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Jim Cramer’s Interview with PPG Industries CEO 8/2 Part II

Jim Cramer interviewed PPG Industries‘ CEO Charles Bunch on his show. Ken Fisher’s Fisher Asset Management had more than $600 Million in PPG at the end of March. Here is the second part of Jim Cramer’s Mad Money on August 2nd:

Jim Cramer

Despite today’s horrendous sell-off, I think we’ve got to circle back to companies that delivered terrific quarters, but simply aren’t getting any credit at all; because they reported in the midst of this chaos. There are a lot of high-quality stocks out there that have been driven down because the sellers aren’t picking and choosing right now. They sell the whole S&P futures or sell some ETF; we’ll have some dump the whole market very quickly. They’re selling the good with the bad and the ugly.

that’s why you can get a great American chemical company like PPG for — hey, listen, for more than seven points less than it was trading before it reported a terrific quarter and, that was on July 21st. PPG makes everything from coatings for packaging cars, airplanes, ships, chemicals, chemicals and glass, part of the raging bull market in chemicals, and best of all, it has been able to consistently raise price to offset most of the higher commodity cost. In other words PPG is exactly the kind of company that can transcend the whole global macro economic litany of woe. and thanks to the seemingly endless sell-off, maybe you can start thinking about buying this stock at a truly bargain basement price. The company’s last quarter was excellent. It delivered $2.12 of earnings. That was a 9 cent beat on stronger than expected revenues that rose 15.3% year over year, driven in part by 2% increase in volume, 6% in pricing, and some good currency gains. 9% in volumes would have been much better but, they had a Japanese supply chain disruption. Hey, makes sense right? And a very weak April courtesy of bad weather. Sales have rebounded nicely since the April bottom. PPG’s really firing on all cylinders here. Performance coatings business is up 11%. Industrial coatings, 14%. Architectural coatings, think paint, up 22%. Optical special material up 8%. And, commodity capital’s up a staggering 31%, mostly thanks to higher prices, and glass up 17%. PPG is a best of breed name with incredible pricing power that people just want to throw away today because they don’t want to look at any stocks. But I think if anyone can ride out this lousy environment, it’s them.

The stock has given you an 80% gain since I got behind it in June of 2009. It was only $45.45 then. Recent pullback, I think maybe we’ve got to start thinking it’s a buy. So let’s take a closer look with Chuck Bunch, the fantastic chairman and CEO of PPG, and find out more about what’s happening in his company and in the broader economy. Mr. Bunch, welcome back to mad money.

Chuck Bunch: Jim, it’s great to be here. Thank you.

Jim: all right, chuck. I think this is a good day to have you on, because we’ve had major CEOs say in the last few days that the world is coming to an end, that the governments are rearranging the chairs on the titanic. I’ll even point to one, David farr, good industrials from Emerson, says he sees no catalyst in the fundamental weakness in the economy and he just has no visibility. Basically saying, listen; we are in a house of pain and a house of doom. You do not see the world that way, do you?

Chuck Bunch: No. we had a great second quarter, as you talked about in your introduction, Jim. And, even though the growth is uneven around the world and in certain of our end use markets, we still think it’s a solid economic picture and one in which we can continue to prosper.

Jim: Alright, Chuck. I think people at home; they probably think all corporations are the same, frankly. They figure it’s all guys walking around, selling product and when business is bad, they sell nothing. And when business is good, they sell a lot. But, companies can innovate, create, and fill in niches that really need where there’s tremendous demand. You have been adept at finding places where there’s tremendous demand and filling them. Can you just walk our people through why you’re not necessarily just hanging by your fingernails because the world’s had a couple bad days?

Chuck Bunch: well, we think we’ve positioned the company very well around the world. We have great geographic diversity. We built a tremendous portfolio of businesses in china. We’re growing in markets like Korea and India. And we have great end-use markets like aerospace, that despite some of the negative economic news recently, the aerospace business is healthy and we’re positioned to take advantage of some excellent growth there.

Jim: when you put together your conference call, did you think at all about saying, look, we could have done much better if it weren’t for the US government?

Chuck Bunch: No, we didn’t really talk about that. I think we had such a great quarter, we were up an all-time record 30% over our previous earnings per share record, 25% up over a net income. So. It was difficult for us to say, hey, there were some things that if they hadn’t been happening out there, we could have done even better. So we — we’re pleased with the way we’ve been performing and we think there’s still good momentum, despite some of the more sluggish economic news that we’ve been hearing about over the last few weeks, especially in the media.

Jim: Did you change your business plan when you see that there’s problems in Washington over a debt ceiling?

Chuck Bunch: No, we didn’t, Jim. We’re focused on delivering and executing the way we have for these past four record quartz that we’ve announced.

Jim: maybe it will help people at home to recognize that some compute better than others. There’s a couple of paint companies in this country. Only one of them seems to be delivering good, consistent earnings. It’s yours. What are you doing different from the other guys? Well, we have a very disciplined operating process. In this period where we’ve seen raw material inflation, we’ve had to be very focused on pricing, on understanding our costs, on communicating what’s going on with our customers and recognizing what’s our value proposition. And I think we’ve been able to operate in this environment, despite the challenges, quite effectively.

Now, you are also levered to a lot of the big foreign automobile companies, which have been doing better. We saw great numbers today, for instance, from Toyota. So Japan coming back online is almost as important to you as to how some of the domestic auto companies are doing, right?

Chuck Bunch: Yes, that should help us. We’re not exposed directly to the Japanese market, but we are important suppliers to them here in North America and in Europe and the effects of the earthquake and tsunami in Japan really disrupted the supply chain for many of our Japanese automotive customers here in North America, as an example. It hurt us a little bit. We were still able to overcome it. And we think the second half, for those car companies, and also for many of our other global automotive customers should still be a good second half. Actually, with I think a little bit out of the seasonal pattern, we should see a little stronger second half than we have historically in our automotive business.

Jim: I’ve got to ask this, chuck, because I’m chuckling to myself, but are we doing something wrong in the way — we, I’m talking media, I guess — we talk about the economy, because we certainly would have you believe, or certain executives that we’re — whom we’re following with a megaphone, would have you believe that business just crashed in this country.

Chuck Bunch: No, I don’t think so. I know there’s been a lot of negative publicity around what’s going on in Washington. you know, I don’t think we’ve had the most supportive political environment for the last couple of years, especially here, but for us, the most important thing is executing on or business plans, delivering for our customers, and try not to get caught up too much in some of the negative atmosphere that we’ve seen over the last couple of weeks.

Jim: well, you’re a breath of fresh air. And a reminder why I still stay positive. I stay positive because of guys like you, Chuck Bunch, Chairman and CEO of PPG Industries. Thank you for coming on.

Chuck Bunch: Thank you, Jim. It has been a pleasure.

Jim: Alright. Do you see the dichotomy here? Like I get it like you do. I mean, I’ve got a woman telling me she’s afraid her social security checks not gonna come — I see the averages they’re all down — a huge amount of red ink. But, then I talk to a guy who’s a businessman, who’s done a fabulous job and is talking about the second half being better. Do you see why I refuse to give up? Do you see why I just refuse to choose despair as an investing strategy? Because of guys like chuck bunch and a stock that could yield 4% if they keep throwing it away. You stick with stuff like this and buy stuff like this. And, you should stick with Cramer.

Go back Jim Cramer’s Mad Money Recap – Part I

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