PPG’s financial results for the quarter ended 30 June 2022 show record second quarter net sales of US$4.7 billion, approximately eight per cent higher than the prior year. The company also had record high quarterly sales of automotive refinish coatings.
Components of the result are:
- Higher selling prices (positive 12 per cent)
- Lower sales volumes (negative four per cent)
- Acquisition-related sales (positive four per cent)
- Unfavourable foreign currency translation (negative four per cent)
Organic sales grew eight per cent on the back of higher selling prices, which were up by 15 per cent on a two-year stack basis. There was also sequential improvement in segment operating margins of 200 basis points, raw material costs rose by around 20 per cent year-over-year, while energy and transportation costs remained elevated.
Automotive refinish coatings organic sales grew by a low-teen-percentage with higher selling prices and strong sales volumes that PPG said continued to outpace industry growth.
“For the seventh consecutive quarter, we delivered record quarterly sales driven by our continued implementation of real-time selling price increases to fully counter inflation, and we benefitted from our recent acquisitions,” said Michael McGarry, PPG Chairman and Chief Executive Officer. “Our sales growth was achieved despite softening consumer demand in Europe, significant COVID-19-related demand disruptions in China, and unfavourable currency translation.
“Our organic sales grew eight per cent as we continued to deliver above-market volume performance in several end-use markets, including all-time quarterly sales records in the automotive refinish coatings, PPG-Comex, and traffic solutions businesses. In addition, our aerospace coatings business sales volumes grew by a double-digit percentage with strengthening momentum each month, although overall industry demand remains well below pre-pandemic levels.”
McGarry said PPG’s strong selling price realisation fully offset persistent cost inflation during the second quarter, leading to higher sequential operating margins compared to the first quarter.
“Although still somewhat challenging, raw material and logistics availability improved throughout the quarter, and we are already experiencing further improvement in the third quarter. We finished the second quarter with order backlogs totalling more than US$200 million, primarily in automotive refinish and aerospace coatings – significantly higher than historical trends,” he said.
The company projects aggregate sales volumes to be “flat to down a low-single-digit percentage year-over-year” for the third quarter 2022, based on current global economic activity and in consideration of the near-term economic uncertainty associated with the impact of geopolitical issues in Europe and the continuing pandemic.
“Looking ahead, in most major regions and end-use markets, underlying demand for PPG products is expected to remain solid,” McGarry said. “We anticipate strong sequential growth in Asia due to higher industrial production compared to the second quarter. Positive growth trends are generally expected to continue in North America. In Europe, we expect economic conditions to remain soft, including normal seasonal demand trends. We have already begun to implement cost mitigation actions in Europe and have contingency plans ready to deploy in the event of a broader economic slowdown.
“In the second half of the year, we expect several of our larger businesses, including automotive original equipment manufacturer and aerospace coatings, to deliver strong growth due to large current supply deficits and low inventories in these end-use markets. Importantly, we expect that our sequential quarterly momentum on operating margin improvement will continue in the third quarter as we work back to our historical margins, and our adjusted earnings will increase on a year-over-year basis.”