PPG reported financial results for the third quarter of 2024.

• Record reported earnings per diluted share (EPS) of $2.00 and adjusted EPS of $2.13
• Net sales of $4.6 billion; organic sales flat compared to the prior year
• Segment margins improved 60 basis points year over year, marking eight consecutive quarters of margin expansion
• Share repurchases of approximately $200 million in the quarter; $500 million year to date

Chairman and CEO Comments

Tim Knavish, PPG chairman and chief executive officer, commented on the quarter:

"We delivered record third-quarter EPS driven by positive volume growth in seven of our 10 businesses, including strong growth in several of our key technology businesses, despite deterioration in automotive original equipment manufacturer (OEM) build rates during the quarter. Our reported EPS was $2.00, and adjusted EPS of $2.13 grew 3% year over year, even with an unfavorable impact from a higher effective income tax rate, which reduced the year-over-year EPS comparison by $0.08. The third quarter marked our seventh consecutive quarter of adjusted EPS growth. Our aggregate segment margin improved 60 basis points year over year, aided by business mix and lower costs, marking our eighth consecutive quarter of increases.

"We delivered year-over-year sales volume growth of 2% in the Performance Coatings segment, offset by increasingly challenged global industrial production, which constrained demand in the Industrial Coatings segment. Performance Coatings growth was driven by sustained strength in aerospace demand, refinish coatings share gains, and strong performance in the architectural coatings Americas and Asia Pacific business. This growth was offset by declines in the Industrial Coatings segment in Europe and the U.S., where automotive OEM build rates weakened, especially late in the quarter, and general industrial production remained soft. In the Asia-Pacific region, both reporting segments delivered solid sales growth in China and India, driven by our share gains.

"During the quarter, we extended our tradition of rewarding our shareholders. We repurchased approximately $200 million of stock during the third quarter and about $500 million year to date. In July, we increased our quarterly dividend by 5%, and we paid about $160 million in dividends in the quarter, with approximately $465 million paid year to date. Our balance sheet remains strong, providing us with the financial flexibility to drive shareholder value creation going forward.

"Looking ahead, we maintain our full-year 2024 sales and EPS guidance, expecting organic sales to be flat and adjusted earnings per share to be at the low end of the $8.15 to $8.30 range. The pending closure of the silica products business divestiture and the strategic review of the architectural coatings U.S. and Canada business reflect our enterprise growth strategy to focus on businesses with the greatest growth and margin opportunities. Finally, we remain committed to strong cost management and productivity improvements that will maintain momentum in driving higher margins and earnings growth.

"This strong performance would not be possible without the dedication of our employees, who deliver growth for PPG. Thank you to our PPG team around the world who make it happen every day: We protect and beautify the world®."

Third-Quarter 2024 Reportable Segment Financial Results

Performance Coatings segment

Performance Coatings net sales increased as higher sales volumes and selling prices were partially offset by the divestiture of the non-North American portion of the traffic solutions business and unfavorable foreign currency translation.

Sales volumes increased 2% year over year, with growth in five of the six businesses in this segment, led by aerospace coatings, protective and marine coatings, and architectural coatings Americas and Asia Pacific. PPG’s aerospace coatings business delivered record quarterly sales from double-digit organic sales growth and ended the quarter with an order backlog of approximately $290 million. This came despite improvements in production capacity this year through debottlenecking and productivity gains. Protective and marine coatings organic sales increased by a low single-digit percentage compared to the prior year, driven by share gains in Europe and Asia Pacific. Organic sales for architectural coatings Americas and Asia Pacific were higher by a low single-digit percentage, with solid volume growth in the professional contractor segment in the U.S. and Canada. PPG continues to benefit from its well-established concessionaire network in Mexico. Organic sales in automotive refinish coatings grew by a mid-single-digit percentage, with high single-digit growth in U.S. collision-related products, despite lower overall industry collision claims. Organic sales for architectural coatings Europe, the Middle East, and Africa were flat, a positive trend after several quarters of declines. This was supported by growth in central and eastern Europe, offset by lower sales volumes across western Europe.

Segment income increased 13% from the prior year, and the segment operating margin improved 190 basis points year over year to 17.6%, driven by higher sales volumes and targeted price increases, partially offset by general cost inflation.

Industrial Coatings segment

Industrial Coatings net sales were lower compared to the third quarter of 2023 due to lower sales volumes and lower selling prices from certain index-based customer contracts.

Automotive OEM coatings organic sales decreased more than initially forecast, declining by a double-digit percentage due to lower U.S. and European industry build rates, which deteriorated notably late in the quarter, partly offset by PPG’s growth in China and Mexico. Similar to prior quarters, industrial activity in the U.S. and Europe was lackluster. As a result, industrial coatings organic sales declined by a mid-single-digit percentage, more than offsetting solid growth in emerging markets. Packaging coatings organic sales were up a low single-digit percentage year over year, with improved sales volumes stemming from share gains, partially offset by lower selling prices.

Segment income decreased 19%, and the segment margin declined by 190 basis points compared to the third quarter of 2023, driven by lower sales volumes and lower selling prices from certain index-based pricing contracts.

Additional Financial Information

At the end of the quarter, the company had cash and short-term investments totaling $1.3 billion. Net debt was $5.2 billion, up $300 million from the third quarter of 2023.

Corporate expenses were $72 million in the third quarter, $16 million lower than the prior year, due to lower incentive-based compensation and cost-saving initiatives. Net interest expense was $19 million.

The reported and adjusted effective tax rates were approximately 22.5% in the third quarter. The adjusted effective tax rate was 19.5% in the third quarter of 2023 due to certain nonrecurring discrete tax items.

Additional information related to third-quarter financial information is available on PPG's website.