PPG Industries' Management Presents at Bank of America Merrill Lynch U.S. Basic Materials Conference (Transcript)

| About: PPG Industries, (PPG)

PPG Industries, Inc. (NYSE:PPG)

Bank of America Merrill Lynch U.S. Basic Materials Conference

December 11, 2013 08:00 a.m. ET


Vince Morales – Vice President of Investor Relations


Kevin McCarthy – U.S. Chemicals Analyst

Kevin McCarthy – U.S. Chemicals Analyst

Okay. Welcome back everybody. This is day two of our US Basic Materials Conference. My name is Kevin McCarthy, US Chemicals analyst, and we are very pleased to welcome today’s first presenting company, PPG Industries. PPG as many of you know is about a $26 billion market cap leading producer of coatings, indeed the largest producer of coatings in the world today following the company’s recent acquisition of Akzo’s North American coatings business.

Representing the company we have Vince Morales, Vice President of Investor Relations. Vince thanks very much for making the trip to Boston. We look forward to an update on PPG.

Vince Morales

Thank you, Kevin. We had trouble getting here for most people I am sure, including myself, but we’re here and very pleased to present at the conference. Before I begin, let me just cover our forward-looking statements that both prepared remarks and Q&A may contain forward-looking statements, and the company is under no obligation to update those statements. I’m going to go through this agenda, talk a little bit about our portfolio transformation that Kevin alluded to, talk a little bit about the coatings industry. For those who know us well this will be a little bit of a rehearsal. We will talk a little bit about our financial and cash position, and certainly wrap-up with a question-and-answer session.

Just generally speaking, in the coatings industry paint and coatings are used anonymously. The paint and coatings industry is a large global industry. It touches a variety of different end markets that we will talk through. Those include automobiles, airplanes, marine coatings, package coatings, certainly commercial and residential construction and repaint heavy duty equipment. So a variety of different end markets and PPG, as you will see, in the forthcoming slides plays in a variety of these different markets as well.

With respect to the company overall, we have gone through over the last decade plus a fairly significant shift of our portfolio or mix of business. Ten years ago or so we were about half coatings. Coatings at that time represented about $4 billion of sales for the company. We had a variety of different businesses. The second largest business at that point was glass. If you flash forward to 2012, we decreased our glass exports fairly significantly with some divestitures.

We also grew our coatings business by about $7 billion, about 175% increase in coating sales. We also grew some other smaller businesses as well. That coatings growth was both organic and inorganic, and at the end of last year represented about three-quarters of the company. So a significant shift over that 10-year period with the portfolio.

In 2013, we took several actions to accelerate that portfolio shift, the first of which we closed on our commodity chemical separation. We separated the commodity chemical business. That business was combined with Georgia Gulf, created a company called Axiall. That was done via Reverse Morris Trust. We completed that in January of 2013.

We in April 1 of 2013 we closed on the acquisition of AkzoNobel’s North American architectural coatings business. I will talk a little bit more about that business later, but that is about a 1.5 billion revenue business. We acquired Deft business, aerospace business. Small business but very good technology in the aerospace industry, and we announced the impending closure, the divestiture of our Transitions Optical joint venture. So very significant portfolio moves, all within the last 12 months, and as a result of those moves you could see the pro forma of 2012 were about 90% coatings, very small positions outside of the coatings footprint, and again about 13 billion in coating sales. So again significant transformation over the past 12 months.

In addition to the portfolio mix we also did a significant amount of activity in terms of geographic spread. We went from what was predominantly a US-based company with some small businesses outside the US in 2002 to where today we are over half outside the US, very strong presence in the emerging regions. Again most of that through our coatings franchise.

And if you look at the purpose for the portfolio shift you could see our earnings trend in our coatings businesses, earnings were up, pre-recession up almost 60%. That includes the negative effect of the recession. We are still in the early stages of recovery or non-recovery in some markets. So 60% earnings growth shows the ability for us to grow our coatings earnings and that does not include the very strong 2013 year-to-date, where we’re up again a 20% on top of 2012. So good strong performance from the overall coatings business and again a 10% CAGR in earnings.

Just looking more broadly at the coatings industry, the coatings industry is about $110 billion. It is a variety of different sub-segments in coatings. The largest subsegment is architectural coatings or decorative coatings. It represents about 45% of the industry. That segment is really focused on both residential, commercial construction as well as majority repaint. It is a very region specific business, and the primary attributes of that business are brand and distribution, and in some cases density of coverage.

The other 55% of coatings is what we refer to as special-purpose coatings. These are coatings that go on a variety of different products such as automobiles, again planes, boats. These coating subsegments have a very heavy technical competency. They are typically focused on protection of a large asset, and also decoration. So the fit and finish of a car, and again, these have more of a global orientation. Some of the customers are very global. It is a technology and spec driven business, and again a very heavy customer intimacy element to it, where in some cases we are working in the factory with customers applying paint, in some cases running their paint line. So special purposes is about 55% of the industry, again a variety of different subsectors.

The industry over time has been in a consolidation phase. PPG has been a consolidator within the industry [Indiscernible], in 2008 as an example PPG bought the then number 9 coatings company in the world, SigmaKalon. That same year AkzoNobel bought the number 5 coatings company in the world, which is ICI. So again we have gone from about 50% of the industry held by the top 10 to now 60%, and we expect consolidation to continue on a go forward basis, and we expect to be part of that -- consolidate our role.

The average CAGR over this time period for the industry is about 6% in terms of revenue. Looking at our position globally, as you could see PPG is a leading player in all the different subcategories of coatings. In many cases the number one position. We hold that same position in most major regions of the world. So we have leading positions in the US as well as in Asia or China, and you could see we are also the only person or the only company that has the positions across all of the major subsectors. So very strong positioning by PPG. Again we started typically, if you look at our footprint, we were more of a special purpose coatings company and with the acquisition in 2008 of SigmaKalon, and the recent acquisition of Akzo we have more of an industry mix. We are about 60% special purpose, 40% architectural, but we have grown our architectural presence over the last five years fairly significantly.

The other element of coatings is fairly interesting is it has fairly equal parts of OEM, new build in cars, new build in homes, new build in heavy duty equipment, and there is a very vibrant equally sized aftermarket. So repainting of homes, car repair, refurbishment of aircraft and marine vessels. So the OEM and after-market component provides stability to the coatings market in most economic cycles and if you look at PPG’s mix we are about 50% OEM, and 50% after-market.

Generally speaking, the coatings industry has been fairly stable in terms of profitability. You could see PPG’s positioning along with some of our primary peers here, and because of the nature again of the OEM aftermarket, because of the heavy variable cost nature of the industry, it is again a very stable industry.

Looking specifically at our financial performance, both for the past couple of years, as well as in 2013 you could see on an EPS basis, we performed exceptionally well. We had a record year in 2008. We saw the impact in 2009 by the recession, but fairly quickly we recovered and in 2010 produced another record, and subsequently two years consecutively we are about 20% EPS growth. And in the right panel of this chart you can see 2013 year-to-date, we are up another 25%, and actually through three-quarters of 2013 we already exceeded our full-year 2012 earnings. So very strong growth in earnings per share.

Looking at our performance by region, you can see in both the US and Canada we have had very good performance in the past several years. Volumes have been up each quarter for the -- since the beginning of 2012. 2013 we have had again good consecutive volume performance against those strong 2012 comparables. So again several recovering markets in the US, but that is supporting certainly the automotive market, aerospace, architectural coatings as we are in the infancy of the housing recovery. And early in the second part of the year the story for us on the top line has been a 30% addition to our sales from the AkzoNobel acquisition. To remind you, again we closed on that acquisition April 1, and that has been a contributor to our sales and earnings. And the acquisition itself has been important for us to grow our position in the US and Canadian architectural markets.

It has added to our position in each of the three distinct distribution channels in the US. Company-owned stores, we are now solid number two with the addition of the 600 stores we acquired from the acquisition. We now have 1000 stores. We furthered our national home center presence for the DIY market. We acquired positions with this acquisition in both Home Depot, and Wal-Mart in the US, as well as Rona and Canadian Tire in Canada, and supplementing our existing position in Menards and Lowes.

And we also furthered our penetration in the independent distributor model. It brought to us a variety of different brands to the PPG family now. In addition it brought us the number one position in Canada. So the number one architectural coatings company in Canada and the number one position in the Caribbean, in addition to the US positioning. So a very positive acquisition for us we think again at the very outset of the construction recovery in the US.

Looking at our Asian business, we continued to grow in Asia. It is one of our most profitable regions. For the most part in Asia we are fully owned with the exception of India, were we do have a JV partner, and we have been able to grow both top and bottom line for an extended period of time. Obviously our earnings are up in 2013 as well, which you could see. We have been able to have good penetration in all the markets we participate in, while we are already number one in some of these markets in the Asian region already with automotive, auto repair, packaging, aerospace, good solid positions already developed. Our sales there has been just under $3 million in one of our more profitable regions from a return on sales perspective.

Moving to Europe this has been -- for us Europe has been a difficult economy to navigate through. Based on our 2012 sales, Europe represented 40% of our coatings profile, and you could see based on the chart on the left that the volume performance for us there, pre-recession to today is down 20%, and as every year has been difficult to navigate. Despite those difficulties, we have been able to produce solid earnings performance. You could see our core earnings performance here, and as we have seen some recovery, or stabilization in some of the European markets we have been able to move to record performance this year in Europe, in terms of earnings and you could see the trend in Europe has shifted from what was remarkably negative in the year. It has improved every year -- every quarter throughout the year.

And you could see we were down about 2% in the third quarter, and that improvement really was evidenced across a variety of different end markets, and a variety of different countries. And so that gives us some optimism that we are seeing some stabilization in that market.

Despite the difficulties in the market, we have had consecutive years of record earnings in Europe, as well as years of record earnings in US and Asia, and again this year despite again very difficult circumstances Europe is up 7%. One of the key drivers for our improvement in earnings has been our restructuring. We announced a very large restructuring program in 2012 pointed at Europe, and has the primary focus, and we have been navigating through those programs, and to date we have a target of about $140 million of savings, and we are closing in on the target since the second quarter of 2012 till today.

So we have announced another more modest restructuring program in July, and that program will be incremental to this program and again we will be focused on a few of the markets in Europe, as well as our protective and marine market globally that remain weak. But we have been able to navigate again a very difficult economic backdrop and produce very solid earnings performance with aggressive cost management. And just looking overall at the company’s performance over the last several years, we have been able to deliver 13 consecutive quarters of EPS records. So again a very strong performance with only a partial recovery of our sector segmentation.

Another strong story for PPG is our cash position, and today we entered the third-quarter with about $2.2 billion of cash on the balance sheet of cash and short-term investments. We typically need between $300 million and $500 million to run the company depending on the season. We do have a seasonal business mix. So we do need a little bit more money early in the years. We are building inventory for the architectural paint season, but we do have, as you could see, some excess cash. Also the pending Transitions Optical joint-venture divestiture is expected to bring about 1.5 billion of after-tax proceeds. We expect that pending transaction to close in the first half of 2014, and so add to our cash position.

As you could see over the past 10 years, we have been fairly balanced in our cash deployment. Now the other attribute to the coatings industry is it is very capital light. We typically need 2% or 3% of sales for maintenance Capex and some organic Capex. We have been averaging about 2.5% of sales for the last five or six years in capital spending, and that includes the growth activity that we have had primarily in Asia to expand our Asian footprint.

Today we have about 15 plants in China. So again that 2.5% of the Capex includes already some growth capital spending in it. We have been a very long dividend payer and we have paid consecutive annual dividends since 1899. We have raised the dividend the past 42 years. Our payout ratio, we like to target between 30% and 35% payout ratio in terms of dividends.

As I mentioned and I will talk about shortly, we have re-used the excess cash after Capex and dividends for both acquisitions as well as share repurchases. And so we have a balanced portfolio of cash deployment.

If you look at our acquisitions, we have done about 50 deals since the late 90s. These are a variety of different coatings markets, a variety of different regions. Some of these are bolt-on, some of them larger. Total cumulative value of these deals in terms of sales is about $8 billion, and again for us I think we have demonstrated the ability to easily implement these businesses into our organizational structure. We have [Indiscernible] all around the world for all of our businesses. So implementation with these acquisitions, and again into our structure to capture synergies is something that we pride ourselves on, and we have built back-office hubs in each major region of the world, so we are able to easily take acquired businesses and move some of the back-office stuff to a shared service centre. We have a shared service centre in the US, we have one in the Czech Republic, one in Malaysia and one in Hong Kong. So we are able to easily again take some of these acquired businesses and focus on the commercial side, and then move the back-office stuff to a shared service environment.

We have also been active in share repurchases and really following our 2008 acquisition and subsequent to the great recession we have expanded the amount of money we have allotted to share repurchases each year. We were very active in 2010 and 2011. In 2012, our share repurchase activity was limited post the announcement of the Commodity Chemical transaction -- because that transaction involved a Reverse Morris Trust, we were limited in the amount of share repurchase activity we can do in the back half of the year.

But we announced in 2013 a share repurchase target of $500 million to $750 million. We indicated at the end of the third quarter that we would go to the upper end of that target. So 750 is our target for the year for 2013. And in both ’10 and ’11, both share repurchase and dividends accounted for about 80% of the cash we generated. So we returned 80% of the cash we generated in ’10 and ’11 to the shareholders. So again a very important element of our cash story -- cash deployment story.

So just in summary, the coatings industry is a very vibrant growing industry globally. As Kevin mentioned, we are the global leader in the industry. We are also the leader in many of the end markets, both technical end markets as well as architectural. We have got good customer spread globally, and we are well-established in every major region of the world. We have gone through the past 12 months of fairly concentrated acceleration of the portfolio, and we delivered both this year as well as in prior years excellent financial performance.

And as we look ahead, we have $2.5 billion of cash roughly, and another $1.5 billion coming in with the Transitions joint-venture divestiture. So cash deployment is extremely active discussion at the company, and we are very levered with the high exposure we have in Europe. We are really levered to any recovery we see in the European region.

So with that I will take any questions.

Question-and-Answer Session

Kevin McCarthy – U.S. Chemicals Analyst

Thank you, Vince. If anyone has questions please just raise your hand, and we will bring the microphone right over.

Just to kick things off here, when you did the Reverse Morris Trust transaction with Georgia Gulf, you redeployed those proceeds, you know, almost immediately with the Akzo deal. So, here today we have the Optical divestiture coming up pretty soon, and you pointed out in your prepared remarks excess cash balance. How should investors think about redeployment of the optical deal proceeds of 1.5 billion in terms of, you know, repurchases versus what you are seeing out there in the M&A market?

Vince Morales

Thanks Kevin. Yes, just as a backdrop we did receive as part of our Reverse Morris Trust $1 billion, just under $1 billion of cash, and coincidentally only, but the acquisition of Akzo was $1 billion. So we bought $1.5 billion of sales for $1 billion with the Akzo acquisition. Now with respect to our cash balance today and the pending proceeds, our primary focus is further consolidation in our core markets of coatings. We have and continued a variety of deals in all geographies, different size deals. There is more -- the coatings industry itself is -- the remaining players that are fairly -- are smaller, not in the top 10 are fairly regional players and in many cases private companies.

So we are working with a variety of different folks to try to assess interest and be acquired, and in many cases getting the economics of acquisitions we have an active pipeline and I would tell you our preference would be to use the majority of that cash to consolidate that space.

That being said the acquisitions are unpredictable both in timing and size. We do have excess cash, and if we don’t see in the short to mid-term the ability to deploy that cash effectively on acquisitions in a disciplined manner, we would revert to share repurchases, which is what we did in 2010 and 2011. Kevin I’m sure you are aware of this, but in 2010 and 2011 we were also looking to do acquisitions. We didn’t find any that hit our price targets, and so we deployed the majority of our cash in those years for share repurchase. So that would be the avenue we take.

Unidentified Participant

After selling or divesting chemicals now, or commodity chemicals and optical there is not a lot left that is in coatings. When you present your segments, [Indiscernible] Silicas and specialties on their own, can you maybe talk about that in fiberglass, which may or may not be on the next trade under the PPG portfolio?

Vince Morales

You know, we have -- and thanks Bob. We have 90% coatings on a pro forma basis. The other 10% is comprised of about $1 billion glass segment. That glass segment consists of two fairly equally sized businesses, flat glass, which is glass primarily for commercial and residential construction, a US-based business for us, and we also have a global fiberglass business embedded in that glass segment.

In the other two businesses we have, in our specialty material businesses would be Silicas, and optical monomers business. That comprises the remainder of the optical specialty materials segment. You know, the specialty businesses in our core – they are businesses that typically have high technology embedded with them. In the glass businesses, we have done a tremendous job over the past 15 years downsizing our glass profile.

As I mentioned earlier in the prepared remarks, glace was at one point over 25% of the company less than 15 years ago. Those two glass businesses today, they are facing markets that still have not fully recovered. We would like to see some more recovery in the markets. There is not an active process for those businesses, but again we would like to see more recovery. We know how to run those businesses. We have run them for over 100 years.

So I think we are very good stewards of the businesses, but we would like to see some more end market recovery both in commercial construction in the US, as well as more broadly fiberglass globally. So we will have to look at our segmentation as you mentioned Bob as we go forward following the Transitions divestiture.

Unidentified Participant

Vince can you comment on where PPG stands today with regard to extraction of synergies from the Akzo deal that you have consolidated of fair amount, but there is still more to go, so where do we stand kind of on the numbers and timelines here?

Vince Morales

Yes, when we announced the Akzo -- when we first announced the acquisition, we put forth the synergy target of about $160 million. Again I will remind you on a sales basis $1.5 billion. When we were closing the deal 4 months later, we raised that synergy target to $200 million, and we closed again April 1 of 2013, we have through the past six or seven months completed on a run rate basis about 50% of the synergy capture. So we are at a $100 million run rate on an annual basis.

So in 2013 we obviously didn’t capture $100 million, but we did capture the run rate of that. The remaining $100 million we expect to extract fairly equally over the years of 2014 and 2015. So incrementally in 2014 we are going to see an incremental earnings impact of between $60 million and $80 million versus 2013, and the remainder incrementally would be achieved in 2015. So we have done some of the basic blocking and tackling. We are moving back office. We are doing some distribution reorientation. We have closed about 80 plus stores that were redundant in the portfolio.

So there is a variety of different actions we are taking and have taken today to complete the synergy capture.

Unidentified Participant

Vince, can you talk about your auto OEM business, the business has been bleeding much last few quarters, are the prospects for that business to continue?

Vince Morales

Sure. Yes, one of our biggest businesses is automotive OEM coatings. We are the global leader and have been for quite some time. Very technically demanding business. Just to put some numbers to it, the average car has about $100 of paint on it. So a $60,000 BMW or so would be $100 of paint content. The application of that paint costs the automaker, $600, $700, $800. So very customer intimate relationship. As Alex mentioned we have been doing fairly well in this business for quite some time, and especially the past 4 to 6 quarters. We have good positions all around the world. In US, Europe, number one in China. And far us some of our volume performance has been based on some new technologies we have introduced.

We have introduced a very good, what we call, compact process technology, that is really targeted at new auto factories. It actually reduces the paint footprint in an auto factory, both the cycle time, as well as the capital outlay required by the automaker. And so the increased cadence provides more efficiency to more environmentally sound, and again less energy efficient -- or less energy cumbersome, so more energy efficient.

In addition to that we picked up -- because of that technology, we have picked up a good share of the new auto plants that are being built all over the world. In addition, one of the elements that is taking place in the auto industry is Japan is -- for the multinationals, Japan is a very difficult market and we sell virtually no automotive OEM paint into Japan. But the Japanese companies that produce cars outside of Japan, we get a fair share of that business.

And Japan, the Japanese automakers have been localizing production. So they have been moving production out of Japan into the other regions of the world for a variety of factors. So that shift of production has been an factor in our performance in order to pick up some share on a global basis despite the auto builds for the Japanese makers being fairly constant.

So we expect that trend to continue Alex, as well as we expect our technology and service to remain keys as we go forward, and again for us the auto market on a global basis we expect 4% to 5% growth next year commensurate with the growth this year. And the other elements of that growth will differ. This year the elements have been strong US performance, good Asian performance, but Europe has been negative. Next year we expect continued US growth, but at a lower growth rate; Asia we expect to continue to perform well and we expect Europe to now be a growth contributor instead of a growth detractor.

Unidentified Participant

Good morning. Two questions, first with Western Europe is there any difference between your exposure on the architecture and special coating side versus your group as a whole, and then second maybe if you can talk a little bit about raw material trends and kind of some of the strategies to -- for them to also to enter raw materials?

Vince Morales

Certainly, certainly. Yes, if you look at our European exposure we do have -- Europe is not an homogenous region for most of the coatings world. It is very country specific on the architectural side. We do have a very small presence in southern Europe architectural, so very small actually. So we have virtually nothing in Spain, Italy, Portugal. We do have a good solid presence in what I call Northwestern Europe, in the UK.

So that presence -- we do have good presence in Eastern Europe architecturally. The special purpose coatings markets are more EU centric. So automotive production in the region, whether it is made in Germany or Italy moves throughout the region, unlike architectural. So if you look at our presence we are about -- in Europe we are about 40% architectural, 60% special-purpose, and again that architectural business has a geographic slant to it.

With respect to our raw materials, we came into 2013 and our anticipation then was for a fairly modest raw material environment. As we look at the results through 2013 that in fact did play out. We have had fairly modest inflation all in our cost bucket. Some raw materials in 2013 have gone up such as propylene derivatives, some have gone down, primarily titanium dioxide.

As we go into 2014, we feel that the inflation environment is fairly consistent with 2013. We may see a bit of modest inflation. But we are seeing actually more is what we would call a return to more seasonal inflation. Coatings is a very seasonal business, and if you go back, you know, if you exclude the past couple of years and you go back a little bit longer time horizon, you would see some inflation at the outset of the coatings season, which are January, February and March are very heavy coatings production months. And so we would see some tightness in some of our raw materials early in the season.

We will then see that tightness moderate when we get to the middle of the year and then loosen when you effectively are selling out of inventory later in the year, we think we are moving more to that type of environment in most of the world. [All in] for the year we expect fairly modest inflation. We do see sufficient supply in most of our raw materials. With respect to just some of the things we are doing to manage our raw material basket. We have been fairly active specifically on titanium dioxide, in trying to be more efficient with our uses of TiO2.

We have had a multi-year program of I will call it efficiency ratio of a couple of percent a year. We are executing on that and we are going to continue to execute on that. We have adopted additional supply, and expanded our supplier base, and more longer term we are working on trying to develop additional suppliers as well in that particular market, and again we are on path with that as well.

Unidentified Participant

And maybe it is too early to tell, but after the sale of [Indiscernible] to private equity, I just wonder if any share issues you could comment on either in the OE or the after-market relating to that transaction?

Vince Morales

Yes, Bob. I think you are referring to the DuPont automotive, DuPont coatings sale. That sale was completed, you know, roughly first part of the year, March or April. You know, we would not -- the marketplace I think for those particular business -- that business plays in the automotive OEM market. You know, the automotive refurbished market, and as an industrial component as well. And we have not -- the market structure has remained constant. The nameplates obviously changed. Those are technology driven markets, and I would tell you that any change within those markets will be driven by technology, not necessarily nameplate. So we are working as we have in the past on developing and implementing new technologies and we have not seen any differentiation in the market although all the competitors have good technologies and good customer relationships.

Kevin McCarthy – U.S. Chemicals Analyst

And so I wanted to touch on packaging coatings, there is a lot of talk in several corners of the chemical industry that a move away from BPA, PPG has had a very strong presence in this business, my understanding is that in the beverage market you have mainly been on the outside of the can. So not much of an issue for you, but I am wondering whether or not it could be an opportunity through technology to move more and more towards the inside of the can?

Vince Morales

Yes, thanks Kevin. Yes, we do have a solid packaging coatings business as you mentioned a global player. But if you look at our positioning historically, really our legacy positioning, we have very good position on the exterior food and beverage containers, and in the US virtually no share on the inside of the can. So we are at once -- what we call once in a generation opportunity. This is an industry for a variety of reasons has kept existing technology in place for several decades.

The product on the inside of the can does go through FDA testing. Certainly it comes in touch with food or beverage. So there is odor, flavor, and so again for a variety of good reasons the industry has kept existing technology in place for quit some time. There is a shift but that is a kind of technology shift. This is our opportunity to really exhibit our technical and R&D traits. Today we have, as I mentioned, nothing on the inside of the can. And for us, anything we get would be incremental in terms of share if and when technology is adopted that that PPG makes.

And then, you know, real quickly there will be a variety of different technologies on the inside of the can depending upon whether it is soup or soda or beer or tomatoes. All those have different characteristics, susceptibility levels, and so there will be a whole host of technologies that are adopted once technology is adopted and again from our specific positioning, you know, we don’t have to win all of those. We only have to win some of those and in doing so we would pick up share on the inside of the can. So for us a good opportunity, once in a generation opportunity.

Unidentified Participant

Just as a brief follow-up to that, you know, when you take into account the FDA testing that you mentioned so forth, when exactly will this shift occur. Might we see some of it in 2014? What would this time frame look like?

Vince Morales

Well, there is no immediate legislation today in the US. There is some legislation in Europe, specifically in France. There is a labeling requirement that starts in 2014, where cans would need to be labeled saying they contain BPA, and then today they are scheduled for a legislation in 2015, where France has to move to non-BPA. In our view that will start a snowball rolling down the hill that would cause adoption, but the only legislation right now is in France.

Kevin McCarthy – U.S. Chemicals Analyst

Excellent. Please join me in thanking PPG and Vince Morales.

Vince Morales

Thank you, Kevin.

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