PPG has reported record fourth quarter net sales of around US$4.2 billion, about 12 per cent higher than the previous year. The result was aided by acquisition-related sales, while organic sales grew nearly four per cent, led by higher selling prices. The company also reported record full-year sales of about US$16.8 billion, aided by 10 per cent organic growth.
The results occurred despite continuing supply disruptions and increased manufacturing interruptions that negatively impacted sales and operating costs, and raw material cost inflation that was 30 per cent higher year-over-year in the fourth quarter.
PPG said automotive refinish coatings’ organic sales grew by a mid-single-digit percentage as demand has slowly improved. The company outperformed market growth, with further recovery expected as aggregate body shop demand remains about 10 per cent below pre-pandemic levels.
Chairman and CEO Michael McGarry said the company achieved higher sales than forecast.
“Our quarterly sales, which were a record for any fourth quarter, were aided by acquisition-related sales and above-market sales volume performance in several of our end-use markets including automotive refinish, marine and PPG-Comex architectural coatings,” McGarry said.
“From an earnings perspective, selling prices improved sequentially versus the third quarter and increased eight per cent year-over-year, partially offsetting raw material and logistics cost inflation. However, we experienced significantly higher operating costs due to unpredictable manufacturing interruptions at both our facilities and our customers’ operations, stemming from a rapid and substantial impact from labour availability due to COVID-19.”
While PPG said demand for its products remains strong, the company expects heightened supply and COVID-related disruptions experienced in the fourth quarter to continue in the first quarter of 2022, impacting its ability to manufacture and deliver product. Raw material costs are expected to remain at an elevated level, and the company is experiencing additional inflation in other cost areas including logistics and labour. PPG said selling price increases are being implemented in all business sectors to mitigate incremental inflation, and the company continues to “aggressively manage” all aspects of its cost structure, including actions to minimise the cost impacts of the current supply challenges.
McGarry said that while operationally 2021 was a very difficult year, significant milestones were achieved.
“Strategically, we made progress in strengthening the company with the successful integration of five acquisitions and further optimising our cost structure, including US$135 million of cost savings from our restructuring programmes. We continued to reward our shareholders by extending our consecutive annual dividend payments to over 120 years, including raising our annual dividend payout for the 50th successive year,” said McGarry.
“I remain very confident that as the business environment returns to a more normal state, we are well positioned to deliver strong organic sales and earnings growth. We not only see a path to returning to our prior peak operating margins, but to exceeding them over time.”