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PPG Reports Record Q2 2022 Net Sales

MONDAY, JULY 25, 2022


Global coatings company PPG released its second-quarter earnings report late Thursday (July 21), reporting $4.7 billion in net sales—approximately 8% higher than this time last year. Net income for the second quarter came in at $443 million with adjusted net income landed at $430 million.

PPG also notes that, compared to Q2 2020, selling prices increased by 12%, but sales volumes were down by about 4%.

The company points to COVID-19 restrictions in China, as well as cost inflation leading to higher sequential operation margins, as impacting the results. However, raw materials and logistics availability was noted to improve during this quarter, with PPG expecting it to improve even further in the third quarter.

“For the seventh consecutive quarter, we delivered record quarterly sales driven by our continued implementation of real-time selling price increases to fully counter inflation and we benefitted from our recent acquisitions. Our sales growth was achieved despite softening consumer demand in Europe, significant COVID-19-related demand disruptions in China and unfavorable currency translation,” said Michael H. McGarry, PPG Chairman and Chief Executive Officer.

“Our organic sales grew 8% as we continued to deliver above-market volume performance in several end-use markets, including all-time quarterly sales records in the automotive refinish coatings, PPG-Comex and traffic solutions businesses. In addition, our aerospace coatings business sales volumes grew by a double-digit percentage with strengthening momentum each month, although overall industry demand remains well below pre-pandemic levels.”

By Segment

In the Performance Coatings segment, PPG reported $2.93 billion in net sales compared to $2.75 billion in the same period last year for a 7% increase. Income came in at $446 million, compared to $454 million in 2021.

© iStock.com / jfarleyphoto
Global coatings company PPG released its second-quarter earnings report late Thursday (July 21), reporting $4.7 billion in net sales—approximately 8% higher than this time last year.
© iStock.com / jfarleyphoto

Global coatings company PPG released its second-quarter earnings report late Thursday (July 21), reporting $4.7 billion in net sales—approximately 8% higher than this time last year.

Within the Performance Coatings segment the company noted that while net sales increased due to price increases across all business and acquisition-related sales, certain raw material availably and bottlenecks constrained coatings manufacturing in the United States, impacting sales volumes.

Sales volumes in the protective and marine coatings business were heavily impacted by the COVID-19 restrictions in China. Aerospace sales volumes were up by about 10% compared to second quarter 2021, as after-market demand continued to recover. Sales volumes for automotive refinish coatings were also up by a low-teen percentage, with traffic solutions delivering organic sales growth of about 15% compared to the year prior.

The Industrial Coatings segment’s net sales increased by about 9% coming in at $1.76 billion compared to $1.6 billion year-over-year. Segment income landed at $156 million, 18% lower compared to $190 million this time last year.

This was primarily driven by raw material and energy cost inflation, currency translation impact, elevated operating costs in China due to restrictions and lower sales volumes. However, these were partially offset by higher selling prices and restructuring cost savings.

TMI Coatings, Inc.
Modern Safety Techniques

OEM coatings were impacted by OEM customer component shortages and China production curtailments. Industrial coatings organic sales were up about 10%, driven by strong selling price realization and solid sales volumes growth in the Americas, but partially offset by lower demand due to pandemic-related restrictions in China and lower activity in Europe.

“Adjusted earnings per share were in-line with our April guidance, despite longer-than-expected COVID-19 restrictions in China and the unfavorable currency effects, which together impacted earnings by about 10 cents per share, as favorable business mix and strong cost management offset these headwinds versus our initial guidance,” wrote McGarry.

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Rapid Prep, LLC

“Our strong selling price realization fully offset persistent cost inflation during the second quarter, leading to higher sequential operating margins compared to the first quarter. Although still somewhat challenging, raw material and logistics availability improved throughout the quarter, and we are already experiencing further improvement in the third quarter. We finished the second quarter with order backlogs totaling more than $200 million, primarily in automotive refinish and aerospace coatings, significantly higher than historical trends.”

Other Numbers, Q3 Outlook

NLB Corporation
APV Engineered Coatings

The company had cash and short-term investments totaling approximately $1 billion at the end of the quarter and net debt of $6.1 billion. The company notes that acquisition-related synergies and business restructuring programs delivered about $30 million of cost savings.

“Looking ahead, in most major regions and end-use markets underlying demand for PPG products is expected to remain solid. We anticipate strong sequential growth in Asia due to higher industrial production compared to the second quarter. Positive growth trends are generally expected to continue in North America. In Europe, we expect economic conditions to remain soft, including normal seasonal demand trends,” said McGarry.

Tarps manufacturing, Inc.
Just Like New Overspray Management

“We have already begun to implement cost mitigation actions in Europe and have contingency plans ready to deploy in the event of a broader economic slowdown. In the second half of the year, we expect several of our larger businesses, including automotive original equipment manufacturer (OEM) and aerospace coatings, to deliver strong growth due to large current supply deficits and low inventories in these end-use markets.

“Importantly, we expect that our sequential quarterly momentum on operating margin improvement will continue in the third quarter as we work back to our historical margins, and our adjusted earnings will increase on a year-over-year basis.”

Seymour Midwest
Quikspray, Inc.

Lastly, the company delivered the following projections for Q3:

  • Aggregate sales volumes flat to down a low-single-digit percentage year-over-year;
  • Corporate expenses of $60 million to $70 million;
  • Net interest expense of $32 million to $35 million;
  • Effective tax rate of about 23%;
  • Reported EPS of $1.60 to $1.85; and
  • Adjusted EPS $1.75 to $2.00, excluding amortization expense of $0.13 and costs related to previously approved and communicated business restructuring of $0.02.

Tagged categories: Business conditions; Business management; Business matters; Business operations; Coating Business; Coatings; Consumer Reports; COVID-19; Earnings reports; Economy; Finance; Industry News; PPG; Program/Project Management


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