PPG reports second quarter 2024 financial results
-
Record reported earnings per diluted share (EPS) of
$2.24 and adjusted EPS of$2.50 -
Net sales of
$4.8 billion ; organic sales flat versus prior year - Segment margins improved 110 basis points year over year, marking seven consecutive quarters of margin expansion
-
Share repurchases of approximately
$150 million in the quarter;$300 million year to date
Second Quarter Consolidated Results
$ in millions, except EPS |
2Q 2024 |
2Q 2023 |
YOY change |
Net sales |
|
|
(2)% |
Net income |
|
|
+8% |
Adjusted net income(a) |
|
|
+10% |
EPS |
|
|
+9% |
Adjusted EPS(a) |
|
|
+11% |
(a) Reconciliations of reported to adjusted figures are included below |
Chairman and CEO Comments
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 11%, marking the sixth consecutive quarter of growth.
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 |
|
|
+6% |
Segment income % |
18.7% |
17.7% |
|
Sales volumes |
|
|
—% |
Selling prices |
|
|
+2% |
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 18.7% were a second quarter record and increased by 100 basis points year over year. Segment income increased by 6% versus the prior year primarily due to improved selling prices partially offset by higher growth-related spending.
Industrial Coatings segment
$ in millions |
2Q 2024 |
2Q 2023 |
YOY change |
Net sales |
|
|
(5)% |
Segment income |
|
|
+4% |
Segment income % |
14.8% |
13.7% |
|
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 4% higher than the prior year as input costs moderated. These net benefits more than offset the impact from lower selling prices based on certain index-based pricing contracts and wage cost inflation.
Additional Financial Information
-
At quarter end, the company had cash and short-term investments totaling
$1.2 billion . Net debt was$5.2 billion , down$0.4 billion from the second quarter 2023. -
Corporate expenses were
$69 million in the second quarter, which was$16 million lower than the prior year, as lower incentive-based compensation and cost savings initiatives were partially offset by general inflation. -
Net interest expense was
$17 million in the second quarter. - 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 23.5% to 24.5%, higher than the prior year adjusted rate of 19.5%, including the impact of several regional tax rate increases, the expected mix of country-specific earnings and the absence of certain prior year favorable discrete tax items.
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
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
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
All information in this release speaks only as of
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 |
|
|
|
|
22.5% |
|
|
|
|
|
23.1% |
Acquisition-related amortization expense |
36 |
|
9 |
|
24.6% |
|
40 |
|
10 |
|
24.6% |
Business restructuring-related costs, net(b) |
4 |
|
2 |
|
46.0% |
|
14 |
|
3 |
|
24.0% |
Portfolio optimization(c) |
26 |
|
8 |
|
31.3% |
|
7 |
|
2 |
|
24.3% |
Legacy environmental remediation charges(d) |
20 |
|
5 |
|
24.3% |
|
— |
|
— |
|
—% |
Adjusted effective tax rate, continuing operations, excluding certain items |
|
|
|
|
23.1% |
|
|
|
|
|
23.2% |
(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. |
|
|
|
|
|
|
|
|
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 |
|
|||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS HIGHLIGHTS (unaudited) |
|||
($ in millions) |
|||
|
Six Months Ended |
||
|
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 |
|
|
|
|
|||||
CONDENSED CONSOLIDATED BALANCE SHEET HIGHLIGHTS (unaudited) |
|||||
($ in millions) |
|||||
|
|
|
|
|
|
|
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) |
|||||
|
|
|
|
|
|
|
2024 |
|
2023 |
|
2023 |
Operating Working Capital (a) |
|
|
|
|
|
As a percent of quarter sales, annualized |
17.0% |
|
15.2% |
|
17.9% |
|
|
|
|
|
|
(a) Operating working capital includes: (1) receivables from customers, net of allowance for doubtful accounts, (2) FIFO inventories and (3) trade liabilities. |
|
|||||||
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. |
|||||||
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 |
CATEGORY Corporate
View source version on businesswire.com: https://www.businesswire.com/news/home/20240718633236/en/
PPG Media Contact:
Corporate Communications
+1-412-434-3046
silvey@ppg.com
PPG Investor Contact:
Investor Relations
+1-412-434-3466
alejandrolopez@ppg.com
investor.ppg.com
Source: PPG