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10
2016 PPG ANNUAL REPORT AND FORM 10-K
produces coatings for appliances, agricultural and construction
equipment, consumer electronics, automotive parts and
accessories, building products (including residential and
commercial construction), transportation vehicles and numerous
other finished products. PPG’s automotive OEM coatings
business was the first to introduce breakthrough automotive
coating technologies such as cathodic electrocoat, powder
clearcoat, compact paint systems and factory-applied spray-in
bedliners, and the Company has a continued focus on innovation
leadership. PPG has established alliances with Kansai Paints to
serve Japanese-based automotive OEM customers in North
America and Europe and Asian Paints Ltd. to serve certain
aftermarket customers and automotive OEMs in India.
The packaging coatings business supplies coatings to a
variety of manufacturing companies. Packaging coatings are
widely used for the protection, performance and decoration of
metal cans, closures, plastic tubes, industrial packaging, and
promotional and specialty packaging.
The coatings services business applies coatings to
customers’ manufactured parts and assembled products. It
operates on-site coatings services within several customer
manufacturing locations, as well as at regional service centers.
Customers ship parts to service centers where they are treated to
enhance paint adhesion and painted with electrocoat, powder or
liquid coatings technologies. Coated parts are then shipped to the
customer’s next stage of assembly.
Price, product performance, technology, cost effectiveness,
quality and technical and customer service are major competitive
factors in the industrial, automotive OEM, packaging coatings,
and coatings services businesses.
The primary specialty coatings and materials products are
amorphous precipitated silicas for tire, battery separator and
other end-use markets; TESLIN
®
substrate used in such
applications as radio frequency identification (RFID) tags and
labels, e-passports, drivers’ licenses and identification cards;
Organic Light Emitting Diode (OLED) materials for use in
displays and lighting; optical lens materials and photochromic
dyes for optical lenses and color-change products. Product
quality and performance, distribution and technical service are
the most critical competitive factors to the specialty coatings and
materials business.
The major global competitors of the Industrial Coatings
reportable segment are Akzo Nobel N.V., Axalta Coating
Systems Ltd., BASF Corporation, Kansai Paints, Nippon Paint
and Valspar Corporation. The average number of persons
employed by the Industrial Coatings reportable segment during
2016 was about 13,400.
Glass
The Glass reportable segment is comprised of the North
American fiber glass business. During 2016, PPG divested its
European fiber glass business and its ownership interest in two
Asian fiber glass joint ventures. Refer to Note 2, “Acquisitions
and Divestitures” under Item 8 of this Form 10-K for further
information relating to these transactions. PPG’s major fiber
glass markets are commercial and residential construction and
the wind energy, energy infrastructure, transportation and
electronics industries. Most fiber glass products are sold directly
to manufacturing companies. PPG manufactures fiber glass by
the continuous-strand process.
Price, quality, technology and customer service are the key
competitive factors in the North American fiber glass business.
The Company competes with many major producers of fiber
glass, including CPIC Fiberglass, Johns Manville Corporation,
Jushi Group, Owens Corning and Taishan Fiberglass.
Excluding divested businesses, the average number of
persons employed by the Glass reportable segment during 2016
was about 1,100.
Strategic Acquisitions
Since the filing of our 2015 Form 10-K, the Performance
Coatings and Industrial Coatings segments announced and
completed several strategic acquisitions, as follows:
Performance Coatings
On January 20, 2017, PPG acquired certain assets of
automotive refinish coatings company Futian Xinshi (Futian),
based in the Guangdong province of China. Futian distributes its
products in China through a network of more than 200
distributors. Futian had sales of approximately $15 million in
2016.
On January 5, 2017, PPG completed the acquisition of
DEUTEK S.A., a leading Romanian paint and architectural
coatings manufacturer, from the Emerging Europe Accession
Fund. DEUTEK, established in 1993, manufactures and markets
a large portfolio of well-known professional and consumer paint
brands, including OSKAR and Danke!. The company’s products
are sold in more than 120 do-it-yourself stores and 3,500
independent retail outlets in Romania. DEUTEK reported sales
of 30 million euros in 2015.
On November 11, 2016, PPG purchased the 50% ownership
interest in PPG Univer S.p.A from its joint-venture partner,
Univer Italiana S.r.l. PPG Univer S.p.A manufactures
architectural and liquid industrial coatings employs about 150
people. It operates a network of 12 retail stores in Italy and
maintains administrative offices and a production facility in the
town of Cavallirio, Italy. PPG Univer S.p.A. had sales of
approximately 30 million euros in 2016.
Industrial Coatings
In July 2016, PPG completed the acquisition of MetoKote
Corporation. MetoKote is a U.S.-based coatings services
business with 2015 global sales of approximately $200 million.
MetoKote applies coatings to customers’ manufactured parts and
assembled products. It operates on-site coatings services within
several customer manufacturing locations, as well as at regional
service centers, located throughout the U.S., Canada, Mexico,
the United Kingdom, Germany, Hungary and the Czech
Republic. Customers ship parts to MetoKote service centers
where they are treated to enhance paint adhesion and painted
with electrocoat, powder or liquid coatings technologies.
MetoKote coats an average of more than 1.5 million parts per
day. Beginning in July 2016, the financial results of MetoKote
are reported as the coatings services operating segment.
Raw Materials and Energy
The effective management of raw materials and energy is
important to PPG’s continued success. The Company’s most
significant raw materials are epoxy and other resins, titanium
dioxide and other pigments, and solvents in the coatings
businesses; sand and soda ash for the specialty coatings and
materials business; and sand and clay in the North American