PPG reports third quarter 2022 financial results

PPG reports third quarter 2022 financial results

  • Record third quarter net sales of $4.5 billion, up about 8% in constant currencies
  • Organic sales growth of more than 9% driven by higher selling prices, which are up 18% on a two-year stacked basis
  • Reported earnings per diluted share from continuing operations (EPS) of $1.39 and adjusted EPS of $1.66
  • Inflationary cost pressures persisted with raw material cost inflation of nearly 40% on two-year stack; energy costs continue to rise
  • Expect improving pace of year-over-year segment operating margin recovery in fourth quarter and into 2023

PITTSBURGH–(BUSINESS WIRE)– PPG (NYSE:PPG) today reported financial results for the third quarter 2022.

Third Quarter Consolidated Results

$ in millions, except EPS3Q 20223Q 2021Y-O-Y change
Net sales*$4,468$4,372+2%
Net income$329$344-4%
Adjusted net income**$393$406-3%
Adjusted EPS**$1.66$1.69-2%
*Components of year-over-year net sales change: higher selling prices (+12%), lower sales volumes (-3%), divestiture-related sales and the wind down of Russia operations (-1%), unfavorable foreign currency translation (-6%)**Detailed reconciliations of reported to adjusted figures are included below

Chairman and CEO Comments

Michael H. McGarry, PPG chairman and chief executive officer, commented on the quarter:

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. 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. 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 totaling about $200 million.

Looking ahead, normal seasonal demand trends are anticipated in the fourth quarter. 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. Due to the reduced economic activity, an additional cost restructuring program is now underway focused on fast payback actions targeting $70 million of annualized savings upon full implementation. 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.

Third Quarter 2022 Reportable Segment Financial Results

  • Performance Coatings segment
$ in millions3Q 2022 3Q 2021 Y-O-Y change
Net sales$2,705 $2,758 -2%
Segment income$362 $408 -11%
Segment income %13.4% 14.8%  
Sales volumes  -6%
Selling prices  +11%
Divestitures and wind down of Russia -1%
Foreign currency translation -6%

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 our 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. Unfavorable foreign currency translation negatively impacted segment earnings by nearly $25 million.

  • Industrial Coatings segment
$ in millions3Q 2022 3Q 2021 Y-O-Y change
Net sales$1,763 $1,614 +9%
Segment income$192 $140 +37%
Segment income %10.9% 8.7%  
Sales volumes  +2%
Selling prices  +14%
Divestitures and wind down of Russia -1%
Foreign currency translation -6%

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.

Additional Financial Information

  • At quarter end, the company had cash and short-term investments totaling about $1.1 billion. Net debt was $5.7 billion, about $400 million lower than the end of the second quarter 2022. Inventories declined in comparison to the second quarter and the company remains focused on further reductions in the fourth quarter, including destocking higher-than-normal raw material inventories.
  • Corporate expenses were about $60 million in the third quarter.
  • Acquisition-related synergies and business restructuring programs delivered about $25 million of cost savings.
  • The company’s reported and adjusted effective tax rates for the third quarter were about 19% and 20%, respectively.


The company today reported the following projections for the fourth quarter 2022 based on current global economic activity and in consideration of the near-term economic uncertainty associated with the impact of geopolitical issues in Europe and the continuing pandemic:

  • Aggregate sales volumes down a mid-single-digit percentage year over year
  • Corporate expenses of between $55 million and $60 million
  • Net interest expense of between $35 million and $40 million
  • Effective tax rate of about 20%
  • Reported EPS of $0.90 to $1.05
  • Adjusted EPS of $1.05 to $1.20, excluding amortization expense of $0.13 and costs related to previously approved and communicated business restructuring of $0.02.

A detailed commentary and associated presentation slides related to the third 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, divestitures, and the wind down of Russia operations.

Source: PPG




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