PPG will sell its architectural coatings business in the U.S. and Canada to focus on portfolio optimisation and cost reduction, while improving margins towards higher-growth areas.
The international paints and coatings supplier PPG
has reached a definitive agreement to sell 100% of its architectural coatings business in the United States and Canada for $550 million to American Industrial Partners (AIP).
The architectural coatings business generated approximately $2 billion in net sales in 2023, contributing a low single-digit EBITDA margin. The company noted that, on a pro forma basis over the last three years, excluding this business would have improved overall sales volumes by more than 200 basis points. Additionally, PPG’s Performance Coatings segment would have seen a 300-basis point improvement in margins for 2023, excluding the U.S. and Canada architectural coatings EBIT and related growth investments.
“We are pleased to reach an agreement with American Industrial Partners and believe the business is well positioned to leverage its current positive momentum, leading brands, proven innovation, established customers, and dedicated and talented employees. I want to thank the architectural coatings U.S. and Canada employees for their dedication and commitment throughout the years to deliver the quality products and services that meet our customers’ evolving needs,” has stated Tim Knavish, PPG chairman and CEO.
PPG revealed a comprehensive cost reduction program, expected to yield annualised pre-tax savings of approximately $175 million once fully implemented. Savings of $60 million are projected for 2025. The program will focus on reducing structural costs, primarily in Europe and other global businesses, alongside corporate cost adjustments following the sales of the silicas products business and the U.S. and Canada architectural coatings business.
“From a PPG perspective, this transaction, along with the pending sale of our silicas products business, demonstrates the active portfolio management by the company and our Board. These divestitures further optimize our portfolio by improving our organic growth and financial return profiles and will result in increased capability to channel our growth resources to areas where we have the strongest right to win with our customers,” has added Tim Knavish.
Moreover, PPG plans to close several facilities and target fixed costs, with the cost reduction initiative impacting about 1,800 positions, mainly in Europe and the U.S. The company will record a pre-tax charge of approximately $250 million in Q4 2024, with additional charges expected over the next few years as specific costs are incurred.
“In addition, we are taking decisive self-help actions to reduce our overall cost structure. While these decisions are difficult, they are necessary to adjust our fixed cost base and to right-size our company following these two business divestitures. None of these actions will impact our ongoing investments or focus on organic growth,” has concluded Tim Knavish.