10.20.22
PPG reported financial results for the third quarter 2022.
Net sales were $4,468 million, up 2% from 3Q 2021. Net income was $329 million, down 4% from the prior year.
“We achieved record sales in the third quarter driven by continued selling price realization, resulting in more than a 12% increase in selling prices versus the third quarter 2021 and an 18% increase on a two-year stacked basis,” Michael H. McGarry, PPG chairman and CEO, said. “However, as we previously communicated, sales volumes were impacted by further softening demand in Europe and less sequential quarterly demand recovery in China than was expected due to a resumption of certain pandemic-related restrictions. These factors, along with worsening foreign currency translation impacts, caused our sales growth to be lower than anticipated at the beginning of the quarter.
“The higher year-over-year sales were aided by record sales in our PPG Comex and global automotive refinish businesses,” added McGarry. “In addition, both the aerospace and automotive original equipment manufacturer (OEM) coatings businesses delivered double-digit percentage sales volume gains, though demand in both industries remains well below pre-pandemic levels.
“Overall supply chain disruptions continued to broadly ease throughout the quarter; however, a few lingering short-supplied raw materials had impacts across several businesses. At quarter-end, the automotive refinish and aerospace coatings businesses continued to have much larger than traditional order backlogs totalling about $200 million,” he noted.
“Looking ahead, normal seasonal demand trends are anticipated in the fourth quarter,” McGarry continued. “In addition, economic activity is forecasted to remain soft in Europe and China, and demand for architectural do-it-for-yourself (DIY) paint products is likely to continue to weaken on a global basis. We continue to expect our business portfolio to prove more resilient in the coming quarters as several of our larger businesses, including automotive OEM and aerospace coatings, are anticipated to deliver growth due to large supply deficits and low inventories in these end-use markets.
"Finally, we expect that our year-over-year operating margins will improve in the fourth quarter and into 2023 as we work to restore our historical margin profile through our actions to fully offset inflation and manage our costs. Lastly, I want to thank our global employees who demonstrate The PPG Way every day by continuing to overcome unexpected challenges to provide our customers across the world with the products and excellent service they rely on.”
Performance Coatings net sales decreased due to lower sales volumes, the impact of divestitures, the wind down of business in Russia, and unfavorable foreign currency translation impacts. These items were partially offset by selling price increases in all businesses.
Supply chain disruptions continued to moderate during the quarter, albeit with some remaining challenges. Most notably, disruptions continued to impact the automotive refinish and aerospace coatings businesses.
As expected, demand for architectural coatings DIY products in Europe remained soft due to decreased consumer confidence and customer inventory destocking stemming from current geopolitical issues. Sales volumes in the U.S. architectural coatings business were also impacted by weaker DIY demand, which offset positive trends related to PPG’s recently announced expanded relationship with The Home Depot in the professional paint channel.
Automotive refinish coatings organic sales grew by a mid-single-digit percentage driven by higher selling prices that were partially offset by lower sales volumes, most notably in China due to COVID-19 restrictions. Aerospace sales volumes were up more than 10% compared to third quarter 2021 as aftermarket demand continued to recover and commercial new build activity began to improve.
Traffic solutions delivered organic sales growth of more than 10% compared to the prior year. Organic sales in the protective and marine coatings business grew by a low-single-digit percentage despite COVID-19 restrictions in China negatively impacting sales volumes.
Segment income was lower than the prior year mainly due to raw material, logistics, and labor cost inflation, the impact of lower sales volumes, unfavorable currency translation and increased manufacturing costs, partially offset by higher selling prices coupled with restructuring cost savings.
Industrial Coatings net sales increased due to higher selling prices across all businesses and increased sales volumes, partially offset by unfavorable foreign currency translation and the wind down of business in Russia.
Automotive OEM coatings organic sales were up more than 20% due to higher selling prices and sales volumes, including record sales in Asia Pacific reflecting the company’s strong position in this region and robust retail sales in China.
Automotive OEM customer production outages due to component shortages continued to impact sales in the U.S. and Europe, but moderated year-over-year. Industrial coatings organic sales were up a high single-digit percentage driven by strong selling price realization, partially offset by lower sales volumes in Europe and China due to softer industrial production activity.
Packaging coatings delivered organic sales growth of about 10% led by higher selling prices and continued U.S. sales volume strength.
Segment income was higher than the prior year by $52 million mainly due to higher selling prices and improving sales volumes, partially offset by increased raw material and energy costs and foreign currency translation. Segment margins improved on a sequential quarterly basis compared to the second quarter 2022.
Net sales were $4,468 million, up 2% from 3Q 2021. Net income was $329 million, down 4% from the prior year.
“We achieved record sales in the third quarter driven by continued selling price realization, resulting in more than a 12% increase in selling prices versus the third quarter 2021 and an 18% increase on a two-year stacked basis,” Michael H. McGarry, PPG chairman and CEO, said. “However, as we previously communicated, sales volumes were impacted by further softening demand in Europe and less sequential quarterly demand recovery in China than was expected due to a resumption of certain pandemic-related restrictions. These factors, along with worsening foreign currency translation impacts, caused our sales growth to be lower than anticipated at the beginning of the quarter.
“The higher year-over-year sales were aided by record sales in our PPG Comex and global automotive refinish businesses,” added McGarry. “In addition, both the aerospace and automotive original equipment manufacturer (OEM) coatings businesses delivered double-digit percentage sales volume gains, though demand in both industries remains well below pre-pandemic levels.
“Overall supply chain disruptions continued to broadly ease throughout the quarter; however, a few lingering short-supplied raw materials had impacts across several businesses. At quarter-end, the automotive refinish and aerospace coatings businesses continued to have much larger than traditional order backlogs totalling about $200 million,” he noted.
“Looking ahead, normal seasonal demand trends are anticipated in the fourth quarter,” McGarry continued. “In addition, economic activity is forecasted to remain soft in Europe and China, and demand for architectural do-it-for-yourself (DIY) paint products is likely to continue to weaken on a global basis. We continue to expect our business portfolio to prove more resilient in the coming quarters as several of our larger businesses, including automotive OEM and aerospace coatings, are anticipated to deliver growth due to large supply deficits and low inventories in these end-use markets.
"Finally, we expect that our year-over-year operating margins will improve in the fourth quarter and into 2023 as we work to restore our historical margin profile through our actions to fully offset inflation and manage our costs. Lastly, I want to thank our global employees who demonstrate The PPG Way every day by continuing to overcome unexpected challenges to provide our customers across the world with the products and excellent service they rely on.”
Performance Coatings
In 3Q 2022, Performance Coatings segment net sales were $2,705 million, down 2% from 3Q 2021. Segment income was $362 million, down 11% from 3Q 2021. Sales volumes were down 6%, but selling prices rose 11%.Performance Coatings net sales decreased due to lower sales volumes, the impact of divestitures, the wind down of business in Russia, and unfavorable foreign currency translation impacts. These items were partially offset by selling price increases in all businesses.
Supply chain disruptions continued to moderate during the quarter, albeit with some remaining challenges. Most notably, disruptions continued to impact the automotive refinish and aerospace coatings businesses.
As expected, demand for architectural coatings DIY products in Europe remained soft due to decreased consumer confidence and customer inventory destocking stemming from current geopolitical issues. Sales volumes in the U.S. architectural coatings business were also impacted by weaker DIY demand, which offset positive trends related to PPG’s recently announced expanded relationship with The Home Depot in the professional paint channel.
Automotive refinish coatings organic sales grew by a mid-single-digit percentage driven by higher selling prices that were partially offset by lower sales volumes, most notably in China due to COVID-19 restrictions. Aerospace sales volumes were up more than 10% compared to third quarter 2021 as aftermarket demand continued to recover and commercial new build activity began to improve.
Traffic solutions delivered organic sales growth of more than 10% compared to the prior year. Organic sales in the protective and marine coatings business grew by a low-single-digit percentage despite COVID-19 restrictions in China negatively impacting sales volumes.
Segment income was lower than the prior year mainly due to raw material, logistics, and labor cost inflation, the impact of lower sales volumes, unfavorable currency translation and increased manufacturing costs, partially offset by higher selling prices coupled with restructuring cost savings.
Industrial Coatings
In 3Q 2022, Industrial Coatings segment net sales were $1,763 million, up 9% from 3Q 2021. Segment income was $1,763 million, up 37% from 3Q 2021. Sales volumes were up 2%, and selling prices increased 14%.Industrial Coatings net sales increased due to higher selling prices across all businesses and increased sales volumes, partially offset by unfavorable foreign currency translation and the wind down of business in Russia.
Automotive OEM coatings organic sales were up more than 20% due to higher selling prices and sales volumes, including record sales in Asia Pacific reflecting the company’s strong position in this region and robust retail sales in China.
Automotive OEM customer production outages due to component shortages continued to impact sales in the U.S. and Europe, but moderated year-over-year. Industrial coatings organic sales were up a high single-digit percentage driven by strong selling price realization, partially offset by lower sales volumes in Europe and China due to softer industrial production activity.
Packaging coatings delivered organic sales growth of about 10% led by higher selling prices and continued U.S. sales volume strength.
Segment income was higher than the prior year by $52 million mainly due to higher selling prices and improving sales volumes, partially offset by increased raw material and energy costs and foreign currency translation. Segment margins improved on a sequential quarterly basis compared to the second quarter 2022.
