- Record reported earnings per diluted share (EPS) of $1.69 and
adjusted EPS of $1.86
- Net sales of $4.3 billion; organic sales declined 2% versus
prior year, down 1% excluding prior year large customer
load-in
- Segment margins improved 60 basis points year over year, the
sixth consecutive quarter of margin expansion versus prior
year
- Share repurchases of approximately $150 million
PPG (NYSE:PPG) today reported financial results for the first
quarter 2024.
First Quarter Consolidated Results
$ in millions, except EPS
1Q 2024
1Q 2023
YOY change
Net sales
$4,311
$4,380
(2)%
Net income
$400
$264
+52%
Adjusted net income(a)
$441
$432
+2%
EPS
$1.69
$1.11
+52%
Adjusted EPS(a)
$1.86
$1.82
+2%
(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:
We achieved year-over-year adjusted EPS growth for the fifth
consecutive quarter despite continued challenges in the macro
environment. The company benefited from our well-established
businesses in Mexico and China, our second and third largest net
sales countries, respectively. We also delivered organic sales
growth in India and in several long-cycle businesses such as
protective and marine coatings and aerospace coatings, where our
backlog grew. These gains were mitigated by a large customer
load-in and pass-through energy surcharges in Europe that occurred
in the prior-year period, lowering year-over-year sales comparisons
by approximately 130 basis points. During this year’s first
quarter, we were also impacted by lower demand in Europe, including
an early Easter holiday which reduced the number of selling days in
March, and ongoing tepid global demand for industrial coatings.
We continue to make progress on returning to our historic
segment margin profile with an aggregate segment margin improvement
of 60 basis points, marking the sixth consecutive quarter of
year-over-year improvement. 2024 is expected to be another year of
excellent cash flow, and our balance sheet remains strong,
including lower inventories year over year, providing us with
ongoing shareholder value creation opportunities. We completed
approximately $150 million of share repurchases in the first
quarter.
Looking ahead, while global industrial production remains at low
absolute levels, we believe that demand in China for our products
will deliver solid organic growth. In Europe, demand is expected to
stabilize as we progress through 2024, despite unevenness by
country. In the U.S., economic conditions have remained subdued in
several end-use markets, but we expect overall improvement as the
year progresses. In Mexico, we forecast strong momentum to
continue.
We are executing on the strategic reviews of the architectural
coatings U.S. and Canada business and global silicas products
business that we announced in the first quarter. Our target is to
determine a path forward for each of these assessments no later
than the third quarter.
PPG remains focused on various enterprise growth initiatives to
drive higher sales volumes and fully capitalize on our technical
and service capabilities. In the second quarter, we expect low
single-digit percentage aggregate sales volume growth, led by our
aerospace, protective and marine, and packaging coatings businesses
and by Mexico, China and India.
Thank you to our more than 50,000 employees around the world who
partner with our customers every day to drive mutual success by
providing best-in-class paints, coatings and specialty materials,
including productivity-enhancing and sustainable solutions.
First Quarter 2024 Reportable Segment Financial
Results
Performance Coatings
segment
$ in millions
1Q 2024
1Q 2023
YOY change
Net sales
$2,614
$2,628
(1)%
Segment income
$402
$395
+2%
Segment income %
15.4%
15.0%
Sales volumes
(3)%
Selling prices
+1%
Foreign currency translation
+1%
Performance Coatings net sales were down 1%, as higher selling
prices and favorable foreign currency translation were offset by
lower sales volumes. Year-over-year first quarter sales volume
comparisons were unfavorably impacted by a prior-year, $40 million
Walmart® sales load-in benefit and the earlier timing of Easter in
2024.
Sales of PPG’s technology-advantaged aerospace products remained
strong, as the business delivered mid-single-digit percentage
organic sales growth year over year, while the order backlog
increased to $275 million. Protective and marine coatings delivered
low single-digit percentage organic sales growth driven by energy
and marine-related demand. Automotive refinish coatings organic
sales were flat, as a challenging prior year comparison in the U.S.
offset solid growth in Asia Pacific, Latin America and Europe.
Organic sales for architectural coatings Europe, Middle East and
Africa were down by a mid-single-digit percentage, including a
shift in the Easter holiday, with lower sales volumes across
western Europe more than offsetting strong growth in central and
eastern Europe. Architectural coatings in Mexico delivered another
solid quarter as we continue to benefit from a growing Mexican
economy and our world-class distribution network in the country.
Architectural coatings sales in the U.S. and Canada were lower due
to the prior-year Walmart® load-in more than offsetting current
year growth in the professional contractor segment. Absent the
impact of the load-in, year-over-year sales volumes grew a low
single-digit percentage in the business.
Segment income increased by 2% versus the prior year primarily
due to higher selling prices and input costs, which moderated from
record levels, and were partially offset by lower sales volumes and
increased wages. Segment operating margins increased by 40 basis
points year over year.
Industrial Coatings
segment
$ in millions
1Q 2024
1Q 2023
YOY change
Net sales
$1,697
$1,752
(3)%
Segment income
$249
$240
+4%
Segment income %
14.7%
13.7%
Sales volumes
(1)%
Selling prices
(2)%
Foreign currency translation
—%
Industrial Coatings segment net sales were lower compared to the
first quarter 2023 due to lower selling prices and slightly lower
sales volumes. The lower price includes the impact from the absence
of European energy surcharges that occurred in the first quarter
2023 reflecting exceedingly high energy prices in the region,
impacting year-over-year comparisons by approximately 100 basis
points.
Automotive original equipment manufacturer coatings organic
sales decreased by a low single-digit percentage due to lower
index-based selling prices and lower industry volumes in the U.S.
and Europe, offset by PPG above-market growth in Asia Pacific and
Mexico. Industrial coatings organic sales declined by a
mid-single-digit percentage with subdued industrial activity in the
U.S., Latin America and Europe more than offsetting strong PPG
growth in China and India. Packaging coatings organic sales were
flat year over year with solidly higher volumes stemming from PPG
share gains offset by lower, index-based pricing.
Segment income was 4% higher than the prior year, as input costs
moderated from historically high levels and manufacturing
performance improved, which more than offset the impact from lower
organic sales and higher wages. Segment margins improved by 100
basis points compared to the first quarter 2023. Lower pricing from
the absence of European energy surcharges was offset by lower
energy-related input costs.
Additional Financial Information
- At quarter end, the company had cash and short-term investments
totaling $1.2 billion. Net debt was $5.0 billion, down $0.8 billion
from the first quarter 2023.
- Corporate expenses were $83 million in the first quarter, which
was $16 million higher than the prior year, primarily due to
inflation, increased benefits costs, and growth-related
investments.
- Net interest expense was $13 million in the first quarter.
- The effective tax rate was approximately 24% in the first
quarter.
Outlook
The company today reported the following projections for the
second quarter and full-year 2024 based on current global economic
activity, continued uneven global industrial production, uneven but
stabilizing demand in Europe, continued growth in Mexico and solid
PPG performance in China.
Outlook
2Q 2024
FY 2024
Organic sales growth
Up low single digits
Up low single digits
Adjusted EPS
$2.42 - $2.52 per share
$8.34 - $8.59 per share
The effective tax rate for the second quarter 2024 is expected
to be between 23.5% to 24.5%, slightly higher than prior year,
including the impact of several regional tax rate increases and the
expected mix of country-specific earnings.
Additional information related to 2024 financial projections are
available in the detailed commentary and associated presentation
slides related to the first 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, April
18. The company will hold a conference call to review its first
quarter 2024 financial performance on April 19, at 8:00 a.m. ET.
Participants can pre-register for the conference by navigating to
https://www.netroadshow.com/events/login?show=51ee74c1&confId=62303.
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 April 19, beginning at
approximately 11:00 a.m. ET, through May 3, 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 679849. 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, April 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 April 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
second 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)
First Quarter
2024
First Quarter
2023
$
EPS(a)
$
EPS(a)
Reported net income from continuing
operations
$400
$1.69
$264
$1.11
Acquisition-related amortization
expense
29
0.12
31
0.13
Business restructuring-related costs,
net(b)
8
0.03
—
—
Portfolio optimization(c)
4
0.02
—
—
Pension settlement charge(d)
—
—
144
0.61
Insurance recovery(e)
—
—
(7
)
(0.03
)
Adjusted net income from continuing
operations, excluding certain items
$441
$1.86
$432
$1.82
First Quarter
2024
First 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
$538
$129
24.0
%
$353
$80
22.7
%
Acquisition-related amortization
expense
38
9
24.6
%
41
10
24.5
%
Business restructuring-related costs,
net(b)
11
3
27.4
%
—
—
—
%
Portfolio optimization(c)
6
2
24.2
%
—
—
—
%
Pension settlement charge(d)
—
—
—
%
190
46
24.3
%
Insurance recovery(e)
—
—
—
%
(9
)
(2
)
24.3
%
Adjusted effective tax rate, continuing
operations, excluding certain items
$593
$143
24.1
%
$575
$134
23.3
%
(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 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.
(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.
(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.
PPG INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF
INCOME (unaudited)
(All amounts in millions except per-share
data)
Three Months Ended March
31
2024
2023
Net sales
$4,311
$4,380
Cost of sales, exclusive of depreciation
and amortization
2,445
2,596
Selling, general and administrative
1,064
992
Depreciation
103
92
Amortization
38
41
Research and development, net
109
104
Interest expense
55
59
Interest income
(42
)
(25
)
Pension settlement charge
—
190
Other charges/(income), net
1
(22
)
Income before income taxes
$538
$353
Income tax expense
129
80
Net income attributable to controlling and
noncontrolling interests
$409
$273
Net income attributable to noncontrolling
interests
(9
)
(9
)
Net income (attributable to PPG)
$400
$264
Earnings per common share (attributable to
PPG)
$1.70
$1.12
Earnings per common share (attributable to
PPG) - assuming dilution
$1.69
$1.11
Average shares outstanding
235.6
235.8
Average shares outstanding - assuming
dilution
236.9
236.9
PPG INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS HIGHLIGHTS (unaudited)
($ in millions)
Three Months Ended March
31
2024
2023
Cash (used for)/from operating
activities
$(60
)
$85
Cash used for investing activities:
Capital expenditures
$256
$120
Cash used for financing activities:
Dividends paid on PPG common stock
$153
$146
PPG INDUSTRIES, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
HIGHLIGHTS (unaudited)
($ in millions)
March 31
December 31
March 31
2024
2023
2023
Current assets:
Cash and cash equivalents
$1,181
$1,514
$1,426
Short-term investments
54
75
56
Receivables, net
3,581
3,279
3,595
Inventories
2,331
2,127
2,599
Other current assets
524
436
517
Total current assets
$7,671
$7,431
$8,193
Current liabilities:
Short-term debt and current portion of
long-term debt
$311
$306
$209
Accounts payable and accrued
liabilities
$4,351
4,467
$4,347
Current portion of operating lease
liabilities
$192
194
$185
Restructuring reserves
$89
87
$127
Total current liabilities
$4,943
$5,054
$4,868
Long-term debt
$5,940
$5,748
$7,082
PPG OPERATING METRICS
(unaudited)
($ in millions)
March 31
December 31
March 31
2024
2023
2023
Operating Working Capital (a)
$3,067
$2,645
$3,217
As a percent of quarter sales,
annualized
17.8
%
15.2
%
18.4
%
(a) Operating working capital includes:
(1) receivables from customers, net of allowance for doubtful
accounts, (2) FIFO inventories and (3) trade liabilities.
PPG INDUSTRIES, INC. AND
SUBSIDIARIES
CONSOLIDATED BUSINESS SEGMENT
INFORMATION (unaudited)
($ in millions)
Three Months Ended March
31
2024
2023
Net sales
Performance Coatings
$2,614
$2,628
Industrial Coatings
1,697
1,752
Total
$4,311
$4,380
Segment income
Performance Coatings
$402
$395
Industrial Coatings
249
240
Total
$651
$635
Items not allocated to segments
Corporate
(83
)
(67
)
Interest expense, net of interest
income
(13
)
(34
)
Business restructuring-related costs, net
(Note A)
(11
)
—
Portfolio optimization (Note B)
(6
)
—
Pension settlement charge (Note C)
—
(190
)
Insurance recovery (Note D)
—
9
Income before income taxes
$538
$353
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 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 consolidated statement of income.
Note C:
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 D:
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/20240418007336/en/
PPG Media Contact: Mark Silvey Corporate Communications
+1-412-434-3046 silvey@ppg.com
PPG Investor Contact: Jonathan Edwards Investor Relations
+1-412-434-3466 jonathanedwards@ppg.com investor.ppg.com
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