PPG Reports Sales, Income Increases in Q2


Global coatings company PPG released its second-quarter earnings report late Monday, reporting net sales at $4.4 billion—approximately 45% higher than this time last year. Net income for the second quarter came in at $431 million with adjusted net income landed at $465 million.

PPG also notes that, compared to Q2 2020, selling prices increased by 3.5% and sales volumes were higher by about 24%.

Despite these numbers, the company points to raw materials shortages and supply chain issues as aspects holding the growth back.

“Our strong organic sales growth reflects a partial demand recovery from the pandemic, including above-market contributions across many of our businesses. However, our volume growth was significantly tempered due to various supply and component disruptions, including those that reduced the overall manufacturing capability of our customers,” said Michael H. McGarry, PPG Chairman and Chief Executive Officer.

“In addition, despite strong underlying end-use market demand, various coatings raw material shortages and logistics issues reduced our ability to fully supply our existing order book within the quarter. Our recent acquisitions also contributed to our strong year-over-year sales growth, and they are meeting our expectations,”

By Segment

In the Performance Coatings segment, PPG reported $2.75 billion in net sales compared to $2.07 billion in the same period last year for a 33% increase. Income came in at $454 million, compared to $362 million in 2020.

Within the Performance Coatings segment the company noted that Architectural coatings – Europe, Middle East and Africa year-over-year net sales, excluding the impact of currency and acquisitions (organic sales), increased by a mid-teen percentage, as some softening for do-it-yourself products was more than offset by strong demand for architectural trade products.

Sales volumes in protective and marine coatings were up by a low-teen percentage, led by growth in China and demand recovery in other regions. Aerospace sales volumes were up by a low single-digit percentage, as commercial aftermarket activity began to recover and demand for PPG aerospace military applications remained solid. Sales volumes for automotive refinish coatings were also up by about 45%.

The Industrial Coatings segment’s net sales increased by about 70% coming in at $1.6 billion compared to $946 million year over year. Segment income landed at $190 million compared to just $34 million this time last year.

This was primarily driven by automotive OEM coatings sales volumes, which rose by about 75%. Sales volumes for the industrial coatings business also continued to improve, increasing by nearly 50% year over year.

“While we delivered solid adjusted EPS in the second quarter, our results were below our April forecast. In addition to the top-line impact from the supply disruptions, we experienced continual increases in raw material and transportation costs throughout the quarter,” McGarry said.

“We actively implemented additional selling price increases during the quarter and our pace of price realization is well ahead of the most recent raw material inflation cycle in 2017-2018. In addition to further selling price increases, we delivered about $40 million of structural cost savings from business restructuring programs and have increased our targeted, full-year 2021 savings by about 10%, to $135 million. We also continued our outstanding cash flow generation which year to date is about $600 million, or about $250 million higher than 2020.”

Other Numbers

The company had cash and short-term investments totaling approximately $1.3 billion at the end of the quarter and net debt of $5.9 billion. The company notes that the Tikkurila, Cetelon, and Wörwag acquisitions were funded through a combination of existing cash on hand and external financing.

“Finally, I am pleased that we closed the Tikkurila, Wörwag, and Cetelon transactions during the second quarter. We have now completed five acquisitions since December 2020, and we welcome all of our new colleagues to the PPG team. Our well-experienced teams are rapidly integrating these acquisitions, and we are beginning to realize initial synergies,” McGarry said.

“These acquisitions have greatly improved our product and technology portfolios, geographic reach, and sustainability capabilities. In aggregate, these acquisitions bring more than 10% sales growth, based on 2019 levels, and strong earnings growth potential. I want to thank all of our employees around the world for their dedication and commitment to doing better today than yesterday, every day, in our efforts to continuously improve our company.”

Lastly, the company delivered the following projections for Q3:

  • Aggregate net sales, including acquisitions, up 21% to 23%, with organic sales growth higher by a low single-digit percentage when compared to the third quarter 2020;
  • Structural cost savings from restructuring actions of about $30 million year over year;
  • Corporate expenses were $52 million in the second quarter and are expected to be about $60 million in the third quarter;
  • Net interest expense of $28 million to $30 million;
  • The company’s global ongoing effective tax rate of 21% to 23%; and
  • Full year adjusted earnings per diluted share between $7.40 and $7.60.

Tagged categories: Asia Pacific; Business matters; COVID-19; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Good Technical Practice; Latin America; North America; PPG; Z-Continents

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