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PPG Reports Sales Increase in Q1, 2021

Monday, April 19, 2021

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Global coatings supplier PPG (Pittsburgh) reported a 15% increase in its 2021 first-quarter net sales, compared to the prior year’s first quarter in a financial results press release on Thursday (April 15).

Sales volumes also grew approximately 7%, which has been pointed to broad global economic recovery, resulting in strong earnings leverage due to the company’s lower cost base.

First-Quarter Performance

Net sales were reportedly roughly $3.9 billion, a 15% decrease from the prior year, although selling prices were reported to increase by nearly 2%. Sales volumes were up by approximately 7%, year-over-year. Foreign currency translation impacted net sales by about $110 million, or more than 3%. Sales related to acquisitions, net of divestitures, contributed nearly 3% to sales growth.

For the first quarter, reported net income from continuing operations was $378 million, or $1.58 per diluted share, up from 2020’s first-quarter $243 million, with adjusted net income for the same business segment totaling $450 million, or $1.88 per diluted share.

© iStock.com / jfarleyphoto

Global coatings supplier PPG Industries (Pittsburgh) reported a 15% increase in its 2021 first-quarter net sales, compared to the prior year’s first quarter in a financial results press release on Thursday (April 15).

“We delivered record adjusted EPS in the first quarter which is significantly above 2020 first quarter results, and also 27% higher than first quarter 2019 despite sales volumes not yet having fully recovered to pre-COVID levels,” said Michael H. McGarry, PPG Chairman and Chief Executive Officer.

“We delivered excellent operating performance in both reportable segments. We achieved these results despite experiencing accelerating raw material and logistics cost inflation during the quarter, and with demand remaining tepid in the global commercial aerospace and U.S. protective coatings end-use markets. The company’s first quarter segment margins were at multi-year seasonal highs as we benefited from strong leverage on higher year-over-year net sales growth.

“In addition to improving sales performance, we delivered about $35 million of structural cost savings from business restructuring programs and continue to target a total of about $125 million of savings for the full-year 2021. We also reduced our working capital as a percent of sales by 200 basis points, driving improved operating cash flow performance compared to the prior year quarter. Finally, we continued to make good progress around our announced acquisitions, closing the VersaFlex transaction and nearing completion of the Tikkurila and Wörwag acquisitions.”

The company had cash and short-term investments totaling approximately $1.9 billion at the end of the quarter and net debt of $4.4 billion. The Tikkurila and Wörwag acquisitions are expected to close in the second quarter and will be funded through a combination of existing cash on hand and external financing.

Performance Coatings

First-quarter sales for PPG’s Performance Coatings segment totaled about $2.3 billion, up approximately $310 million, or about 16%, compared to 2020. The improvement was led by higher sales volumes of about 5%, with selling prices also having increased by more than 2%. Acquisition-related sales added approximately $95 million, primarily from the Ennis-Flint and ICR acquisitions. Favorable foreign currency translation revealed increased net sales by nearly 4%, or about $75 million.

PPG’s Architectural Coatings EMEA segment witnessed an increase of about 20% in net sales year-over-year, excluding the impact of currency and acquisitions (organic sales), driven by continued consumer demand growth for PPG’s paint products for residential renovations. In Mexico, the PPG-Comex architectural coatings business also grew organic sales by a high-single-digit percentage as consumer demand through the concessionaire network remained strong. Organic sales within the Americas and Asia Pacific were also up a high-single-digit percentage. Both the U.S. trade professional and do-it-for-yourself channels had robust organic sales growth.

Sales volumes in protective and marine coatings were up a low-single-digit percentage, led by strong PPG protective coatings demand in China that was partially offset in the U.S. due to a continued lower demand for energy-related protective coatings.

Aerospace coatings sales volumes remained down nearly 30%, impacted by lower commercial original equipment and aftermarket demand, while sales for aerospace military applications remained solid.

© iStock.com / jetcityimage

Sales volumes in protective and marine coatings were up a low-single-digit percentage, led by strong PPG protective coatings demand in China that was partially offset in the U.S. due to a continued lower demand for energy-related protective coatings.

Sales volumes for automotive refinish coatings were up a high-teen percentage aided by an easier sales comparison to first quarter 2020 in China due to the pandemic and some U.S. customer restocking in the first quarter 2021.

Segment income for the first quarter was $386 million, a $114 million increase over 2020’s first quarter—a more than 40% increase. The company points the increase in segment due to the impact of improved sales volumes, higher selling prices and cost savings from continuing restructuring initiatives, partially offset by raw material and logistics cost inflation.

Industrial Coatings

Compared to the prior year’s performance in the same quarter, net sales for PPG’s Industrial Coatings segment were about $1.6 billion, up about $190 million, or nearly 14%. The growth reflected demand improvements for automotive and general industrial coatings and continued strong packaging coatings sales. Selling prices were also higher compared to the first quarter of 2020, including in the automotive OEM coatings business, with sales volumes for the segment reporting a 10% increase, year-over-year.

Foreign currency translation increased net sales by about 3%, in comparison to 2019, segment net sales volumes have partially recovered from the pandemic, but were down about 2% in aggregate.

Automotive original equipment manufacturer coatings sales volumes rose a low-teen percentage in aggregate. Industrial coatings continued to improve, increasing by a low-teen percentage year over year for a second consecutive quarter.

Segment income was $245 million, up roughly $65 million, or approximately 35%, year-over-year. This was reportedly aided by higher sales volumes, restructuring cost savings, and favorable foreign currency translation, partially offset by raw material and logistics cost inflation.

Moving Forward

According to the press release, PPG anticipates that second quarter aggregate sequential net sales will be up a low-teen percentage when compared to the first quarter 2021 and consistent with historical pre-COVID sequential quarterly changes. Structural cost savings from restructuring actions are also expected to reach about $30 million year over year.

The company reports that it is basing its projections on current global economic activity, customer production restraints due to global chip shortages, and in consideration of the near-term economic uncertainty associated with the continued impact of the pandemic.

“Looking ahead, we expect overall global coatings demand growth to be broad-based across most of the end-use markets that we supply, including an eventual replenishment of many of our customers’ inventories,” said McGarry.

“In addition, I am encouraged to see an increase in domestic flight activity in various parts of the world, which should support the gradual recovery in aftermarket aerospace coatings demand in the second half of 2021. In addition to these organic growth opportunities, we will have further sales growth and earnings accretion from our recent acquisitions. Lastly, I want to thank all of our global employees who continued to manage through the pandemic in the quarter, to serve our customers and support our communities in need.”

   

Tagged categories: Asia Pacific; Business management; Business matters; Business operations; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Latin America; North America; PPG; Program/Project Management; Project Management; Z-Continents

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