PPG has reported record third quarter net sales of US$4.5 billion, up about eight per cent in constant currencies, for the third quarter of 2022, with the result aided by record Q3 sales for the company’s global automotive refinish businesses.
Driven by higher selling prices, organic sales rose more than nine per cent, but inflationary cost pressures persisted with raw material cost inflation of nearly 40 per cent on two-year stack while energy costs continued to rise.
“We achieved record sales in the third quarter driven by continued selling price realisation, resulting in more than a 12 per cent increase in selling prices versus the third quarter 2021 and an 18 per cent increase on a two-year stacked basis,” said Michael McGarry, PPG Chairman and Chief Executive Officer. “However, as we previously communicated, sales volumes were impacted by further softening demand in Europe and less sequential quarterly demand recovery in China than was expected due to a resumption of certain pandemic-related restrictions. These factors, along with worsening foreign currency translation impacts, caused our sales growth to be lower than anticipated at the beginning of the quarter.
“The higher year-over-year sales were aided by record sales in our PPG Comex and global automotive refinish businesses. In addition, both the aerospace and automotive original equipment manufacturer (OEM) coatings businesses delivered double-digit percentage sales volume gains, though demand in both industries remains well below pre-pandemic levels.”
McGarry said overall supply chain disruptions continued to broadly ease throughout the quarter, but a few lingering short-supplied raw materials impacted several businesses. At quarter-end, the automotive refinish and aerospace coatings businesses continued to have much larger than traditional order backlogs totalling about US$200 million. Looking ahead, PPG anticipates normal seasonal demand trends in the fourth quarter, and economic activity to remain soft in Europe and China.
Due to the reduced economic activity, an additional cost restructuring programme, focused on fast payback actions targeting US$70 million of annualised savings upon full implementation, is underway.
“We continue to expect our business portfolio to prove more resilient in the coming quarters as several of our larger businesses, including automotive OEM and aerospace coatings, are anticipated to deliver growth due to large supply deficits and low inventories in these end-use markets,” McGarry said. “Finally, we expect that our year-over-year operating margins will improve in the fourth quarter and into 2023 as we work to restore our historical margin profile through our actions to fully offset inflation and manage our costs.”