A Message from Our Chairman
Our Valued Shareholders,
For all of us, 2020 was a year of significant challenges and many sacrifices. We have learned to adapt through a global pandemic, respond to an uncertain economic environment, meet the changing needs of our customers, help support our communities, and confront social equality and injustice.
Despite these challenges, I am extremely proud of how our 47,000 employees came together as One PPG. Thanks to the dedication of our people, we’ve seen countless, extraordinary examples of efforts to keep our operations running; continue the research and development of tomorrow’s paints, coatings and specialty materials; run our stores and distribution centers; and work together in new ways to serve our customers around the globe.
Today, PPG remains steadfast in our commitment to develop innovative products and sustainable solutions that create value for our customers and our shareholders – growing sales and earnings consistently to deliver superior returns.
The character of our employees has never shone brighter than it has during these times of adversity. Our people have shown great resiliency in continuing to serve our customers and drive a common purpose: We protect and beautify the world.
Despite all of these challenges, PPG’s 2020 net sales totaled approximately $13.8 billion. Our lower sales volumes of about 10%, due primarily to the pandemic, were partially offset by improved selling prices of 1.5% and acquisition-related sales of 1%, with the largest contributions coming from the ICR, Whitford, and Hemmelrath acquisitions. The company generated adjusted earnings per diluted share from continuing operations of $5.70.
Strategically, we continued to strengthen and optimize our portfolio with the announcement of six acquisitions since January 2020, which will further broaden the company’s geographical footprint and technology reach. These acquisitions include:
- Tikkurila, a publicly-traded, paint and coatings company listed and headquartered in Helsinki, Finland with full-year 2020 revenue of approximately $680 million. Tikkurila sells decorative paints and painting-related products to wholesalers, retailers, and construction supply stores. This acquisition is expected to be completed in the first half of 2021.
- Ennis-Flint, a global leader in pavement markings and traffic safety solutions with full-year 2020 revenue of approximately $600 million. PPG completed this acquisition in December 2020 and has now formed a new PPG strategic business unit called traffic solutions.
- Wörwag, a global manufacturer of coatings for automotive and industrial applications with full-year 2020 revenue of approximately $260 million. The acquisition is expected to be completed in the first half of 2021.
- VersaFlex, a manufacturer specializing in polyurea, epoxy and polyurethane coatings with full-year 2020 revenue of approximately $70 million. PPG completed this acquisition in February 2021.
- ICR, a manufacturer of automotive and light industrial paints and coatings. PPG completed this acquisition in January 2020.
- Alpha Coating Technologies, a manufacturer of powder coatings for light industrial applications and heat-sensitive substrates. PPG completed this acquisition in March 2020.
The company also continued to perform well operationally, achieving about $115 million in cost savings from restructuring programs. We drove additional interim cost savings of about $300 million during the year to mitigate the adverse demand impacts from the pandemic, and we expect to retain at least $80 million of these cost savings in 2021.
We generated more than $2.1 billion of cash from operations, which is a record, and we continue to have excellent financial flexibility with cash and short-term investments of about $1.9 billion at year-end. We also continued our legacy of returning cash to shareholders, with about $500 million returned in 2020 through dividends, including an annual per share dividend increase for the 49th consecutive year.
Our capital-light structure enabled us to sustain long-term investments, despite the challenging economic environment in 2020. We continued to invest in mobility and digital initiatives that will pay significant dividends in the years ahead. We launched new passive fire protection coatings for the inside of battery casings for electric vehicles and thermal gap fillers, delivering initial wins in the automotive market beyond our traditional products. We also continue to invest significant financial and people resources to support our automotive customers as they accelerate the rollout of electric vehicles.
The resiliency of our coatings model shone brightly once again. The lessons learned from past global financial crises were significantly enhanced and the speed of execution from our global team was exceptional. Our business portfolio demonstrated a swift recovery of operating margins and record adjusted earnings per share in the second half of the year, up nearly 20 percent compared to the prior year. We are bringing this sustained momentum into 2021.
Also in 2020, we were pleased that Kathleen Ligocki, former chief executive officer, Agility Fuel Solutions, LLC, joined PPG’s board of directors. Her diverse and proven capabilities and industry experience will help to further strengthen the company and the Board’s governance. Kathleen’s senior leadership experience in the automotive and transportation industry will be valuable as we continue to execute our growth strategies in this key growth segment.
Finally, I want to recognize the many PPG people who went above and beyond to support the underserved communities in which we live and operate. PPG and the PPG Foundation invested $13 million in 2020, supporting initiatives focused on education, COVID-19 relief, social justice and other critical areas. Despite the pandemic, we also restarted our award-winning COLORFUL COMMUNITIES® program in the third quarter of 2020. Through these efforts, PPG delivered on our purpose to protect and beautify the world.
2020 financial performance:
Our focus on the future
I am optimistic about 2021, despite the economic uncertainty relating to the pandemic. We will continue to aggressively manage all elements within our control as we monitor and respond to changing market conditions. We remain focused on delivering above-market earnings per share and cash flow growth, while strategically pursuing organic and inorganic growth opportunities.
I strongly believe that we are well-positioned as a company for the coming year and beyond.
I see many opportunities for growth and for PPG to support the industrial demand recovery. We plan to leverage our learnings from the COVID-19 pandemic related to evolving market trends, utilizing digital tools, and customer behaviors to accelerate top-line growth and win in the marketplace. We will increase the speed of our decision-making, improve productivity using technology and data in new ways, and accelerate the scope and scale of our innovation. And we’re committed to sustaining this speed in ways that will inspire and engage our teams.
This next leg of our journey will focus on further leveraging customer relationship management tools and processes to strengthen the value we provide to customers; leveraging digital solutions to enhance the customer experience; and adopting new ways of working to drive innovation, growth and productivity. Our leaders have made significant progress developing strategies in these areas and are beginning to strengthen our capabilities as we further accelerate in 2021.
I want to thank you for your continued interest and investment in PPG. Despite the challenges in front of us during these unprecedented times, our employees are focused on delivering results The PPG Way. They make it happen and work hard to do better today than yesterday, every day.
We at PPG hope you and your loved ones remain safe and healthy. And we look forward to continuing to fulfill our purpose - to protect and beautify the world.
Michael H. McGarry
Chairman and Chief Executive Officer