PPG reported financial results for the first quarter 2022. Net sales were $4,308 million, up 11% from Q1 2021. Net income was $18 million, down 95% from $378 million. Adjusted net income was $327 million, a decrease of 27%.

“We delivered record sales during the quarter despite ongoing supply chain disruptions along with the initial impacts of geopolitical issues in Europe and increasing COVID-19 restrictions in China,” Michael H. McGarry, PPG chairman and CEO, said. “Our organic sales growth of 7% was driven by continued selling price realization and above-market sales volume performance in several of our end-use markets, most notably in automotive refinish and PPG-Comex architectural coatings.

“On a two-year stacked basis, our selling prices are up about 12% over the first quarter 2020 as we continue to manage through persistent and broad inflation. Sales also bene-fitted from our recent acquisitions as Tikkurila and traffic solutions both delivered strong performances,” McGarry add-ed.

“In addition to further selling price capture, adjusted earnings exceeded our January guidance as we delivered excellent earnings leverage on higher-than-expected sales volumes,” McGarry noted. “The leverage benefits were aided by sequential quarterly improvements in manufacturing perfor-mance, including the benefit of more consistent raw material availability. We once again finished the quarter with a much larger than normal order back-log, totaling about $180 million, primarily in automotive refinish and aerospace coatings, and we expect further volume growth in these busi-nesses in the coming quarters.

“Looking ahead, aggregate underlying demand for PPG products is expected to remain solid, in-cluding continued pandemic-related recovery in certain end-use markets,” he noted. “While supply disruptions are expected to persist, we anticipate further sequential raw material availability im-provements driven by increased supplier manufacturing capabilities and labor availability in the US, along with lower European demand. Given higher global energy prices, we are implementing further selling price increases in all businesses, and our commercial processes are enabling closer to real-time pricing relative to inflation. We are also developing further cost mitigation actions in the event of broader economic slowdowns. The continuing crisis in Europe and pandemic-related re-strictions in China have increased the level of near-term economic uncertainty, as a result our finan-cial guidance for the second quarter considers a wider range of potential earnings outcomes.

“I remain optimistic about the number of organic growth opportunities that we are pursuing, in-creased sales volumes associated with return to normal historical inventory levels in most of our end-use markets and the expected recovery in automotive original equipment manufacturer (OEM) and aerospace coatings, where we have leading global positions. Finally, I want to thank all our global employees who continue to ‘make it happen’ by providing excellent service to our custom-ers and supporting our communities in need during these challenging times,” McGarry concluded.

First Quarter 2022 Reportable Segment Financial Results

The Performance Coatings segment’s net sales were $2,570  million, up 11% from 1Q 2021. Segment income was $319 million, a decrease of 17%.
Performance Coatings net sales increased primarily due to selling price increases across all busi-nesses and acquisition-related sales. While demand remained strong in most end-use markets, raw material availability continued to constrain sales in many businesses, with the largest impacts in architectural coatings Americas and Asia Pacific, traffic solutions, and automotive refinish.

As expected, demand for architectural coatings do-it-yourself products continued to moderate in all major regions compared to elevated first-quarter 2021 levels. Sales volumes in the US architectural coatings business benefited modestly from the launch of the recently announced expanded relation-ship with The Home Depot in the professional paint channel, but the inventory load-in was con-strained due to raw material availability.

Automotive refinish net sales grew by a high-single-digit percentage with higher selling prices and sales volumes that continued to outpace industry growth. Aerospace sales volumes were up by a mid-teen-percentage compared to first quarter 2021 levels as after-market demand continued to re-cover; however, volumes remain nearly 20% below first quarter 2019 pre-pandemic levels. Traffic solutions delivered strong organic sales growth of about 25% compared to the prior year. The re-cently acquired Tikkurila business represented most of the acquisition-related sales.

Segment income was lower than the prior year, mainly due to raw material, logistics, and energy cost inflation, along with increased manufacturing costs and lower sales volumes, partially offset by higher selling prices coupled with restructuring cost savings. Segment margins improved on a sequential quarterly basis com-pared to the fourth quarter of 2021.

The Industrial Coatings segment’s net sales were $1,738 million, also up 11% from 1Q 2021. Segment income was $149 million, a decrease of 43%.

Industrial Coatings net sales increased primarily due to selling price increases across all businesses and acquisition-related sales, partially offset by lower sales volumes in comparison to strong, pan-demic-related volume recovery in the prior year.

Most businesses were also impacted by lower economic activity in China due to the Winter Olym-pics and growing COVID-19 restrictions later in the quarter. Automotive OEM coatings organic sales were up due to higher selling prices partially offset by lower sales volumes, as industry de-mand was impacted by OEM customer component shortages, geopolitical issues in Europe and production curtailments in China.

Industrial coatings organic sales were up a high-single-digit percentage driven by strong selling price realization and solid sales volumes growth in the Americas, partially offset by lower demand in China due to pandemic-related restrictions.

Packaging coatings delivered strong organic sales growth led by higher selling prices and contin-ued sales volume strength in the U.S. canned beverage segment. Wörwag, Tikkurila and Cetelon represented the acquisition-related sales.

Segment income was lower than the prior year mainly due to raw material cost inflation, elevated operating costs due to intermittent manufacturing outages early in the quarter and lower sales vol-umes. These were partially offset by higher selling prices, restructuring cost savings, and acquisi-tion-related earnings.

At quarter end, the company had cash and short-term investments totaling about $1 billion. Net debt was $6.1 billion, up by about $600 million from the end of the fourth quarter 2021. Working capital increased, reflecting seasonal trends and raw material inflation.

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