- Record net sales of about $4.4 billion
- Organic sales growth of more than 5% versus prior year, led by
higher selling prices
- Reported earnings per diluted share (EPS) of $1.11 and adjusted
EPS of $1.82
- Accelerating margin recovery; operating margins up 380 basis
points year over year
- Supply disruptions moderating and manufacturing operations
improving
- Operating cash flow improvement of about $400 million year over
year
PPG (NYSE:PPG) today reported financial results for the first
quarter 2023.
First Quarter Consolidated Results
$ in millions, except EPS
1Q
2023
1Q
2022
Y-O-Y
change
Net sales*
$4,380
$4,308
+2%
Net income
$264
$18
+1,367%
Adjusted net income**
$432
$327
+32%
EPS
$1.11
$0.08
+1,288%
Adjusted EPS**
$1.82
$1.37
+33%
*Components of year-over-year net sales
change: higher selling prices (+8%), lower sales volumes (-3%),
divestiture-related sales and the wind down of Russia operations
(-1%), unfavorable foreign currency translation (-2%)
**Detailed reconciliations of reported to
adjusted figures are included below
President and CEO Comments
Tim Knavish, PPG president and chief executive officer,
commented on the quarter:
As we communicated earlier this month, the pace of our operating
margin recovery accelerated during the quarter, which drove a 33%
year-over-year increase in adjusted EPS. Our improving results are
despite macroeconomic conditions that remain challenging and
reflect the strengths of our diverse business portfolio and
progress we are making on restoring margins in line with our
historical profile.
While the global demand environment generally remained
consistent with our prior expectations, several businesses
outperformed our original forecast and their respective markets.
These include the aerospace coatings business and our Latin America
region, each delivering record sales in the first quarter. In
addition, our automotive original equipment manufacturer (OEM)
coatings business benefited from solid global production growth and
remains well positioned. Finally, our latest customer win in the
U.S. architectural business provided a higher load-in benefit than
originally projected.
Our strong earnings growth was across most business units and
was aided by higher incremental margins that were driven by higher
selling prices, improving manufacturing efficiencies and overall
cost discipline. These factors also resulted in record first
quarter operating earnings in our Europe, Middle East and Africa
(EMEA) region.
Looking ahead, we anticipate the macro environment will
generally remain consistent with the first quarter, with continued
stabilization of economic activity (at lower absolute levels) in
Europe and modestly improving demand in China. In the U.S., we
expect sequential slowing in economic activity in certain end-use
markets, particularly those that are construction-related. Supply
chain disruptions are abating, and we are already experiencing and
expect further increases in commodity raw material availability. We
remain highly focused on partnering with our customers and
delivering superior service and products with a focus on enhancing
their productivity and sustainability. Finally, along with
additional organic growth, we are executing and delivering on our
previously announced restructuring actions and acquisition-related
synergies, which collectively will drive additional margin recovery
momentum and related operating cash flow.
Lastly, I want to thank our global employees for their
unwavering dedication and focus on living our purpose – We protect
and beautify the world – by making it happen and helping to deliver
these strong first-quarter financial results.
First Quarter 2023 Reportable Segment Financial
Results
- Performance Coatings
segment
$ in millions
1Q
2023
1Q
2022
Y-O-Y
change
Net sales
$2,628
$2,570
+2%
Segment income
$395
$319
+24%
Segment income %
15.0%
12.4%
Sales volumes
-3%
Selling prices
+9%
Divestitures and wind down of Russia
-2%
Foreign currency translation
-2%
Performance Coatings net sales increased as
higher selling prices in all businesses more than offset lower
sales volumes, the impact of divestitures, the wind down of
business in Russia, and unfavorable foreign currency
translation.
Organic sales in the U.S. architectural
coatings business grew by a high single-digit percentage aided by
new business wins and higher selling prices, which more than offset
the effect of weakening regional construction markets. PPG Comex
delivered a record quarter and continues to benefit from strong
concessionaire network growth and performance. As expected, demand
for architectural coatings products in Europe remained subdued and
consistent with prior quarters, stemming from low consumer
confidence from continued geopolitical issues. Due to customer
order patterns in Europe and the U.S., automotive refinish coatings
organic sales were flat compared to the first quarter 2022, with
order backlogs remaining in the U.S. The company expects refinish
sales volumes to be close to 2019 pre-pandemic levels in the second
quarter. Aerospace coatings sales volumes were stronger than
originally anticipated with high-teen-percentage year-over-year
sales volume growth. Organic sales in the protective and marine
coatings business improved by a mid-single-digit percentage,
primarily due to strong demand in the U.S. and Latin America.
Segment income increased by 24% versus the
prior year primarily due to higher selling prices, which more than
offset aggregate cost inflation and the impact of lower sales
volumes. Additionally, we achieved restructuring cost savings from
our previously announced programs. Segment operating margins
improved by 260 basis points year over year.
- Industrial Coatings
segment
$ in millions
1Q
2023
1Q
2022
Y-O-Y
change
Net sales
$1,752
$1,738
+1%
Segment income
$240
$140
+71%
Segment income %
13.7%
8.1%
Sales volumes
-3%
Selling prices
+7%
Acquisitions
+1%
Divestitures and wind down of Russia
-1%
Foreign currency translation
-3%
Industrial Coatings net sales increased
modestly as higher selling prices across all businesses were
partially offset by lower sales volumes, unfavorable foreign
currency translation, and the wind down of business in Russia.
Automotive OEM coatings organic sales were
sharply higher with solid contributions from higher sales volumes
and global selling prices. Industry build growth was highest in
Europe, where the company is well positioned with advantaged
technologies and where regional growth is forecast to remain robust
in 2023. Industrial coatings organic sales were down a low
single-digit percentage as solid selling price realization was more
than offset by lower sales volumes due to softer global industrial
production. Packaging coatings delivered low single-digit
percentage organic sales growth led by higher selling prices, which
were offset by lower sales volumes in most regions.
Segment income was higher than prior year by
$100 million mainly due to higher selling prices focused on margin
recovery, partially offset by lower sales volumes. Segment margins
improved by 560 basis points compared to the first quarter
2022.
Additional Financial Information
- At quarter end, the company had cash and short-term investments
totaling nearly $1.5 billion. Net debt was $5.8 billion, which is
about $300 million lower compared to the prior-year first quarter.
Inventories rose modestly on a sequential basis ahead of
historically higher seasonal sales levels.
- Corporate expenses were about $70 million in the first quarter,
which was $15 million higher than the prior year, primarily due to
higher non-cash pension expense.
- Acquisition-related synergies and business restructuring
programs delivered about $15 million of cost savings in the
quarter.
Outlook
The company today reported the following projections for the
second quarter and full year 2023 based on current global economic
activity and in consideration of the economic uncertainty
associated with the impacts of geopolitical issues in Europe and
higher interest rates in most developed countries:
Second Quarter 2023:
- Aggregate sales volumes flat with equal potential for slight
improvement or decrease of a low single-digit percentage year over
year
- Corporate expenses of about $75 million; higher than prior year
primarily due to increased pension costs (non-cash)
- Net interest expense of between $35 million and $40
million
- Effective tax rate of 22.5% to 24%
- Reported EPS of $1.92 to $2.02
- Adjusted EPS of $2.05 to $2.15, excluding amortization expense
of $0.13
Full Year 2023:
- Adjusted EPS of $6.95 to $7.25, excluding amortization expense,
costs related to previously approved and communicated business
restructuring, a non-cash pension settlement charge and the benefit
from an insurance recovery. The mid-point of the full-year guidance
projects 10% year-over-year earnings growth in the second half of
2023.
A detailed commentary and associated presentation slides related
to the first quarter financial information is posted on the
company’s investor relations website.
The term organic sales as used in this press release is defined
as net sales excluding the impact of currency, acquisitions,
divestitures and the wind down of Russia operations.
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 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
$17.7 billion in 2022. 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
20. The company will hold a conference call to review its first
quarter 2023 financial performance on April 21, at 8:00 a.m. ET.
Participants can pre-register for the conference by navigating to
https://www.netroadshow.com/events/login?show=591d152e&confId=48643.
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 21, beginning at
approximately 11:00 a.m. ET, through May 5, 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 960369. A Web replay also
will be available shortly after the call on the PPG Investor Center
at www.ppg.com, and will remain through Friday, April 19, 2024.
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 expected effects on our business of
COVID-19, global economic conditions, geopolitical issues in
Europe, 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 2022 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 20,
2023, 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
full-year 2023 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 2023
First Quarter 2022
$
EPS(a)
$
EPS(a)
Reported net income from continuing
operations
$264
$1.11
$18
$0.08
Pension settlement charge(b)
144
0.61
—
—
Acquisition-related amortization
expense
31
0.13
33
0.14
Insurance recovery of expenses incurred
due to a natural disaster(c)
(7)
(0.03)
—
—
Impairment and other related
charges(d)
—
—
263
1.10
Business restructuring-related costs,
net(e)
—
—
10
0.04
Acquisition-related costs(f)
—
—
3
0.01
Adjusted net income from continuing
operations, excluding certain items
$432
$1.82
$327
$1.37
First Quarter 2023
First Quarter 2022
Income Before Income
Taxes
Income Tax Expense
Effective Tax Rate
Income Before Income
Taxes
Income Tax Expense
Effective Tax Rate
Effective tax rate, continuing
operations
$353
$80
22.7
%
$78
$55
70.5
%
Pension settlement charge(b)
190
46
24.3
%
—
—
—
%
Acquisition-related amortization
expense
41
10
24.5
%
43
10
24.8
%
Insurance recovery of expenses incurred
due to a natural disaster(c)
(9)
(2)
24.3
%
—
—
—
%
Impairment and other related
charges(d)
—
—
—
%
290
27
9.3
%
Business restructuring-related costs,
net(e)
—
—
—
%
14
4
25.8
%
Acquisition-related costs(f)
—
—
—
%
4
1
24.0
%
Adjusted effective tax rate, continuing
operations, excluding certain items
$575
$134
23.3
%
$429
$97
22.6
%
(a)
Earnings per diluted share is calculated
based on unrounded numbers. Figures in the table may not
recalculate due to rounding.
(b)
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.
(c)
The company incurred expenses due to
damages at a southern U.S. factory resulting from a hurricane in
2020. In the first quarter 2023, the company received reimbursement
under its insurance policies related to the damages incurred at
this factory due to this hurricane.
(d)
In the first quarter 2022, the Company
recorded impairment and other related charges due to the wind down
of the company’s operations in Russia.
(e)
Included in business restructuring-related
costs, net are business restructuring charges, accelerated
depreciation of certain assets and other related costs, offset by
releases related to previously approved programs.
(f)
Acquisition-related costs include
advisory, legal, accounting, valuation, other professional or
consulting fees, and certain internal costs directly incurred to
effect acquisitions. These costs are included in Selling, general
and administrative expense in the condensed consolidated statement
of income.
PPG INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENT OF INCOME (unaudited) (All amounts in
millions except per-share data) Three Months Ended March 31
2023
2022
Net sales
$4,380
$4,308
Cost of sales, exclusive of depreciation and amortization
2,596
2,698
Selling, general and administrative
992
974
Depreciation
92
102
Amortization
41
43
Research and development, net
104
115
Interest expense
59
30
Interest income
(25)
(9)
Impairment and other related charges
-
290
Pension settlement charge
190
-
Other income, net
(22)
(13)
Income before income taxes
$353
$78
Income tax expense
80
55
Net income attributable to controlling and noncontrolling interests
$273
$23
Net income attributable to noncontrolling interests
(9)
(5)
Net income (attributable to PPG)
$264
$18
Earnings per common share (attributable to PPG)
$1.12
$0.08
Earnings per common share (attributable to PPG) - assuming
dilution
$1.11
$0.08
Average shares outstanding
235.8
236.6
Average shares outstanding - assuming dilution
236.9
238.2
PPG INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS HIGHLIGHTS (unaudited) ($
in millions) Three Months Ended March 31
2023
2022
Cash from/(used for) operating activities
$85
$(304)
Cash used for investing activities: Capital expenditures
$120
$194
Business acquisitions, net of cash balances acquired
$-
$9
Financing activities: Dividends paid on PPG common stock
$146
$139
PPG INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEET HIGHLIGHTS (unaudited) ($ in
millions) March 31 December 31 March 31
2023
2022
2022
Current assets: Cash and cash equivalents
$1,426
$1,099
$960
Short-term investments
56
55
73
Receivables, net
3,595
3,303
3,659
Inventories
2,599
2,272
2,439
Other current assets
517
444
496
Total current assets
$8,193
$7,173
$7,627
Current liabilities: Short-term debt and current portion of
long-term debt
$209
$313
$319
Accounts payable and accrued liabilities
4,347
4,087
4,492
Current portion of operating lease liabilities
185
183
190
Restructuring reserves
127
138
171
Total current liabilities
$4,868
$4,721
$5,172
Long-term debt
$7,082
$6,503
$6,834
PPG OPERATING METRICS (unaudited) ($ in millions) March 31
December 31 March 31
2023
2022
2022
Operating Working Capital (a)
$3,217
$2,830
$2,757
As a percent of quarter sales, annualized
18.4%
16.9%
16.0%
(a) Operating working capital includes: (1) receivables from
customers, net of allowance for doubtful accounts, (2) FIFO
inventories and (3) trade liabilities.
PPG INDUSTRIES, INC. AND
SUBSIDIARIES CONSOLIDATED BUSINESS SEGMENT INFORMATION
(unaudited) ($ in millions) Three Months Ended March 31
2023
2022
Net sales Performance Coatings
$2,628
$2,570
Industrial Coatings
1,752
1,738
Total
$4,380
$4,308
Segment income Performance Coatings
$395
$319
Industrial Coatings
240
140
Total
$635
$459
Items not allocated to segments Corporate
(67)
(52)
Interest expense, net of interest income
(34)
(21)
Pension settlement charge (Note A)
(190)
-
Insurance recovery of expenses incurred due to a natural disaster
(Note B)
9
-
Impairment and other related charges (Note C)
-
(290)
Business restructuring-related costs, net (Note D)
-
(14)
Acquisition-related costs (Note E)
-
(4)
Income before income taxes
$353
$78
Note A: 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 B: The company incurred expenses due to damages at a southern
U.S. factory resulting from a hurricane in 2020. In the first
quarter 2023, the company received reimbursement under its
insurance policies related to the damages incurred at this factory
due to this hurricane.
Note C: In the first quarter 2022, the Company recorded impairment
and other related charges due to the wind down of the company’s
operations in Russia.
Note D: Included in business restructuring-related costs, net are
business restructuring charges, accelerated depreciation of certain
assets and other related costs, offset by releases related to
previously approved programs.
Note E: Acquisition-related costs include advisory, legal,
accounting, valuation, other professional or consulting fees, and
certain internal costs directly incurred to effect acquisitions.
These costs are included in Selling, general and administrative
expense in the condensed consolidated statement of income.
CATEGORY Corporate
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230420005640/en/
PPG Media Contact: Mark Silvey Corporate Communications
+1-412-434-3046 silvey@ppg.com
PPG Investor Contact: John Bruno Investor Relations
+1-412-434-3466 jbruno@ppg.com investor.ppg.com
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