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PPG Reports Record First Quarter 2021 Financial Results

General News
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–Record first quarter net sales of approximately $3.9 billion, about 15% higher than prior year

–Record reported earnings per diluted share (EPS) of $1.58 and adjusted EPS of $1.88

–Sales volumes grew about 7% year over year reflecting continued, broad global economic recovery, resulting in strong earnings leverage due to the company’s lower cost base

–Additional pricing actions already initiated due to rising input costs

–Cash and short-term investments of approximately $1.9 billion at quarter-end

–Completed VersaFlex acquisition and expect the Tikkurila and Wörwag acquisitions to close in the second quarter

PPG reported first quarter 2021 net sales of approximately $3.9 billion, approximately 15% higher than the prior year. Selling prices increased by nearly 2% and sales volumes were higher by approximately 7% year over year. Favorable foreign currency translation impacted net sales by more than 3%, or about $110 million, and acquisition-related sales contributed nearly 3% of the sales growth.

First quarter 2021 reported net income was $378 million, or $1.58 per diluted share, and adjusted net income was $450 million, or $1.88 per diluted share. Adjusted figures exclude after-tax items, including acquisition-related amortization expense of $29 million and other expenses of $43 million, primarily related to environmental remediation charges, expenses related to natural disasters, and other acquisition and integration-related costs. First quarter 2020 reported net income from continuing operations was $243 million, or $1.02 per diluted share, and adjusted net income from continuing operations was $310 million, or $1.31 per diluted share. The first quarter 2021 reported and adjusted effective tax rates were both approximately 23%, compared to the first quarter 2020 reported and adjusted effective tax rates of about 22%. Detailed reconciliations of the reported to adjusted figures are included below.

“We delivered record adjusted EPS in the first quarter which is significantly above 2020 first quarter results, and also 27% higher than first quarter 2019 despite sales volumes not yet having fully recovered to pre-COVID levels,” said Michael H. McGarry, PPG chairman and chief executive officer. “We delivered excellent operating performance in both reportable segments. We achieved these results despite experiencing accelerating raw material and logistics cost inflation during the quarter, and with demand remaining tepid in the global commercial aerospace and U.S. protective coatings end-use markets. The company’s first quarter segment margins were at multi-year seasonal highs as we benefited from strong leverage on higher year-over-year net sales growth.

“In addition to improving sales performance, we delivered about $35 million of structural cost savings from business restructuring programs and continue to target a total of about $125 million of savings for the full-year 2021. We also reduced our working capital as a percent of sales by 200 basis points, driving improved operating cash flow performance compared to the prior year quarter. Finally, we continued to make good progress around our announced acquisitions, closing the VersaFlex transaction and nearing completion of the Tikkurila and Wörwag acquisitions. We are rapidly integrating those acquisitions which have already closed, and we are forecasting total 2021 synergies from all acquisitions to be $25 million to $30 million, assuming that both Tikkurila and Wörwag are completed in May.

“In the near-term, we are proactively managing through both direct supply chain disruptions and production constraints at some of our customers due to their input component shortages. These issues will likely delay some seasonal sales activity into the second half of the year, but overall demand growth across much of our business portfolio remains very strong. The commodity disruptions specifically affecting the coatings supply chain have resulted in raw material cost inflation, which we expect to remain elevated into at least the third quarter. We are prioritizing further selling price increases, which we expect to fully offset raw material cost inflation in the second half of 2021. In addition, we will continue to aggressively manage all aspects of our cost structure,” added McGarry.

“Looking ahead, we expect overall global coatings demand growth to be broad-based across most of the end-use markets that we supply, including an eventual replenishment of many of our customers’ inventories. In addition, I am encouraged to see an increase in domestic flight activity in various parts of the world, which should support the gradual recovery in aftermarket aerospace coatings demand in the second half of 2021. In addition to these organic growth opportunities, we will have further sales growth and earnings accretion from our recent acquisitions. Lastly, I want to thank all of our global employees who continued to manage through the pandemic in the quarter, to serve our customers and support our communities in need,” concluded McGarry.

First Quarter 2021 Reportable Segment Financial Results

Performance Coatings segment first quarter net sales were about $2.3 billion, up approximately $310 million, or about 16%, versus the prior year. The improvement was led by higher sales volumes of about 5%. In addition, selling prices increased by more than 2% and acquisition-related sales added about 5%, or about $95 million, primarily from the Ennis-Flint and ICR acquisitions. Finally, favorable foreign currency translation increased net sales by nearly 4%, or about $75 million. In comparison to 2019, aggregate segment net sales volumes have partially recovered from the effects of the pandemic, but were still down about 1%, with wide disparity by end-use market and region.

Architectural coatings – Europe, Middle East and Africa (EMEA) year-over-year net sales excluding the impact of currency and acquisitions (organic sales), increased by about 20%, driven by continued consumer demand growth for PPG’s paint products for residential renovations. Organic sales within the architectural coatings – Americas and Asia Pacific businesses were up a high-single-digit percentage year over year, with differences by channel and region. Both the U.S. trade professional and do-it-for-yourself channels had robust organic sales growth. In Mexico, the PPG-Comex architectural coatings business also grew organic sales by a high-single-digit percentage as consumer demand through the concessionaire network remained strong. Sales volumes in protective and marine coatings were up a low-single-digit percentage, led by strong PPG protective coatings demand in China that was partially offset in the U.S. by continued lower demand for energy-related protective coatings. Aerospace coatings sales volumes remained down nearly 30%, impacted by lower commercial original equipment and aftermarket demand, while sales for aerospace military applications remained solid. Sales volumes for automotive refinish coatings were up a high-teen percentage aided by an easier sales comparison to first quarter 2020 in China due to the pandemic and some U.S. customer restocking in the first quarter 2021.

Segment income for the first quarter was $386 million, up $114 million, or more than 40%, year over year. Segment income increased due to the impact of the improving sales volumes, higher selling prices and cost savings from continuing restructuring initiatives, partially offset by raw material and logistics cost inflation.
Industrial Coatings segment first quarter net sales were about $1.6 billion, up about $190 million, or about 14%, versus the prior year. The growth reflected demand improvements for automotive and general industrial coatings and continued strong packaging coatings sales, resulting in a 10% year over year increase in sales volumes for the reporting segment. Selling prices were also higher compared to the first quarter of 2020, including in the automotive OEM coatings business. Favorable foreign currency translation increased net sales by about 3% year over year. In comparison to 2019, segment net sales volumes have partially recovered from the pandemic, but were down about 2% in aggregate.

PPG automotive OEM coatings sales volumes rose a low-teen percentage in aggregate, with differences by region, and remained above global industry auto production rates. Global automotive production rates continue to be impacted by computer chip shortages, and car dealership inventory levels remain at very low levels historically. Sales volumes for the industrial coatings business continued to improve, increasing by a low-teen percentage year over year for a second consecutive quarter, as global industrial demand continues to recover including robust demand for the electronic materials, cookware, and appliance sub-segments. Packaging coatings sales volumes increased a low-teen percentage year over year, with solid growth across the beverage and food can segments.

Segment income for the first quarter was $245 million, up about $65 million, or approximately 35% year over year. Segment income was aided by higher sales volumes, restructuring cost savings, and favorable foreign currency translation, partially offset by raw material and logistics cost inflation.
The company had cash and short-term investments totaling approximately $1.9 billion at the end of the quarter and net debt of $4.4 billion. The Tikkurila and Wörwag acquisitions are expected to close in the second quarter and will be funded through a combination of existing cash on hand and external financing.

In addition, the company today reported the following projections for the second quarter 2021 based on current global economic activity, customer production restraints due to global chip shortages, and in consideration of the near-term economic uncertainty associated with the continued impact of the pandemic. The figures below do not include any financial results for acquisitions that have not yet closed:

–Aggregate sequential net sales up a low-teen percentage when compared to the first quarter 2021 and consistent with historical pre-COVID sequential quarterly changes.

–Structural cost savings from restructuring actions of about $30 million year over year.

–Corporate expenses were about $50 million in the first quarter and are expected to be $55 million to $60 million in the second quarter.

–Net interest expense between $27 million and $29 million.

–The company’s global ongoing effective tax rate of 23% to 24%.

–Second quarter adjusted earnings per diluted share between $2.15 and $2.20.

For the full press release, click here.

About PPG

At PPG (NYSE:PPG), we work every day to develop and deliver the paints, coatings and materials that our customers have trusted for more than 135 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 $13.8 billion in 2020. We serve customers in construction, consumer products, industrial and transportation markets and aftermarkets. To learn more, visit


Mark Silvey – Corporate Communications – – (412) 434-3046

Source: PPG Industries, Inc.