Inside PPG Industries’ Industrial Coatings Segment



Industrial coatings segment

PPG Industries’ (PPG) industrial coatings segment is the company’s second-largest revenue generator. According to PPG’s 2015 annual report, this segment contributed 36%, or $5.5 billion, of PPG’s total revenue. In 2010, the segment reported revenue of $3.7 billion. This implies a CAGR (compound annual growth rate) of ~8.2%.

The revenue stream for this segment includes businesses of automotive OEMs (original equipment manufacturers), industrial coatings, specialty coatings and materials, and packaging coatings.

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Market position

According to PPG’s latest presentation at an investor’s forum, the company is the leader in the automotive OEM business. BASF holds second place, and Axalta (AXTA) is in third place.

In the industrial coatings segment, AkzoNobel is the leader, and PPG is in second place. In the packaging coatings segment, Valspar (VAL) leads the race, and PPG holds second place. Other competitors include DuPont (DD) and Nippon Paint.

Business model

PPG’s automotive OEM business and packaging business have adopted the business model of selling directly to manufacturing companies. PPG has alliances with Kansai Paint and Asian Paints to serve certain automotive OEM markets in Asia.

Growth strategy of industrial coating

As we already saw, PPG’s industrial coatings segment’s revenue has increased at a CAGR of 8.2% since 2010. Revenue growth for its industrial coating segment was achieved due to increased demand in the automotive industry and a number of acquisitions. Some of the important acquisitions of this segment include the following:

  • PPG acquired Spraylat in 2012 for approximately $75 million. Spraylat and Deft contributed $166 million to the business in 2013.
  • In April 2015, PPG acquired France-based Revocoat, a leader in automotive adhesives and sealants.
  • PPG acquired IVC Industrial Coatings, a US-based specialty powder and liquid coatings company, in September 2015.

Investors can indirectly hold PPG Industries by investing in the iShares US Basic Materials ETF (IYM). About 5.1% of its portfolio was held in PPG Industries as of August 26, 2016.

In the next part, we’ll look at PPG’s glass segment.


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