PPG
#Sure.
If you look at our last six acquisitions, they've all ---+ we paid less than 10 times EBITDA for all of them.
The only one that's been above that has actually been Comex where we paid, if I remember, 11.2 or something (multiple speakers)
Pre-synergy.
Pre-synergy.
So, you know, clearly the most ---+ two large ones in our space that were done at a significantly higher level, I'd regard those as unique properties at unique times in the cycle.
Everybody I talk to that I want to buy, they point to those two and I'm sure they would like to have that, but it's not realistic for the sellers to do that.
And obviously when we bought MetoKote, those numbers or at least one of those numbers was in the space and we are negotiating with others right now, so I would tell you we are going to continue to remain disciplined and we're going to do the best we can to make sure we increase the value for our shareholders.
P.
J.
, I just want to add to that.
I want to pick up something that <UNK> said, too, is that there's pre-synergy and there's post-synergy multiple.
And as <UNK> said, there is a very disciplined process here, but when we evaluate each acquisition on its own merits, there's the headline price, but then there's a lot of sensitivity analysis that goes around the revenue CAGR, as well as the synergies.
I think one of the reasons that PPG has been more successful than the average Fortune company in integrating acquisitions is the diligence around both revenue and cost synergies.
If you look at the properties we've acquired in the last few years, they've had an element of either a unique technology, unique customer base, but all had some kind of additional leverage that we could get either by expanding the customer base globally or putting the technology as part of our overall portfolio.
So it's not just the initial multiple.
We look at the whole resultant set of factors, including synergies and the multiple pre and post.
So, P.
J.
, first of all, as <UNK> mentioned, we've got to get the organic volumes up, which we intend to do so in Q3.
We have a lot of latent capacity, as we've talked about, in terms of ability to leverage our cost structure.
I think <UNK> has given you a number in the past of 30% to 40% in Europe, 20% to 25% incremental margins elsewhere in the world.
We continue to work on self-help activities.
That's been a hallmark of ours and we have more coming in the back half of the year, based on our previous restructuring, and as we've talked several times on the call today, we are going to redeploy or deploy cash and accelerate our deployment of cash in the back half of the year.
So those are the three pillars that I would tell you we are going to rely on to maintain good growth in our EPS.
I'll just take the first section on the stranded costs.
The stranded costs are relatively modest because the business, obviously separate from the coatings part of the portfolio, ran pretty much on its own.
Of course, there were certain allocations that come out of the corporate group, but we've been obviously cognizant of this for some time and we have plans and we are planning to execute plans so that the stranded costs do not become an overhang for the Company.
As <UNK> alluded to, as we get into 2017, it won't happen immediately, but as we go through the next several quarters, we have active plans we'll be putting in place and specific initiatives to eliminate that what I'll call relatively modest stranded cost situation.
And then in regard to your question about fiberglass, we always evaluate all our businesses, and in this regard, fiberglass is a noncore business, and should anybody come to us and make us an offer that's worth more than we think it's worth, then we have a shareholder responsibility.
We are not in any active engagement right now, though.
<UNK>, if you look prior quarters, we were up 1% to 2% fairly consistently.
I do have to remind folks, we had in Europe last year, so second-quarter 2015, extremely favorable weather, and this year we had the exact opposite.
So if you said what's the base growth rate for our business there, it would be low single digits.
And we expect the return there in the back half of the year.
(multiple speakers).
The only thing I would say to an organic growth, and <UNK> mentioned this before, is it's okay ---+ it is fair to focus on things that we are doing in the architectural portfolio because we would've liked the topline to be a little bit more robust in the quarter.
But there was significant momentum generated in the industrial and packaging business, as well as really nice momentum in refinish, aerospace, and automotive OEM doing well in the vast majority of the globe.
And that momentum should continue.
If you look at the heat map, there are a few selected parts of the portfolio where, whether it's a macro issue where we get a little bit of help, and obviously a little bit of help from the weather in Europe going forward, as well as some activities we've got going on in architectural [rescha], with those turning, you'll have the vast majority of the portfolio on a pretty good path.
And that's why we have confidence for the back half of the year into 2017 that we are going to improve in the organic growth rate overall.
Let me take this by business.
Automotive, the vast majority of that growth is coming from technology and market, right.
So the market has grown between 3% and 4% and we are outperforming that.
So that's all due to our new compact process.
If you take our industrial business, you know that ---+ our industrial business grew mid-single digits in the quarter.
That is really a variety ---+ some of it is automotive.
Some of it is coil.
Our coil business had a good one.
Electronic materials had a pretty good quarter.
So, all good from that standpoint.
When you look at packaging, that's all technology.
We are just ---+ our new technology is helping us grow.
It grew high single digits.
You know, one of our regions grew low double digits.
You know, we are just taking share in that regard.
When you bring it over to architectural, there's not as much technology in the architectural and we are not getting that.
The market space we think is growing about 3%, maybe 4%, max, and then you shift on over to protective/marine.
That's a declining market with a huge overhang in the marine.
We are taking share due to technology, so that's another area.
Refinish is all driven by the waterborne, so a good performance there, and aerospace is driven by technology.
So I'd say in those segments where technology is a real key, it's both the market and our ability to drive share gains for technology.
These are proprietary systems, so I wouldn't be able to answer the question about whether or not the other ones have a similar type plan.
But it is across all SKUs, so that is a uniform initiative on that part.
I think, <UNK>, we've been consistent in saying that it's in a slow secular decline, low single digits as the big boxes, as well as the company-owned store network, takes share in that regard.
I do not envision that that trend line is going to change.
And so, the other issue you have is that for some of these independent dealers, they have no succession plans, and so sometimes as they get older, they decide to either sell out or they decide to close their doors.
So it's something that we are managing very closely.
Like <UNK> mentioned, we are able to adjust our cost structure to match this decline rate.
It's a very profitable segment for us.
So we are very happy to have these customers.
But it is a drag, if you will, on the overall growth rate of the business.
I think <UNK> said in his repaired remarks the point-of-sale sales were positive for our DIY customers.
When we bought the business, if you remember, we bought the business at a very favorable purchase price and reflection of the state of the business.
We have made significant improvements.
We reversed the negative trend ---+ growth trend.
We now have a positive growth trend in that business.
That positive growth trend is not at market, but it's closing the gap slowly, as <UNK> mentioned.
We've got a lot of time and attention put into that and we continue to make strides and we expect to fully close that gap over time.
But the purchase we did, with the synergies we've been able to capture, has been very, very accretive to our shareholders, so optically while the growth rate is not there, it's certainly been a shareholder-enhancing transaction.
And we had to rebrand all the stores.
We had to take the Glidden products out of their stores and put the PPG products in, so it's not something that transforms itself overnight.
It's not like a light switch, but it has gotten better every quarter sequentially.
And it's a great point <UNK> was just making.
A lot of the capital deployment that was required to get things in the shape we wanted to be in is behind us, and so the incremental profitability on the incremental investment is going to be very attractive.
<UNK>, we haven't made that decision yet.
That's one of the scenarios we'd certainly look at.
Year over year ---+ that's a comment on year over year, <UNK>, and we had exceptional growth last year in packaging Europe.
So we are starting to anniversary that growth, so we still have very good growth rates, but we are coming up against some harder comps.
If you remember, Europe is the first region that converted to the newer technology.
And some of that is actually good news in the fact that we've got some really good momentum in the industrial business in EMEA, so it looks very, very good in comparison, particularly as compared to last year's comps.
So if you start with Central America, I would say we are in inning two.
We are very early.
We just rolled out our own Glidden products under the PPG brand.
Previously, it was a licensee.
We started that about 15 months ago.
The momentum is very significant, so we are very pleased with that.
Clearly as we gain more momentum, we've gotten phone calls from people down there.
We anticipate continuing to get phone calls.
Obviously, we are making our own phone calls.
So there is potential for that.
It's too early to talk about what that might shake out to be, but clearly the model that we have in Comex, the concessionaire network model, plays very well into Central America where you have entrepreneurial people that are looking to put extra TVs in their house, go out and buy a car.
This model works very well down there and we are exporting the Comex model into Central America.
So, that's a real positive for us.
You know, we are bringing the PPG products into Comex.
That has continued, the acceleration of the Comex sales.
That's why we are more than two times GDP.
The Comex team continues to perform at a very high level.
We've been pleased.
We've added over 100 stores in the first half of the year, so we are adding a store every other day, basically.
We anticipate having over 170 stores by the end of the year.
So, we continue to get more geographic diversity.
If you remember when we bought it, we said we had higher share than normal in the central part and we were underrepresented in the north and the south.
We are taking care of that, and so we are growing additional share and presence in both the north and the south.
So, overall, I couldn't be more pleased with our Comex team.
You know, at this point of the cycle I don't anticipate much pricing, except for the new products, so anytime we roll out a new product.
We've said that we are going to have flat pricing across PPG and that would also pertain to general industrial.
The reason we are not accelerating that is we still don't see any recovery in heavy-duty equipment.
Heavy-duty equipment remains a large part of that portfolio.
Wood also is a little bit challenged, but I would tell you that momentum in our industrial business is quite good.
And then if you're talking about the industrial segment, I would say overall all three businesses, packaging, industrial, and automotive, you saw good growth in those businesses and strong performance.
First of all, I would bring to your attention that we did buy IVC.
This is a powder and liquid coatings, mostly US based, although they also had operations in Asia.
So we have done others besides Comex and Consorcio Latinoamericano.
And in regards to your original question, for the other one, Sealants Europe has better than a company average return.
I would tell you that when we bought REVOCOAT, it had less than the company average, but it has probably closed at least 50% of the gap and we continue to work on ---+ our customers are really excited the fact that we have REVOCOAT.
It provides another opportunity to have more content in the paint shop in our automotive customers and they really like that.
So that's been a nice win for us as well.
I guess I would answer your question this way.
There have only been two acquisitions in the past five years from a European competitor of any substance.
And so, I would not necessarily say anything that the current advent advantaged interest rate environment in Europe is going to have any impact.
We are going to continue to drive the consolidation in the coatings space.
Clearly, one of our major competitors is actively engaged and so their activity level in acquisition might be reduced.
So I would tell you we are going to still be the leader in driving consolidation.
The other thing I would add, too, <UNK>, is that while it may be true that certain competitors are domiciled in jurisdictions that have very attractive debt rates, we have access to capital worldwide, as evidenced by the fact we raised EUR1.2 billion last year at an average interest rate of 1.1%.
We have ample fire power.
We've got a good credit rating.
We have a solid balance sheet, access to all kinds of capital worldwide.
Our primary consideration is getting a good return, good long-term return, for our shareholders with high-quality assets at both pre- and post-synergy.
So, that will be our primary consideration criteria for when we do acquisitions.
We don't want to just look at what might be opportunistic in the short term, although we'll look at any asset in our space, along with close adjacencies, but it's that long-term value creation that we are going to remain disciplined about.
