Affected by the global epidemic of new pneumonia, the global supply chain has been greatly impacted. Manufacturing industries such as automobiles, ships, containers, mobile phones, aviation, home appliances, and furniture have been affected, and production and sales have declined to varying degrees. This will inevitably impact coatings in the application industry, and it is inevitable that PPG will be affected as a company operating globally. To this end, PPG is also taking active measures to deal with this crisis.
On June 8, coating giant PPG announced that the company had approved a major and extensive restructuring plan to reduce its global structural costs. This plan was proposed due to the development of the new coronavirus epidemic and the slow pace of recovery in several end markets, which led to the global economic weakness and the company's need to further optimize the supply chain and business cost structure.
The epidemic has a big impact on PPG's sales performance
PPG Industries said that although the new coronary pneumonia epidemic continues to affect business demand, the overall impact and the pace of recovery are consistent with the company's expectations on the April 28 earnings call. This includes strong demand for architectural DIY coatings, military aerospace coatings and packaging coatings, but these needs have been weakened by commercial aerospace coatings, automotive OEM coatings, automotive refinish coatings, building ready-to-use coatings and certain general industrial coatings. Offset by.
Overall, the company's sales in April 2020 decreased by approximately 35% from the same period last year. The company continued to improve throughout May, with total monthly sales falling by less than 30% from 2019. The sales results for these two months were slightly better than the company's initial forecast. These results include year-on-year sales growth in China, and monthly net sales growth in the US and Europe. It is expected that there will be a further month-on-month improvement in June, reflecting the rise in demand in May and the further recovery of global economic activity.
McGarry previously stated, "We expect that customer demand levels will continue to be severely affected, and automotive OEM coatings, automotive refinish coatings and aerospace coatings business will continue to decline significantly. In certain other industries, including packaging coatings, DIY architectural coatings, long-term protection Demand for coatings and military products has been limited by the crisis. In addition, our business in China is now in full swing and regional economic activity is returning to pre-crisis levels. We remain focused on carefully managing our cash and balance sheets."
Global startup reduces costs
According to the plan, the company will save $160-170 million in pre-tax costs each year. When these plans are completed, the company expects to save $160-170 million in pre-tax costs each year, of which about $25-35 million will be saved in 2020. The remaining annual cost savings are expected to be realized by the end of 2021. The plan includes voluntary separation programs provided by the United States and Canada.
"Given the widespread impact of the new coronary pneumonia epidemic on the economy and the recovery timetable of some end-use markets, we are taking decisive measures to further adjust the cost basis." Michael H. McGarry, Chairman and CEO of PPG said, "These measures will enable The company is able to get out of the crisis at lower structural costs. Thanks to these measures, coupled with continued discretionary cost control, we expect strong operating profit margins to be leveraged as economic activities continue to improve. Despite our efforts Lower total costs, but we remain committed to continuing to invest in growth-related initiatives, including providing full funding for the research and development of our products, services, and digital functions to drive long-term growth."
PPG will account for pre-tax restructuring costs of US$160-180 million (approximately RMB1.131 billion-RMB1273 million) in the second quarter of 2020, US$125-140 million after tax, or US$0.52-0.58 per share after dilution Almost all of these costs are related to employee turnover. In the next few quarters, the company will also bear other costs related to restructuring of about 10 million US dollars. The total cash expenditure required to complete these operations is approximately US$ 180 million, and is expected to reach US$ 110 million in 2020, with the rest to be completed in 2021. Cash expenditures include capital expenditures for rescheduling certain business activities.
Control cash flow through multiple methods such as layoffs and salary cuts
PPG has already taken decisive cost action and increased attention to cash generation and liquidity. The main measures include the announcement of a reduction in the salary of senior leaders, the closure of some factories and distribution businesses, the implementation of temporary employee leave for companies most affected by demand, the reduction of all business and functional expenses, and deferred capital expenditure.
In April of this year, PPG Industries has taken a salary reduction action, which has announced that the salary of the Chairman and CEO and all executives will be reduced by 15%-30%; in addition, the salary of paid professionals will also be temporarily reduced: PPG will be based on local The regulations implement temporary pay cuts, and these adjustments will take effect on May 1, and are expected to continue for six months.
Source: Mobei Public Account
