PPG reports second quarter 2024 financial results
PPG (NYSE:PPG) reported strong financial results for Q2 2024, with record reported EPS of $2.24 and adjusted EPS of $2.50, marking an 11% year-over-year growth. Net sales were $4.8 billion, with flat organic sales. Segment margins improved by 110 basis points, the seventh consecutive quarter of expansion. The company repurchased approximately $150 million in shares during the quarter.
Key highlights include:
- Net income increased 8% to $528 million
- Adjusted net income grew 10% to $590 million
- Gross margins improved by 180 basis points year-over-year
- Strong performance in aerospace, packaging, and architectural coatings in Americas and Asia Pacific
- Challenges in global automotive and industrial production
For Q3 2024, PPG projects flat-to-low single-digit percentage aggregate organic sales growth and adjusted EPS of $2.10 - $2.20 per share.
- Record reported EPS of $2.24 and adjusted EPS of $2.50, an 11% year-over-year increase
- Net income grew 8% to $528 million
- Adjusted net income increased 10% to $590 million
- Segment margins improved 110 basis points, marking seven consecutive quarters of expansion
- Gross margins improved by 180 basis points year-over-year
- Strong performance in aerospace, packaging, and architectural coatings in Americas and Asia Pacific
- Share repurchases of approximately $150 million in Q2, $300 million year-to-date
- Net sales decreased 2% to $4.794 billion
- Flat organic sales growth
- Challenges in global automotive and industrial production
- Lower sales volumes in automotive refinish coatings
- Subdued demand in several end-use markets in the U.S.
- Lower selling prices in Industrial Coatings segment due to index-based customer contracts
Insights
PPG has reported solid financial results for the second quarter of 2024, with record adjusted EPS of $2.50, an increase of
One of the key highlights is the continuous margin expansion. Segment margins improved by
The balance sheet remains robust, with net debt down to
From an investor's perspective, the company appears to be on a stable trajectory, showing resilience and adaptability in a tough economic landscape. Investors should watch for how PPG navigates the uneven demand in Europe and the subdued economic conditions in the U.S. to sustain its growth momentum.
PPG’s financial results reveal a nuanced picture of the market dynamics affecting its various segments. While organic sales remained flat, it's notable that specific segments such as aerospace coatings and packaging coatings experienced growth. Aerospace coatings show double-digit growth and a notable order backlog of
Regionally, the performance varied significantly. PPG saw strong results in Mexico, benefiting from a robust economy and a well-established distribution network, which contributed to record sales and earnings in the architectural coatings segment. Conversely, Europe’s sales volumes remained unfavorable despite some sequential improvement, highlighting persistent economic challenges in that region.
This mixed performance across different markets underscores the importance for investors to consider geographic diversification and segment-specific trends when evaluating PPG’s overall growth potential. The strategic reviews of the architectural coatings U.S. and Canada business and the global silicas business could potentially unlock further value, but these are still in progress and their outcomes remain to be seen.
-
Record reported earnings per diluted share (EPS) of
$2.24 $2.50 -
Net sales of
$4.8 billion - Segment margins improved 110 basis points year over year, marking seven consecutive quarters of margin expansion
-
Share repurchases of approximately
$150 million $300 million
Second Quarter Consolidated Results
$ in millions, except EPS |
2Q 2024 |
2Q 2023 |
YOY change |
Net sales |
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|
(2)% |
Net income |
|
|
+ |
Adjusted net income(a) |
|
|
+ |
EPS |
|
|
+ |
Adjusted EPS(a) |
|
|
+ |
(a) Reconciliations of reported to adjusted figures are included below |
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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
Overall organic sales were flat, but grew in many of our businesses, including aerospace coatings, packaging coatings, architectural coatings
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
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
Looking ahead, we expect strong momentum in
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
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 |
|
|
—% |
Segment income |
|
|
+ |
Segment income % |
|
|
|
Sales volumes |
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|
—% |
Selling prices |
|
|
+ |
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
Segment operating margins of
Industrial Coatings segment
$ in millions |
2Q 2024 |
2Q 2023 |
YOY change |
Net sales |
|
|
(5)% |
Segment income |
|
|
+ |
Segment income % |
|
|
|
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
Segment margins improved by 110 basis points compared to the second quarter 2023. Segment income was
Additional Financial Information
-
At quarter end, the company had cash and short-term investments totaling
$1.2 billion $5.2 billion $0.4 billion -
Corporate expenses were
$69 million $16 million -
Net interest expense was
$17 million -
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
Outlook |
3Q 2024 |
FY 2024 |
Organic sales growth |
Flat to up low single digits |
Flat to up low single digits |
Adjusted EPS |
|
|
The effective tax rate for the third quarter 2024 is expected to be between
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
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
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
Regulation G Reconciliation - Net Income and Earnings per Diluted Share
|
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|
Second Quarter 2024 |
|
Second Quarter 2023 |
||||
|
$ |
|
EPS(a) |
|
$ |
|
EPS(a) |
Reported net income from continuing operations |
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related amortization expense |
36 |
|
9 |
|
|
|
40 |
|
10 |
|
|
Business restructuring-related costs, net(b) |
4 |
|
2 |
|
|
|
14 |
|
3 |
|
|
Portfolio optimization(c) |
26 |
|
8 |
|
|
|
7 |
|
2 |
|
|
Legacy environmental remediation charges(d) |
20 |
|
5 |
|
|
|
— |
|
— |
|
—% |
Adjusted effective tax rate, continuing operations, excluding certain items |
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
|
||
(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
|
|
Six Months Ended
|
||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
Net sales |
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
Income tax expense |
156 |
|
149 |
|
285 |
|
229 |
Net income attributable to controlling and noncontrolling interests |
|
|
|
|
|
|
|
Net income attributable to noncontrolling interests |
(9) |
|
(7) |
|
(18) |
|
(16) |
Net income (attributable to PPG) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share (attributable to PPG) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share (attributable to PPG) - assuming dilution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
Cash used for investing activities: |
|
|
|
Capital expenditures |
|
|
|
Business acquisitions, net of cash balances acquired |
|
|
|
Cash used for financing activities: |
|
|
|
Dividends paid on PPG common stock |
|
|
|
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 |
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Short-term debt and current portion of long-term debt |
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PPG OPERATING METRICS (unaudited) |
|||||
($ in millions) |
|||||
|
June 30 |
|
December 31 |
|
June 30 |
|
2024 |
|
2023 |
|
2023 |
Operating Working Capital (a) |
|
|
|
|
|
As a percent of quarter sales, annualized |
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
Six Months Ended
|
||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
Net sales |
|
|
|
|
|
|
|
Performance Coatings |
|
|
|
|
|
|
|
Industrial Coatings |
1,746 |
|
1,831 |
|
3,443 |
|
3,583 |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment income |
|
|
|
|
|
|
|
Performance Coatings |
|
|
|
|
|
|
|
Industrial Coatings |
259 |
|
250 |
|
508 |
|
490 |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. |
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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 |
|||||||
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 |
|||||||
Note E: |
|||||||
In the first quarter 2023, the company received reimbursement under its insurance policies for damages incurred at a southern |
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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
Source: PPG
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