PPG Architectural Coatings
Vince Morales
Vice President, Investor Relations and Treasurer
Goldman Sachs Chemical Intensity Days
Houston, TX March 15, 2016
Information current as of March 15, 2016
Forward Looking Statement
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by
or on behalf of the Company. This presentation contains forward-looking statements that reflect the Company’s
current views with respect to future events and financial performance. You can identify forward-looking statements
by the fact that they do not relate strictly to current or historic facts. Forward-looking statements are identified by the
use of the words “aim,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast” and other
expressions that indicate future events and trends. Any forward-looking statement speaks only as of the date on
which such statement is made, and the Company undertakes no obligation to update any forward looking statement,
whether as a result of new information, future events or otherwise. You are advised, however, to consult any further
disclosures we make on related subjects in our reports to the Securities and Exchange Commission. Also, note the
following cautionary statements.
Many factors could cause actual results to differ materially from the Company’s forward-looking statements. Such
factors include global economic conditions, increasing price and product competition by foreign and domestic
competitors, fluctuations in cost and availability of raw materials, the ability to maintain favorable supplier
relationships and arrangements, the timing of and the realization of anticipated cost savings from restructuring
initiatives, difficulties in integrating acquired businesses and achieving expected synergies therefrom, economic and
political conditions in international markets, the ability to penetrate existing, developing and emerging foreign and
domestic markets, foreign exchange rates and fluctuations in such rates, fluctuations in tax rates, the impact of
future legislation, the impact of environmental regulations, unexpected business disruptions and the unpredictability
of existing and possible future litigation, including litigation that could result if the proposed asbestos settlement does
not become effective. However, it is not possible to predict or identify all such factors. Consequently, while the list of
factors presented here and under Item 1A of PPG’s 2015 Form 10-K is considered representative, no such list
should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may
present significant additional obstacles to the realization of forward-looking statements. Consequences of material
differences in the results compared with those anticipated in the forward-looking statements could include, among
other things, lower sales or earnings, business disruption, operational problems, financial loss, legal liability to third
parties, other factors set forth in Item 1A of PPG’s 2015 Form 10-K and similar risks, any of which could have a
material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity.
2
Global Coatings End-Uses
Industry End-Use Demand
(~$130B Sales Value)
PPG Coatings End-Use Sales Mix
Aerospace
1%
Packaging
2%
Architectural
Coatings
Protective
& Marine
12%
Today’s Focus
Refinish
6%
40%
Architectural
43%
Auto OEM
8%
60%
General
Industrial
28%
Special-Purpose Coatings:
• General Industrial
• Aerospace
• Protective & Marine
• Automotive OEM
• Packaging
• Automotive Refinish
• Specialty Coatings & Materials
Source: Kusumgar, Nerlfi, & Growney;
Company Annual Reports; PPG estimates
PPG mirrors the global coatings industry end-use mix
3
Overview of Global Architectural Coatings Industry
2016 Value ~$50B USD
Thousands
Small /
Niche Regionals
Top 4
Global
Leaders
~40%
~40%
~20%
Next 15
Leading
Regionals
Fragmented global industry requires local brands and distribution
Sources: Industry Earnings Releases, KNG, IRL
4
PPG Regional Participation and Position
Europe, Middle East, Africa
$16-17B
Asia Pacific
$17-18B
United States & Canada
$12-13B
Latin America
$4-5B
100%
90%
Others, incl. Benjamin Moore
80%
Masco
70%
Next Two
Suvinil (BASF)
/ Pintuco
60%
50%
40%
Next Three
Caparol / Materis / Tikkurila
30%
20%
Akzo Nobel
Sherwin Williams
Next Three
Asian Paint / Kansai / Nippon
Valspar
10%
0%
PPG is the only supplier with meaningful presence across all regions
Sources: Industry Earnings Releases, KNG, IRL
5
Drivers of Global Architectural Demand
% of Industry
Demand
65%
Residential
• Consumer Sentiment
New Construction
25%
Remodel /
Repaint
75%
New Construction
40%
Remodel /
Repaint
60%
• Disposable Income
• Unemployment
35%
Commercial
Demand and mix vary by region
Sources: KNG, IRL, Orr and Boss
6
Economic Trends and Outlook in Key Geographies
PPG’s core markets reflect positive growth forecasts
Source: IHS
7
PPG Architectural Coatings Geographic Mix (by value)
EMEA
Asia-Pacific
US & Canada
CAGR
20%
Latin America
2006
2016
EMEA
Asia-Pacific
Industry
US & Canada
CAGR
3%
Latin America
PPG Architectural Coatings Supplier Position
Leading Position
#2 Participant
#3 Participant
Limited
Participation
Sources: Industry Earnings Releases, KNG, IRL
8
Distinct Channels and Brands Around the World
Global
Industry
PPG
USCA
EMEA
LATAM
AP
9
Home Centers Becoming Increasingly Global
*
*
*Announced during the past 3 months
10
Industry Details – Latin America
Industry Revenue by Country
Regional Industry Characteristics
•
Paint season is strongest from
October through December
•
Distribution through independents;
home centers still a small component
•
Consumers are very brand centric
•
Central America remains very
fragmented
15%
50%
25%
10%
Mexico
Central America
Brazil
Other
Outlook
•
•
•
Oil is moderating Mexican GDP,
consumer spending is improving
Mexican GDP Growth Forecast
(PPG Comex historically grew at ~2x GDP)
4%
High single-digit (HSD) growth in
Central America is expected over
the next several years
3%
Brazilian paint demand declined
HSD in 2015; remains weak in 2016
1%
2%
0%
2015
Source: PPG
Estimates
Sources:
World
Bank, KNG, IRL
11
11
2016
2017
2018
2019
2020
Mexican Architectural Coatings Landscape
Company
Description
Coatings industry leader,
Largest exclusive network
Store
Count
4,000+
PPG Comex Store Location
Large manufacturer in north
region, Home Depot supplier
~155
Large presence in the
metropolitan area with ~60
stores
~360
Strong presence in central
region with ~ 135 third party
stores
~300
~180 stores in southwest
region and Jalisco
~350
~135 third party stores in the
central region
~630
Density
Lower
Higher
Geographic expansion opportunities remain for PPG Comex
12
Rapidly Growing Comex and Glidden in Central America
2016 $400MM Industry
Stores
(Comex and Glidden)
Guatemala
39
El Salvador
19
PPG supplies all major distribution channels in Panama
Channel exclusivity through Glidden sub-brands
Honduras
11
9
Panama
9
Nicaragua
Costa Rica
6
Belize
4
13
Industry Details – Asia-Pacific
Industry Revenue by Country
Regional Industry Characteristics
•
20%
45%
7%
7%
21%
China
India
China and Australia have very different
paint dynamics:
Japan
Australia
•
Other

Home centers growing and predominant in
Australia; not relevant in China

Chinese competitive environment very
fragmented

Professionals account for 90% of paint
application in China
Home center consolidation underway in
Australia (PPG aligned with Bunnings)
Outlook
•
•
•
Australia Housing Renovation Forecast
Value of Investment
Regional growth rates remain above
developed regions
4%
China growth continues – but moderating
due to commercial construction
3%
2%
Australian house price appreciation is
attracting homeowner investments; new
home builds continue to be solid
Avg. Growth +2.6%
1%
0%
2015
Sources:
Housing
Industry Association Limited, KNG, IRL
Source: PPG
Estimates
14
14
2016
2017
2018
2019
2020
Asia-Pacific Architectural Coatings Landscape
$17-18B in Architectural Demand – Key Geographies:
China $8B, India $4B, Japan $1B, Australia $1B
Australia
China
Haymes
Others :
• China Paint
• Jiangsu
• DGL Camel
• Northwest
Yongxin
• First Paint
• Shanghai
Shengxin
• Jiangsu Qiye
Emulsion
• 1,000s of
competitors
Top 3:
Nipsea (Nippon)
AkzoNobel
Valspar
Dulux
Next 2 (alpha order):
PPG
Valspar
Next 5:
Carpoly
Maydos
Shandong Paint
Yips
Shanghai Coatings
PPG
Sources: Industry Earnings Releases, KNG, IRL
15
PPG Asia-Pacific Architectural Coatings at a Glance
PPG Revenue Mix
Home Center
China
Company Stores
Australia
Independent Dealer
Australia
PPG Brands
•
PPG strongly aligned with Bunnings (leading ANZ home center)
•
~40 Taubmans company-owned stores; Bristol captive independents
China
PPG Brands
•
Master’s Mark® product competes favorably in premium range
•
Seigneurie ® used for project segment
•
PPG a very small participant in the Chinese architectural paint industry
16
16
Industry Details – Europe, Middle East, and Africa (EMEA)
Industry Revenue by Channel
Regional Industry Characteristics
•
Private label is prevalent in home centers
•
Western Europe is much different than
Eastern Europe:
35%
40%

Western Europe: mature distribution models,
focus on product quality and service

Eastern Europe: lower consumption; wholesaler
distribution models
25%
Home Center
Company Stores
Independent
Outlook
•
•
UK & Ireland continue to demonstrate growth
above other developed countries
4%
Home center consolidation activities
•
Eastern Europe growing but mixed
•
France demand stabilizing
•
Early 2016 industry demand growth
France Construction
weighted index
2%
Sources:
Euroconstruct,
KNG, PPG estimates
Source: PPG
Estimates
0%
2011 2012 2013 2014 2015 2016 2017 2018
-2%
-4%
17
17
European Architectural Coatings Industry
EMEA Architectural
Suppliers
2015 $16-17B Industry
Others*:
Betek
Dekart
DYO
Empils
Helios
Lakra
Marshall
Pintuco
Polisan
Others
AkzoNobel
PPG
Next 7*:
Next 5*:
Cin
Crown Hempel
Flugger
JWO
Meffert
Sneizka
STO
Brillux
Caparol
Jotun
Materis
Tikkurila
Sources: Industry Earnings Releases, KNG, IRL
18
PPG’s key competitors
differ by region
and segment
* competitors listed in alpha order
Competitive Landscape Varies by Country
SCANDANVIA
AkzoNobel
Flugger
Jotun
Tikkirula
note: competitors listed in alpha order
GERMANY
Brillux
DAW
Ostendorf
Remmers
FRANCE
AkzoNobel
Materis
PPG
V 33
POLAND
AkzoNobel
PPG
Sneizka
Tikkurila
IBERIA
Cin
Materis
PPG
Titan
UNITED KINGDOM
AkzoNobel
Hempel (Crown)
Ostendorf
PPG
ITALY
>500 paint companies
European paint supply is fragmented by country and sub-region
Sources: Industry Earnings Releases, KNG, IRL
19
PPG Remains Positioned for Growth in Europe
European* Coatings
Demand
Demand in regions relative to
PPG Presence
PPG
participation:
small to none
$9B
PPG
Participation:
top 1 or 2 position
$5B
*Does not include Middle East and Africa
Sources: IRL, KNG, PPG estimates
20
#1 PPG Position
#2 PPG Position
#3 PPG Position
>#3 PPG Position
No PPG Participation
Industry Details – U.S. and Canada
Industry Revenue by Channel
Regional Industry Characteristics
•
Very distinct distribution
channels
Coatings consolidation over
time, accelerated the past
decade
Focus on product
categories and branding
15%
•
35%
•
50%
Home Center
Company Stores
Independent
Outlook
•
•
•
US construction recovery
continues
Residential and commercial
maintenance (aftermarket)
expected to grow
Canada demand projected to be
flat in 2016
Index 2015 = 1.00
Housing Starts
1.80
1.60
1.40
1.20
1.00
2015
Source: PPG Estimates
Median Home Price
21
21
2016
Source: Moody’s
2017
2018
2019
2020
U.S. and Canada Architectural Coatings Competitive Landscape
Other
• Competitive set differs by
channel and country
• PPG is a major participant
in all 3 channels
• PPG is a clear leader in
Canada
Source: PPG Analysis
Source: Company Reports, PPG estimates
22
22
U.S. and Canada Architectural Coatings Industry Landscape
Home Centers– End Use
Industry
PPG
0%
50%
100%
Company Stores – End Use
Industry
PPG
0%
25%
50%
75%
100%
Ind. Dealers – End Use
Industry
PPG
0%
50%
Professional
100%
DIY
Company Owned Stores
Home Centers
Source: PPG Analysis
PPG has significant participation in all channels
Source: Company Reports, PPG estimates
23
23
Independent Dealer
U.S. Architectural Coatings Demand Drivers
Existing Home Sales
Housing Starts
140%
120%
100%
80%
60%
40%
20%
140%
120%
100%
80%
60%
2000
2005
2010
2015
2020
2000
2005
2010
2015
2020
Commercial Construction
Residential Fixed Investment
160%
140%
120%
100%
80%
60%
40%
120%
100%
80%
60%
2000
2005
2010
2015
2020
2000
2005
2010
2015
Recovery in progress - Industry volumes still down 10% - 15%
Source: Moody’s
24
2020
PPG Architectural Coatings – U.S. and Canada
20%
80%
Customer Touch Points
Channel
Points of
Sale (POS)
Home Centers
~8,000
Independent
Distributors
~6,000
CompanyOwned Stores
~900
Total
~15,000
Channel Mix - Revenue
End-Use Mix - Revenue
65%
35%
Residential
Home Center
Company Stores
Independent Dealer
25
25
Commercial
PPG Company-Owned Stores – U.S. and Canada
Growth opportunities: increase density and expand presence
26
26
Company-Owned Stores: Supporting Professional Painters
Professional Painters – Value Drivers
•
Product specifications
•
Product performance
•
Delivery
•
Credit
•
Product availability
•
Competitive pricing
Robust Support Network Surround Stores
Store Manager
Full Time Associate(s)
Part Time Associate(s)
Rebranding Initiative
•
•
Operations
Sales Support
Store Group Manager
Account Development
Director of Store Operations
Regional Sales
Vice President of Stores
Zone Sales
Consistent branding coast-to-coast
Store upgrades
27
National Home Centers
Coatings remains an important sales category for home centers
PPG sales to home centers
Wide Offering of
PAINT REPRESENTS
Decorative Paint
7-9%
Leader in
OF HOME CENTER SALES
Stains
Leveraging
Adhesives and Sealants
Paint is critical for home centers; drives foot traffic and profits
Source: Lowes/THD Annual Reports
28
2016 National Accounts Product Launches
Providing value for key channel partners
2016 Brand
Investment
• New premium
products
• New product
formulations
New product delivers
extreme durability
New & improved formula
Best paint for valueconscious consumer
• New product
labeling
• Increased focus
on customer field
support, tools
First super premium
paint at Menards
Walmart premium offering
Clear product differentiation
Launches supported by $15MM investment in Q1 2016
Source: Lowes/THD Annual Reports
29
Independent Dealer Channel
Dealer Attributes
•
10,000 + locations in USCA
•
Range from hardware stores to
dedicated paint stores
•
Vary in size from single store to several
dozen locations
PPG Strategy
•
“Partner of Choice”
•
Differentiate through products, brands
and professional programs
•
Acquirer of choice for owners exiting
the business
Offering
Coatings Suppliers
•
Service

Benjamin Moore
•
Location

PPG
•
Product
• Multiple supplier brands
• Range of decorative -toprotective coatings

Valspar (Ace Hardware)

Pratt and Lambert (Sherwin-Williams)

California Paints
•
Some offer interior design services
30
Key Comments on Architectural Coatings
• Global Industry
 Growing across most geographies; emerging region growth outpacing mature
region growth
 Local brands, distribution, and operational excellence drive commercial
success
• Competitive Dynamics
 Fragmented competitive landscape with few global players
 Industry consolidation likely to continue as key competitors build scale
 Strong regional players will continue to exist and grow
• PPG Focus
 Continue to develop and expand in existing regions
 New stores, independent dealer acquisitions, enhanced brand strategy
 Balance emerging region growth with mature market opportunities
 Acquisitions and organic growth
 Drive margin expansion via scale and operational excellence
31
PPG Video
32
Key Comments on Architectural Coatings
• Global Industry
 Growing across most geographies; emerging region growth outpacing mature
region growth
 Local brands, distribution, and operational excellence drive commercial
success
• Competitive Dynamics
 Fragmented competitive landscape with few global players
 Industry consolidation likely to continue as key competitors build scale
 Strong regional players will continue to exist and grow
• PPG Focus
 Continue to develop and expand in existing regions
 New stores, independent dealer acquisitions, enhanced brand strategy
 Balance emerging region growth with mature market opportunities
 Acquisitions and organic growth
 Drive margin expansion via scale and operational excellence
33