- Record reported earnings per diluted share (EPS) of $2.24 and
adjusted EPS of $2.50
- Net sales of $4.8 billion; organic sales flat versus prior
year
- Segment margins improved 110 basis points year over year,
marking seven consecutive quarters of margin expansion
- Share repurchases of approximately $150 million in the quarter;
$300 million year to date
PPG (NYSE:PPG) today reported financial results for the second
quarter 2024.
Second Quarter Consolidated Results
$ in millions, except EPS
2Q 2024
2Q 2023
YOY change
Net sales
$4,794
$4,872
(2)%
Net income
$528
$490
+8%
Adjusted net income(a)
$590
$534
+10%
EPS
$2.24
$2.06
+9%
Adjusted EPS(a)
$2.50
$2.25
+11%
(a) Reconciliations of reported to
adjusted figures are included below
Chairman and CEO Comments
Tim Knavish, PPG chairman and chief executive officer, commented
on the quarter:
PPG delivered strong financial results in an increasingly
challenging macro-environment. We achieved record reported EPS and
adjusted EPS and grew year-over-year adjusted EPS by 11%, marking
the sixth consecutive quarter of growth.
Overall organic sales were flat, but grew in many of our
businesses, including aerospace coatings, packaging coatings,
architectural coatings Americas and Asia Pacific, traffic solutions
and specialty coatings and materials. This growth was offset by
global automotive builds that weakened as the quarter progressed
and global industrial production which remained soft. Also,
refinish coatings sales were down year over year reflecting a
comparison to record prior year results and uneven distributor
order patterns.
Overall European year-over-year sales volume comparisons
improved sequentially versus the first quarter, but sales volumes
remained unfavorable and were below our initial expectations. Our
financial results continued to benefit from our well-established
businesses in Mexico and China, our second and third largest
countries based on revenue.
We built on our segment margin growth momentum as aggregate
segment margins improved 110 basis points, which marks the seventh
consecutive quarter of year-over-year improvement. Also, our gross
margins improved by 180 basis points year over year. Our balance
sheet remains strong, including lower inventories year over year,
and we remain committed to utilizing cash for shareholder value
creation. For the third consecutive quarter we repurchased shares,
with approximately $150 million repurchased in the quarter and
about $300 million year to date.
Looking ahead, we expect strong momentum in Mexico. We believe
that demand in China for PPG technology-advantaged products will
deliver continued organic growth, albeit at lower growth rates than
achieved in the first half of the year. In Europe, demand remains
uneven by country and end use, but we expect to realize modest
sequential year-over-year improvement. In the U.S., economic
conditions have remained subdued in several end-use markets, but we
expect overall improvement as the second half of the year
progresses.
As we execute on various enterprise growth initiatives and
capitalize on our technical and service capabilities, we expect
positive momentum in driving improved sales volumes will broaden
within our business portfolio. In addition to those businesses that
grew in the second quarter, we expect organic growth in automotive
refinish coatings and protective and marine coatings. Also, while
still slightly unfavorable year over year, we are projecting modest
sequential quarterly improvement in general industrial
demand. As a result, in the third quarter we are projecting
flat-to-low single-digit percentage aggregate organic sales
growth.
The strategic reviews of the architectural coatings U.S. and
Canada business and the global silicas business that were announced
in the first quarter are progressing. We are diligently working
toward and remain on schedule to determine paths forward as a
result of each of these reviews.
Our more than 50,000 employees continue to be dedicated to
delivering growth for PPG. Our record results this quarter were
made possible by our PPG team around the world who make it happen
and deliver on our purpose every day: We protect and beautify the
world®.
Second Quarter 2024 Reportable Segment Financial
Results
Performance Coatings
segment
$ in millions
2Q 2024
2Q 2023
YOY change
Net sales
$3,048
$3,041
—%
Segment income
$570
$537
+6%
Segment income %
18.7%
17.7%
Sales volumes
—%
Selling prices
+2%
Foreign currency translation
(1)%
Divestitures
(1)%
Performance Coatings net sales were flat, as higher selling
prices were offset by the divestitures of the non-North American
portion of the traffic solutions business and unfavorable foreign
currency translation.
Sales of PPG’s aerospace products remained strong, as the
business delivered double-digit percentage organic sales growth
year over year, while the order backlog increased to approximately
$290 million. Protective and marine coatings organic sales were
flat as growth in Europe and the Asia Pacific region was offset by
lower sale volumes in other regions. Organic sales for
architectural coatings Americas and Asia Pacific were higher by a
low single-digit percentage, supported by sales volume growth in
the professional contractor segment in the U.S. and Canada. In
Mexico, architectural coatings delivered record sales and earnings
as we continue to benefit from a strong Mexican economy and our
world-class distribution network in the country. Organic sales for
architectural coatings Europe, Middle East and Africa decreased by
a low single-digit percentage with lower sales volumes across
western Europe, which offset growth in central and eastern Europe.
As expected, automotive refinish coatings organic sales were lower
by a mid-single-digit percentage, as a challenging prior-year
comparison and uneven distributor order patterns in the U.S. offset
solid growth in Asia and Europe.
Segment operating margins of 18.7% were a second quarter record
and increased by 100 basis points year over year. Segment income
increased by 6% versus the prior year primarily due to improved
selling prices partially offset by higher growth-related
spending.
Industrial Coatings
segment
$ in millions
2Q 2024
2Q 2023
YOY change
Net sales
$1,746
$1,831
(5)%
Segment income
$259
$250
+4%
Segment income %
14.8%
13.7%
Sales volumes
—%
Selling prices
(3)%
Foreign currency translation
(1)%
Other
(1)%
Industrial Coatings segment net sales were lower compared to the
second quarter 2023 due to lower selling prices from certain
index-based customer contracts and unfavorable foreign currency
translation.
Automotive original equipment manufacturer (OEM) coatings
organic sales decreased by a high single-digit percentage due to
lower index-based selling prices and lower U.S. and European
industry volumes, partly offset by above-market PPG growth in
Mexico and moderated growth in China. Industrial coatings organic
sales declined by a low single-digit percentage with subdued
industrial activity in the U.S. and Europe more than offsetting
solid PPG growth in China and India. Packaging coatings organic
sales were up a mid-single-digit percentage year over year with
solidly higher sales volumes stemming from PPG share gains
mitigated by lower selling prices.
Segment margins improved by 110 basis points compared to the
second quarter 2023. Segment income was 4% higher than the prior
year as input costs moderated. These net benefits more than offset
the impact from lower selling prices based on certain index-based
pricing contracts and wage cost inflation.
Additional Financial Information
- At quarter end, the company had cash and short-term investments
totaling $1.2 billion. Net debt was $5.2 billion, down $0.4 billion
from the second quarter 2023.
- Corporate expenses were $69 million in the second quarter,
which was $16 million lower than the prior year, as lower
incentive-based compensation and cost savings initiatives were
partially offset by general inflation.
- Net interest expense was $17 million in the second
quarter.
- The effective tax rate was approximately 23% in the second
quarter.
Outlook
The company today reported the following projections for the
third quarter and full-year 2024 based on current global economic
activity, continued uneven global industrial production, lower
global automotive production, uneven but stabilizing demand in
Europe, continued growth in Mexico and India, and low single-digit
growth in China.
Outlook
3Q 2024
FY 2024
Organic sales growth
Flat to up low single digits
Flat to up low single digits
Adjusted EPS
$2.10 - $2.20 per share
$8.15 - $8.30 per share
The effective tax rate for the third quarter 2024 is expected to
be between 23.5% to 24.5%, higher than the prior year adjusted rate
of 19.5%, including the impact of several regional tax rate
increases, the expected mix of country-specific earnings and the
absence of certain prior year favorable discrete tax items.
Additional information related to 2024 financial projections are
available in the detailed commentary and associated presentation
slides related to the second quarter financial information, which
are posted within the Investors section of PPG.com.
The term organic sales as used in this press release is defined
as net sales excluding the impact of currency, acquisitions and
divestitures.
PPG: WE PROTECT AND BEAUTIFY THE WORLD®
At PPG (NYSE:PPG), we work every day to develop and deliver the
paints, coatings and specialty materials that our customers have
trusted for more than 140 years. Through dedication and creativity,
we solve our customers’ biggest challenges, collaborating closely
to find the right path forward. With headquarters in Pittsburgh, we
operate and innovate in more than 70 countries and reported net
sales of $18.2 billion in 2023. We serve customers in construction,
consumer products, industrial and transportation markets and
aftermarkets. To learn more, visit www.ppg.com.
The PPG Logo and We protect and beautify the world are
registered trademarks of PPG Industries Ohio, Inc.
Additional Information
PPG will provide detailed commentary regarding its financial
performance, including presentation-slide content, on the PPG
Investor Center at www.ppg.com at about 4:30 p.m. ET today, July
18. The company will hold a conference call to review its second
quarter 2024 financial performance on July 19, at 8:00 a.m. ET.
Participants can pre-register for the conference by navigating to
https://www.netroadshow.com/events/login?show=b15d2051&confId=67003.
The conference call also will be available in listen-only mode via
Internet broadcast from the PPG Investor Center at www.ppg.com. A
telephone replay will be available July 19, beginning at
approximately 11:00 a.m. ET, through August 2, at 11:59 p.m. ET.
The dial-in numbers for the replay are: in the United States,
1-866-813-9403; Canada, 1-226-828-7578; UK (Local), 0204-525-0658;
international, +44-204-525-0658; passcode 281083. A web replay also
will be available shortly after the call on the PPG Investor Center
at www.ppg.com, and will remain through Thursday, July 17,
2025.
Forward-Looking Statements
Statements contained herein relating to matters that are not
historical facts are forward-looking statements reflecting PPG’s
current view with respect to future events and financial
performance. These matters within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, involve risks and
uncertainties that may affect PPG’s operations, as discussed in the
company’s filings with the Securities and Exchange Commission
pursuant to Sections 13(a), 13(c) or 15(d) of the Exchange Act, and
the rules and regulations promulgated thereunder. Accordingly, many
factors could cause actual results to differ materially from the
forward-looking statements contained herein. Such factors include
statements related to the effects on our business of COVID-19,
global economic conditions, geopolitical issues, the amount of
future share repurchases, increasing price and product competition
by our competitors, fluctuations in cost and availability of raw
materials, energy, labor and logistics, the ability to achieve
selling price increases, the ability to recover margins, customer
inventory levels, PPG inventory levels, the ability to maintain
favorable supplier relationships and arrangements, the timing of
realization of anticipated cost savings from restructuring and
other initiatives, the ability to identify additional cost savings
opportunities, the timing and expected benefits of potential future
and completed acquisitions, difficulties in integrating acquired
businesses and achieving expected synergies therefrom, economic and
political conditions in international markets, the ability to
penetrate existing, developing and emerging foreign and domestic
markets, foreign exchange rates and fluctuations in such rates,
fluctuations in tax rates, the impact of future legislation, the
impact of environmental regulations, unexpected business
disruptions, the unpredictability of existing and possible future
litigation, including asbestos litigation, and governmental
investigations. However, it is not possible to predict or identify
all such factors. Consequently, while the list of factors presented
here and in our 2023 Annual Report on Form 10-K considered
representative, no such list should be considered to be a complete
statement of all potential risks and uncertainties. Unlisted
factors may present significant additional obstacles to the
realization of forward-looking statements. Consequences of material
differences in results compared with those anticipated in the
forward-looking statements could include, among other things, lower
sales or earnings, business disruption, operational problems,
financial loss, legal liability to third parties and similar risks,
any of which could have a material adverse effect on PPG’s
consolidated financial condition, results of operations or
liquidity.
All information in this release speaks only as of July 18, 2024,
and any distribution of this release after that date is not
intended and will not be construed as updating or confirming such
information. PPG undertakes no obligation to update any
forward-looking statement, except as otherwise required by
applicable law.
Regulation G Reconciliation
PPG believes investors’ understanding of the company’s
performance is enhanced by the disclosure of net income, earnings
per diluted share from continuing operations and PPG’s effective
tax rate adjusted for certain items. PPG’s management considers
this information useful in providing insight into the company’s
ongoing performance because it excludes the impact of items that
cannot reasonably be expected to recur on a quarterly basis or that
are not attributable to our primary operations. Net income,
earnings per diluted share from continuing operations and the
effective tax rate adjusted for these items are not recognized
financial measures determined in accordance with U.S. generally
accepted accounting principles (“U.S. GAAP”) and should not be
considered a substitute for net income, earnings per diluted share,
the effective tax rate or other financial measures as computed in
accordance with U.S. GAAP. In addition, adjusted net income,
adjusted earnings per diluted share and the adjusted effective tax
rate may not be comparable to similarly titled measures as reported
by other companies. PPG is not able to provide a reconciliation of
third quarter and full-year 2024 expected adjusted earnings per
diluted share to the most directly comparable GAAP financial
measure without unreasonable effort because certain items that
impact such measure are uncertain or cannot be reasonably predicted
at this time.
Regulation G Reconciliation - Net
Income and Earnings per Diluted Share ($ in millions, except
per-share amounts)
Second Quarter
2024
Second Quarter
2023
$
EPS(a)
$
EPS(a)
Reported net income from continuing
operations
$528
$2.24
$490
$2.06
Acquisition-related amortization
expense
27
0.11
30
0.13
Business restructuring-related costs,
net(b)
2
0.01
11
0.05
Portfolio optimization(c)
18
0.08
3
0.01
Legacy environmental remediation
charges(d)
15
0.06
—
—
Adjusted net income from continuing
operations, excluding certain items
$590
$2.50
$534
$2.25
Second Quarter
2024
Second Quarter
2023
Income Before Income
Taxes
Tax Expense
Effective Tax Rate
Income Before Income
Taxes
Tax Expense
Effective Tax Rate
Effective tax rate, continuing
operations
$693
$156
22.5%
$646
$149
23.1%
Acquisition-related amortization
expense
36
9
24.6%
40
10
24.6%
Business restructuring-related costs,
net(b)
4
2
46.0%
14
3
24.0%
Portfolio optimization(c)
26
8
31.3%
7
2
24.3%
Legacy environmental remediation
charges(d)
20
5
24.3%
—
—
—%
Adjusted effective tax rate, continuing
operations, excluding certain items
$779
$180
23.1%
$707
$164
23.2%
(a)
Earnings per diluted share is calculated
based on unrounded numbers. Figures in the table may not
recalculate due to rounding.
(b)
Business restructuring-related costs, net
include business restructuring charges, offset by releases related
to previously approved programs, which are included in Other
charges/(income), net on the condensed consolidated statement of
income, accelerated depreciation of certain assets, which is
included in Depreciation on the condensed consolidated statement of
income, and other restructuring-related costs, which are included
in Cost of sales, exclusive of depreciation and amortization and
Selling, general and administrative on the condensed consolidated
statement of income.
(c)
Portfolio optimization includes losses on
the sale of non-core assets, including the loss recognized on the
sale of the Company's traffic solutions business in Argentina
during the second quarter 2024, which is included in Other
charges/(income), net in the condensed consolidated statement of
income. Portfolio optimization also includes advisory, legal,
accounting, valuation, other professional or consulting fees and
certain internal costs directly incurred to effect acquisitions, as
well as similar fees and other costs to effect divestitures and
other portfolio optimization exit actions. These costs are included
in Selling, general and administrative expense on the condensed
consolidated statement of income. In 2023, net loss of $2 million
was attributable to noncontrolling interests.
(d)
Legacy environmental remediation charges
represent environmental remediation costs at certain non-operating
PPG manufacturing sites. These charges are included in Other
charges/(income), net in the condensed consolidated statement of
income.
PPG INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF
INCOME (unaudited)
(All amounts in millions except per-share
data)
Three Months Ended June
30
Six Months Ended June
30
2024
2023
2024
2023
Net sales
$4,794
$4,872
$9,105
$9,252
Cost of sales, exclusive of depreciation
and amortization
2,734
2,866
5,179
5,462
Selling, general and administrative
1,077
1,069
2,141
2,061
Depreciation
98
93
201
185
Amortization
36
40
74
81
Research and development, net
111
110
220
214
Interest expense
62
67
117
126
Interest income
(45)
(32)
(87)
(57)
Pension settlement charge
—
—
—
190
Other charges/(income), net
28
13
29
(9)
Income before income taxes
$693
$646
$1,231
$999
Income tax expense
156
149
285
229
Net income attributable to controlling and
noncontrolling interests
$537
$497
$946
$770
Net income attributable to noncontrolling
interests
(9)
(7)
(18)
(16)
Net income (attributable to PPG)
$528
$490
$928
$754
Earnings per common share (attributable to
PPG)
$2.25
$2.08
$3.95
$3.20
Earnings per common share (attributable to
PPG) - assuming dilution
$2.24
$2.06
$3.93
$3.18
Average shares outstanding
234.5
236.0
235.1
235.9
Average shares outstanding - assuming
dilution
235.7
237.3
236.3
237.1
PPG INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS HIGHLIGHTS (unaudited)
($ in millions)
Six Months Ended June
30
2024
2023
Cash from operating activities
$305
$621
Cash used for investing activities:
Capital expenditures
$374
$242
Business acquisitions, net of cash
balances acquired
$27
$106
Cash used for financing activities:
Dividends paid on PPG common stock
$305
$292
PPG INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
HIGHLIGHTS (unaudited)
($ in millions)
June 30
December 31
June 30
2024
2023
2023
Current assets:
Cash and cash equivalents
$1,131
$1,514
$1,228
Short-term investments
61
75
68
Receivables, net
3,845
3,279
3,821
Inventories
2,299
2,127
2,506
Other current assets
448
436
445
Total current assets
$7,784
$7,431
$8,068
Current liabilities:
Short-term debt and current portion of
long-term debt
$639
$306
$809
Accounts payable and accrued
liabilities
4,332
4,467
4,306
Current portion of operating lease
liabilities
194
194
188
Restructuring reserves
60
87
113
Total current liabilities
$5,225
$5,054
$5,416
Long-term debt
$5,765
$5,748
$6,099
PPG OPERATING METRICS
(unaudited)
($ in millions)
June 30
December 31
June 30
2024
2023
2023
Operating Working Capital (a)
$3,264
$2,645
$3,485
As a percent of quarter sales,
annualized
17.0%
15.2%
17.9%
(a) Operating working capital includes:
(1) receivables from customers, net of allowance for doubtful
accounts, (2) FIFO inventories and (3) trade liabilities.
PPG INDUSTRIES, INC. AND
SUBSIDIARIES
CONSOLIDATED BUSINESS SEGMENT
INFORMATION (unaudited)
($ in millions)
Three Months Ended June
30
Six Months Ended June
30
2024
2023
2024
2023
Net sales
Performance Coatings
$3,048
$3,041
$5,662
$5,669
Industrial Coatings
1,746
1,831
3,443
3,583
Total
$4,794
$4,872
$9,105
$9,252
Segment income
Performance Coatings
$570
$537
$972
$932
Industrial Coatings
259
250
508
490
Total
$829
$787
$1,480
$1,422
Items not allocated to segments
Corporate
(69)
(85)
(152)
(152)
Interest expense, net of interest
income
(17)
(35)
(30)
(69)
Business restructuring-related costs, net
(Note A)
(4)
(14)
(15)
(14)
Portfolio optimization (Note B)
(26)
(7)
(32)
(7)
Legacy environmental remediation charges
(Note C)
(20)
—
(20)
—
Pension settlement charge (Note D)
—
—
—
(190)
Insurance recovery (Note E)
—
—
—
9
Income before income taxes
$693
$646
$1,231
$999
Note A:
Business restructuring-related
costs, net include business restructuring charges, offset by
releases related to previously approved programs, which are
included in Other charges/(income), net on the condensed
consolidated statement of income, accelerated depreciation of
certain assets, which is included in Depreciation on the condensed
consolidated statement of income and other restructuring-related
costs, which are included in Cost of sales, exclusive of
depreciation and amortization and Selling, general and
administrative on the condensed consolidated statement of
income.
Note B:
Portfolio optimization includes
losses on the sale of non-core assets, including the losses
recognized on the sales of the Company's traffic solutions business
in Argentina during the second quarter 2024, which is included in
Other charges/(income), net in the condensed consolidated statement
of income. Portfolio optimization also includes advisory, legal,
accounting, valuation, other professional or consulting fees, and
certain internal costs directly incurred to effect acquisitions, as
well as similar fees and other costs to effect divestitures and
other portfolio optimization exit actions. These costs are included
in Selling, general and administrative expense on the condensed
consolidated statement of income.
Note C:
Legacy environmental
remediation charges represent environmental remediation costs at
certain non-operating PPG manufacturing sites. These charges are
included in Other charges/(income), net in the condensed
consolidated statement of income.
Note D:
In the first quarter 2023, PPG
purchased group annuity contracts that transferred pension benefit
obligations for certain of the company’s retirees in the U.S. to
third-party insurance companies, resulting in a non-cash pension
settlement charge.
Note E:
In the first quarter 2023, the
company received reimbursement under its insurance policies for
damages incurred at a southern U.S. factory from a winter storm in
2020.
CATEGORY Corporate
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240718633236/en/
PPG Media Contact: Mark Silvey Corporate Communications
+1-412-434-3046 silvey@ppg.com
PPG Investor Contact: Alex Lopez Investor Relations
+1-412-434-3466 alejandrolopez@ppg.com investor.ppg.com
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