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In a bid to neutralize raw material inflation, PPG Industries ( PPG - Analyst Report ) recently said that it is raising the prices on fiber glass products across the Americas and Europe, Middle East and Africa (EMEA).
The Pennsylvania-based leading coatings and specialty products company noted that it is hiking the prices on all fiber glass products by 5%, a move which is allowed by contract. The affected products include chopped fibers, direct and multi-end rovings, mats and specialty yarns.
PPG Industries, which competes with the DuPont Performance Coatings segment of EI DuPont de Nemours & Co. ( DD - Analyst Report ) , has been beset by rising cost of raw materials. It has been increasing prices in an effort to compensate for escalating raw material and other costs.
PPG Industries’ Fiber Glass business makes reinforcement materials for thermoset and thermoplastic composite applications. The company’s major markets are energy, infrastructure, transportation and electronics industries. Most glass products are sold directly to manufacturing companies.
PPG Industries continued its positive surprise streak in first-quarter 2012 with adjusted earnings of $1.81 a share beating the Zacks Consensus Estimate by a couple of cents. The results were aided by strong domestic demand and growth in emerging markets.
While the company foresees the European market will remain under pressure, it expects accelerated growth in emerging markets, buoyed by increased industrial activity in China.
PPG Industries’ strategy of diversifying its business across various products and geographies has come in handy in testing times. It has a strong cash position and continues to utilize cash on growth initiatives.
However, raw material costs remain a matter of concern for the company. PPG Industries’ operational performance is tied to raw material imports and energy. The price of the company’s primary raw material TiO2 has been on the upswing.
We, nonetheless, believe that PPG Industries will continue to deliver growth on the back of its strong businesses and improvement in end markets. Our long-term Outperform recommendation on the stock is backed by a Zacks #1 Rank, which translates into a short-term (1 to 3 months) Strong Buy rating.
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