2009 26/3/2009 27/3/2009 30/3/2009 31/3/2009 Beta = 0.17697 Stock Price 36.88 38.71 36.8 36.87 36.9 36.9 NYSE Index 5064.33 5127 5230 5096.64 4899.05 4978.98
Expected Return using CAPM (Capital Asset Planning Model):
Risk Free Rate = Rf: 0.58% (Government Bond Rate for 1 year) Beta = B: 1.03 (Taking the market Beta Value) Beta = 0.001280 Risk Premium = (Rm – Rf): 7%
Expected Return
= Rf + B(Rm – Rf) = 0.0058 + 1.03(0.07) = 0.0779 or 7.79 %
(Beta Value as calculated) = 0.0058 + 0.1769(0.07) = 0.01818 or 1.818% The expected rate of return taking Beta (B) as per the market value is 7.79 % which is considerable as per the today’s conditions and the return taking the calculated beta of 6 days of the share movement with the NYSE index is 1.818% which is very low as per the conditions in the actual market. So taking the market value of the beta the expected return is good and can be considered. Also the movement of the shares goes along with the market with less of risk.
doc_866898568.doc