04.24.23
PPG reported financial results for the first quarter 2023.
First quarter 2023 net sales were $4,380 million, up 2% from $4,308 million in 1Q 2022. Net incl=ome increased +1,367% to $264 million from $18 million in Q1 2022.
“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,” said Tim Knavish, PPG president and chief executive officer. “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,” Knavish added. “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,” Knavish concluded. “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. 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.”
Performance Coatings net sales increased 2% to $2,628 million, 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% to $395 million 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 net sales increased modestly by 1% to $1,752 million, 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 to $249 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.
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.
First quarter 2023 net sales were $4,380 million, up 2% from $4,308 million in 1Q 2022. Net incl=ome increased +1,367% to $264 million from $18 million in Q1 2022.
“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,” said Tim Knavish, PPG president and chief executive officer. “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,” Knavish added. “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,” Knavish concluded. “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. 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.”
Performance Coatings net sales increased 2% to $2,628 million, 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% to $395 million 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 net sales increased modestly by 1% to $1,752 million, 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 to $249 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.
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.
