PPG Purchases Minority Stake In Taiwan Chlorine Industries

PPG Industries (NYSE:PPG) has purchased a 40% ownership interest in Taiwan Chlorine Industries Ltd. (“TCI”) from China Petrochemical Development Corporation (“CPDC”).

TCI was formed in 1986 as a joint venture between PPG and CPDC to produce chlorine-based products in Taiwan, in which PPG owned a 60% stake. With the separation of its commodity chemicals business in 2013, PPG transferred the ownership interest in TCI to Axiall Corporation which was further acquired by Westlake Chemical Corporation in 2016.

In connection with the transfer of PPG’s 60% stake in TCI to Axiall, CPDC was granted an option to sell its 40% ownership interest in TCI to Axiall for $100 million after three-year anniversary of the separation of PPG’s commodity chemical business. Axiall was granted the right to name PPG as its designee to purchase CPDC’s 40% ownership interest. In Apr 2016, CPDC decided to sell its 40% TCI ownership interest to Axiall, and in Jun 2016, the latter designated PPG to purchase the ownership interest.

PPG Industries’ shares rallied around 10.3% over the past three months, outperforming the Zacks categorized Chemicals-Diversified industry’s 5.9% gain.

The company has a diversified business, both in terms of products offered and geographical presence. The company’s strong presence in emerging regions has enabled it to deliver growth to shareholders by tapping opportunities there. PPG Industries is also taking initiatives to expand its business through acquisitions.

PPG Industries has announced certain restructuring measures to lower its cost structure globally. Special emphasis will be put on regions and end-use markets with the weakest business. The restructuring actions are expected to deliver $120–$130 million in annual savings, with $40–$50 million of savings expected to be realized in 2017.

The company also has an impressive record of returning cash to shareholders through dividends and share buybacks. PPG Industries expects to deploy $2.5–$3.5 billion cash in acquisitions and share repurchases for 2017 and 2018 combined.

PPG Industries is however, exposed to unfavorable currency exchange translation, especially in the emerging markets. The company also continues to face macroeconomic challenges. It sees uneven growth in emerging economies in 2017.

PPG Industries, Inc. Price and Consensus

PPG Industries, Inc. Price and Consensus | PPG Industries, Inc. Quote

Zacks Rank & Key Picks

PPG Industries currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the chemical space include Univar Inc. (NYSE:UNVR) , The Chemours Company (NYSE:CC) and Kronos Worldwide Inc (NYSE:KRO) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Univar has expected long-term growth of 9.4%.

Chemours has expected long-term growth of 15.5%.

Kronos has expected long-term growth of 5%.

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