Global automotive coatings supplier PPG announced its board of directors have approved “significant and broad restructuring actions to reduce its global cost structure”.
The actions are focused on certain regions and end-use markets where business conditions are weakest, and they are targeting structural reductions in operating, functional and administrative costs, the company said in a statement.
“Because of continued slow overall growth in global demand, we are taking decisive action to adjust our cost structure,” said Michael McGarry, PPG chairman and chief executive officer. “These measures will better align our resources with anticipated ongoing business conditions and will keep PPG competitive in the end-markets in which we participate. Even with this broad effort to reduce our total costs, we remain committed to continued investment in growth-related initiatives and in geographies with continued growth potential.”
PPG will record a pretax restructuring charge of US$190m to $200m, or 53-58 cents per share, in the fourth quarter of 2016, of which approximately $140m represents cash costs and $50m to $60m is related to the write-down of certain assets and other non-cash costs. Of the approximately $140m total cash outlay, about $110m is expected in 2017, with the balance to occur in 2018.
In addition to the pretax charge and cash costs, approximately $15m of incremental restructuring-related cash costs are expected during 2017, for items that are required to be expensed on an as-incurred basis.
When completed, the company expects the restructuring actions to generate $120m to $130m in annual savings, with $40m to $50m of savings projected to be realised in 2017 and the remainder of the expected annual savings to be substantially realised by the end of 2018.