PPG Reports Second Quarter 2021 Financial Results

PPG reported second quarter 2021 net sales of approximately $4.4 billion, approximately 45% higher than the prior year. Selling prices increased by 3.5% and sales volumes were higher by approximately 24% in comparison to the previous year. Favorable foreign currency translation impacted net sales by about 6%, or about $185 million, and acquisition-related sales added more than 11% year over year.

Second quarter 2021 reported net income was $431 million, or $1.80 per diluted share, and adjusted net income was $465 million, or $1.94 per diluted share. Adjusted figures exclude after-tax items, including acquisition-related amortization expenses of $31 million and other items totaling to $3 million of expense, primarily related to environmental matters, income from legal settlements, decrease in allowance for doubtful accounts, natural disaster-related expenses, other acquisition- and integration-related costs, and a charge related to the U.K. statutory tax rate change. Second quarter 2020 reported net income from continuing operations was $99 million, or $0.42 per diluted share, and adjusted net income from continuing operations was $258 million, or $1.09 per diluted share. The second quarter 2021 reported and adjusted effective tax rates were about 27% and 23% respectively, compared to the second quarter 2020 reported and adjusted effective tax rates of about 23% and 25% respectively. Detailed reconciliations of the reported to adjusted figures are included below.

“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. 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,” said Michael H. McGarry, PPG chairman and chief executive officer.

“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. 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.

“We continue to proactively manage various supply chain disruptions, which we now expect will likely persist through the third quarter. As a result, we expect that aggregate input and logistics costs will be sequentially higher in the third quarter, compared to the second quarter. We continue to prioritize further selling price increases, which we expect will fully offset raw material cost inflation before the end of 2021, on a run-rate basis. Overall economic demand growth remains very broad and robust and, as supply conditions normalize, we expect strong sales growth later this year and into next year aided by our technology advantaged products, our diverse geographic and end-use market participation, and continuing recovery from our aerospace business. As is PPG’s hallmark, we will continue to aggressively manage all aspects of our cost structure,” added McGarry.

“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. 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,” concluded McGarry.