PPG has approved significant and broad restructuring actions to reduce its global cost structure.
The company cited weakened global economic conditions stemming from the COVID-19 pandemic and related pace of recovery in a few end-use markets, along with further opportunities to optimize supply chain and functional costs.
When completed, the company expects the planned actions will deliver US$160M to US$170M in annual pre-tax cost savings, with approximately US$25M to US$35M of savings projected in 2020.
The remainder of the annual cost savings is anticipated to be substantially realised by year-end 2021.
The plan includes a voluntary separation programme that was offered in the USA and Canada.
"Given the broad economic impact relating to the COVID-19 pandemic and the recovery timeline in a few end-use markets, we are taking decisive action to further adjust our cost base,” said Michael H McGarry, PPG Chairman and CEO.
"These measures will enable the company to come out of the crisis with lower structural costs. As a result of these actions, along with continued discretionary cost controls, we expect strong operating margin leverage as economic activity continues to improve.
"Despite efforts to reduce our total costs, we remain committed to continuing our investments in growth-related initiatives, including fully funding our research and development for products, services and digital capabilities that will drive long-term growth.”
Separately, while the COVID-19 pandemic continues to affect business demand, the aggregate impact and pace of recovery are consistent with the company’s expectations noted during its April 28 earnings teleconference.
This includes strong demand for architectural do-it-for-yourself coatings, aerospace applications for military programmes and packaging coatings, but which has been more than offset by soft demand for commercial aerospace, automotive original equipment manufacturer (OEM), automotive refinish, architectural do-it-for-me and certain general industrial coatings end uses.
In aggregate, company sales volumes were lower versus the prior year in April by approximately 35%.
The company saw continued improvement throughout the month of May, with aggregate monthly sales down less than 30% versus 2019.
Volume results in both months were modestly better than the company originally forecasted.
These results include higher year-over-year volumes in China and sequential monthly improvement of net sales in both the US and Europe.
Further sequential improvement is expected in June reflecting higher run-rate demand levels exiting May and additional reopening of economic activity across the world.
The company will provide further details during its second-quarter earnings update in July.
