PPG reported financial results for the fourth quarter 2021.

In the fourth quarter of 2021, PPG had net sales of $4,190 million, up 12% from 4Q 2021. Net income was down 2% from 4Q 2021, to $267 million.

Components of year-over-year net sales change included higher selling prices (+8%), lower sales volumes (-4%), acquisition-related sales (+9%), and unfavorable foreign currency translation (-1%).

Industrial coatings sales volumes were lower driven by softer demand in Asia Pacific and in comparison with a strong, prior-year pandemic recovery-related demand. Packaging coatings once again delivered strong organic sales growth, led by higher selling prices and strong sales volumes in the U.S. and Canada and EMEA regions. Wörwag, Tikkurila and Cetelon represented the acquisition-related sales.

Segment income of $105 million was 63% lower than the prior year mainly due to raw material cost inflation, elevated operating costs due to intermittent manufacturing outages and lower sales volumes. These were partially offset by higher selling prices, restructuring cost savings, and acquisition-related earnings.

PPG’s full-year 2021 sales were $16.8 billion, up 21% from 2021. Components of year-over-year net sales change: higher selling prices (+5%), higher sales volumes (+5%), acquisition-related sales (+9%), favorable foreign currency translation (+2%).

Full-year 2021 reported net sales from continuing operations were approximately $16.8 billion, up about 21% versus the prior year. Net income was $1,420 million, up 34%. Organic sales were higher by 10% including sales volume growth and higher selling prices. About 40% of the business portfolio remains more than 15% below pre-pandemic sales volume levels, and is expected to be a revenue and earnings growth catalyst in 2022 and 2023. This 40% represents the automotive OEM, aerospace, and automotive refinish coatings businesses.

“We achieved higher sales than we originally forecasted as demand for our products remained strong and we continued to rapidly implement additional selling price increases,” said Michael H. McGarry, PPG chairman and CEO.

“Our quarterly sales, which were a record for any fourth quarter, were aided by acquisition-related sales and above-market sales volume performance in several of our end-use markets, including automotive refinish, marine, and PPG-Comex architectural coatings,” McGarry noted. “The prior year fourth quarter results included elevated architectural coatings do-it-yourself demand and higher global industrial activity related to initial recovery from the pandemic.

“From an earnings perspective, selling prices improved sequentially versus the third quarter and increased 8% year-over-year, partially offsetting raw material and logistics cost inflation,” he continued. “However, we experienced significantly higher operating costs due to unpredictable manufacturing interruptions at both our facilities and our customers’ operations stemming from a rapid and substantial impact from labor availability due to COVID-19. Also impacting sales and earnings were ongoing raw material and transportation availability challenges resulting in continued difficulty fulfilling strong order books in several end-use markets, as we ended the quarter with order backlog of over $150 million.”

McGarry said that while demand for PPG products remains strong, the heightened supply and COVID-related disruptions experienced in the fourth quarter are expected to continue in the first quarter of the year impacting PPG’s ability to manufacture and deliver product.

“We expect raw material costs to remain at an elevated level and we are experiencing additional inflation in other cost areas, including logistics and labor,” he noted. “Further selling price increases are being implemented in all of our businesses to mitigate the incremental inflation, and we continue to aggressively manage all aspects of our cost structure, including actions to minimize the cost impacts of the current supply challenges.”
Segment Report

Performance Coatings net sales increased 16% to $2,507 million, primarily due to acquisition-related sales and selling price increases across all businesses. While demand remained strong in most end-use markets, raw material availability constrained sales in all businesses, with the largest impacts in the architectural Americas and Asia Pacific, automotive refinish and aerospace coatings businesses.

As expected, demand for architectural coatings do-it-yourself products continued to contract in all major regions compared to elevated 2020 fourth quarter levels. Automotive refinish coatings organic sales grew by a mid-single-digit percentage as demand continues to gradually improve and the company outperformed market growth, with further recovery expected as aggregate body shop demand remains about 10% below pre-pandemic levels.

Aerospace coatings sales volumes were well above prior-year levels despite increasing manufacturing disruptions, but still remain about 20% below fourth quarter 2019 levels. Protective and marine coatings sales volumes were up about 10% year-over-year driven by strong above-market growth. Ennis-Flint and Tikkurila represented the majority of the acquisition-related sales.

Segment income of $243 millon was 19% lower than the prior year, mainly due to raw material and logistics cost inflation, increased manufacturing costs and lower sales volumes, partially offset by higher selling prices coupled with restructuring cost savings.

Industrial Coatings net sales were $1,683 million, an increase of 6% primarily due to acquisition-related sales and selling price increases across all businesses, partially offset by lower sales volumes. In comparison to strong prior year demand, automotive original equipment manufacturer (OEM) coatings sales volumes were down and slightly below automotive industry production rates due to customer mix, and continued to be impacted by lower year-over-year industry production due to semiconductor chip shortages.

Net debt was $5.5 billion at the end of the fourth quarter, which is down about $350 million since funding the Tikkurila acquisition in June 2021.

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