PPG’s Q2 results for FY2024 show disappointing European sales and highlight strong growth in Mexico and China

• Record reported earnings per diluted share (EPS) of US$2.24 and adjusted EPS of US$2.50
• Net sales of US$4.8 billion; organic sales flat versus prior year
• Segment margins improved 110 basis points year over year, marking seven consecutive quarters of margin expansion
• Share repurchases of approximately US$150 million in the quarter; US$300 million year to date

Tim Knavish, PPG Chairman and CEO, commented on the quarter: “PPG delivered strong financial results in an increasingly challenging macro-environment. We achieved record reported EPS and adjusted EPS and grew year-over-year adjusted EPS by 11%, marking the sixth consecutive quarter of growth.

“Overall organic sales were flat, but grew in many of our businesses, including aerospace coatings, packaging coatings, architectural coatings Americas and Asia Pacific, traffic solutions and speciality coatings and materials. This growth was offset by global automotive builds that weakened as the quarter progressed and global industrial production which remained soft. Also, refinish coatings sales were down year over year reflecting a comparison to record prior year results and uneven distributor order patterns.

“Overall European year-over-year sales volume comparisons improved sequentially versus the first quarter, but sales volumes remained unfavourable and were below our initial expectations. Our financial results continued to benefit from our well-established businesses in Mexico and China, our second and third largest countries based on revenue.

“We built on our segment margin growth momentum as aggregate segment margins improved 110 basis points, which marks the seventh consecutive quarter of year-over-year improvement. Also, our gross margins improved by 180 basis points year over year. Our balance sheet remains strong, including lower inventories year over year, and we remain committed to utilising cash for shareholder value creation. For the third consecutive quarter we repurchased shares, with approximately US$150 million repurchased in the quarter and about US$300 million year to date.

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“Looking ahead, we expect strong momentum in Mexico. We believe that demand in China for PPG technology-advantaged products will deliver continued organic growth, albeit at lower growth rates than achieved in the first half of the year. In Europe, demand remains uneven by country and end use, but we expect to realise modest sequential year-over-year improvement. In the U.S., economic conditions have remained subdued in several end-use markets, but we expect overall improvement as the second half of the year progresses.

“As we execute on various enterprise growth initiatives and capitalise on our technical and service capabilities, we expect positive momentum in driving improved sales volumes will broaden within our business portfolio. In addition to those businesses that grew in the second quarter, we expect organic growth in automotive refinish coatings and protective and marine coatings. Also, while still slightly unfavourable year over year, we are projecting modest sequential quarterly improvement in general industrial demand. As a result, in the third quarter we are projecting flat-to-low single-digit percentage aggregate organic sales growth.

“The strategic reviews of the architectural coatings U.S. and Canada business and the global silicas business that were announced in the first quarter are progressing. We are diligently working toward and remain on schedule to determine paths forward as a result of each of these reviews.”

A detailed analysis can be found here.