PPG has reported second quarter 2021 net sales of approximately US$4.4 billion – around 45 per cent higher than the previous year.
Selling prices increased by 3.5 per cent and sales volumes were higher by approximately 24 per cent in comparison to the previous year. PPG said favourable foreign currency translation impacted net sales by approximately six per cent or about US$185 million, and acquisition-related sales added more than 11 per cent year over year. Reported net income for second quarter 2021 was US$431 million and adjusted net income was US$465 million.
“Our strong organic sales growth reflects a partial demand recovery from the pandemic, including above-market contributions across many of our businesses,” said Michael McGarry, Chairman and Chief Executive Officer of PPG. “However, our volume growth was significantly tempered due to various supply and component disruptions, including those that reduced the overall manufacturing capability of our customers.
“In addition, despite strong underlying end-use market demand, various coatings raw material shortages and logistics issues reduced our ability to fully supply our existing order book within the quarter. Our recent acquisitions also contributed to our strong year-over-year sales growth and they are meeting our expectations.
McGarry said that while the company delivered “solid” adjusted EPS in the second quarter, results were below its April forecast.
“In addition to the top-line impact from the supply disruptions, we experienced continual increases in raw material and transportation costs throughout the quarter. We actively implemented additional selling price increases during the quarter and our pace of price realisation is well ahead of the most recent raw material inflation cycle in 2017-2018.
“In addition to further selling price increases, we delivered about US$40 million of structural cost savings from business restructuring programmes and have increased our targeted full-year 2021 savings by about 10 per cent, to US$135 million. We also continued our outstanding cash flow generation which year to date is about US$600 million, or about US$250 million higher than 2020.”
McGarry said the company is continuing to manage various supply chain disruptions, which PPG expects will likely persist through the third quarter.
“As a result, we expect that aggregate input and logistics costs will be sequentially higher in the third quarter compared to the second quarter. We continue to prioritise further selling price increases, which we expect will fully offset raw material cost inflation before the end of 2021, on a run-rate basis.
“Overall economic demand growth remains very broad and robust and, as supply conditions normalise, we expect strong sales growth later this year and into next year aided by our technology-advantaged products, our diverse geographic and end-use market participation, and continuing recovery from our aerospace business. As is PPG’s hallmark, we will continue to aggressively manage all aspects of our cost structure,” McGarry said.
PPG also completed five acquisitions, with McGarry saying they had greatly improved the company’s product and technology portfolios, geographic reach, and sustainability capabilities. “In aggregate, the acquisitions bring more than 10 per cent sales growth, based on 2019 levels, and strong earnings growth potential,” he said.