PPG has recorded its sixth consecutive quarter of year-over-year segment margin improvement, according to the company’s financial results for Q1 2024. Net sales were US$4.3 billion after organic sales declined two per cent. Earnings per diluted share were US$1.69 and adjusted EPS was US$1.86, a new record.
Tim Knavish, Chairman And Chief Executive Officer of PPG, said the company achieved year-over-year adjusted EPS growth for the fifth consecutive quarter despite continued challenges in the macro environment. The company benefited from its businesses in Mexico and China, PPG’s second and third largest net sales countries respectively. PPG also delivered organic sales growth in India and in several long-cycle businesses, such as protective and marine coatings and aerospace coatings, where backlogs grew.
“These gains were mitigated by a large customer load-in and pass-through energy surcharges in Europe that occurred in the prior-year period, lowering year-over-year sales comparisons by approximately 130 basis points,” said Knavish. “During this year’s first quarter, we were also impacted by lower demand in Europe, including an early Easter holiday, which reduced the number of selling days in March, and ongoing tepid global demand for industrial coatings.
“We continue to make progress on returning to our historic segment margin profile with an aggregate segment margin improvement of 60 basis points, marking the sixth consecutive quarter of year-over-year improvement. 2024 is expected to be another year of excellent cash flow, and our balance sheet remains strong, including lower inventories year-over-year, providing us with ongoing shareholder value creation opportunities. We completed approximately US$150 million of share repurchases in the first quarter.”
Performance Coatings net sales were down one per cent as higher selling prices and favourable foreign currency translation were offset by lower sales volumes. Year-over-year first quarter sales volume comparisons were unfavourably impacted by a prior-year, US$40 million Walmart sales load-in benefit, along with the early Easter. Automotive refinish coatings organic sales were flat, as a challenging prior year comparison in the US offset solid growth in Asia Pacific, Latin America and Europe.
Segment income increased by two per cent versus the prior year primarily due to higher selling prices and input costs, which moderated from record levels, and were partially offset by lower sales volumes and increased wages. Segment operating margins increased by 40 basis points year over year.
“Looking ahead, while global industrial production remains at low absolute levels, we believe that demand in China for our products will deliver solid organic growth,” said Knavish. “In Europe, demand is expected to stabilise as we progress through 2024, despite unevenness by country. In the US, economic conditions have remained subdued in several end-use markets, but we expect overall improvement as the year progresses. In Mexico, we forecast strong momentum to continue.
“We are executing on the strategic reviews of the architectural coatings US and Canada business and global silicas products business that we announced in the first quarter. Our target is to determine a path forward for each of these assessments no later than the third quarter.
“PPG remains focused on various enterprise growth initiatives to drive higher sales volumes and fully capitalise on our technical and service capabilities. In the second quarter, we expect low single-digit percentage aggregate sales volume growth, led by our aerospace, protective and marine, and packaging coatings businesses and by Mexico, China and India.”