PPG - Earnings call transcript Q4 2018

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Operator

Good afternoon, and welcome to the PPG Fourth Quarter 2018 Earnings Conference Call. My name is Andrea, and I will be your conference specialist today. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to John Bruno, Director of Investor Relations. ahead. go Please

John Bruno

Fourth and John Andrea, your everyone. again, to Once interest Call. Results Thank Director good of is our you welcome Bruno, PPG appreciate XXXX Investor this Financial in Conference you, and afternoon, Quarter Relations. continued We

Officer; the Chief Executive Financial Vince me Officer. and on Michael Chairman Vice from call Joining Morales, are Senior PPG McGarry, Chief and and President

will detailed January commentary relate The shortly. Our on accompanying our that financial XX, Thursday, XXXX. support this for make the on everyone of I webcast and to the on comments we slides slides provide to released posted and presentation Center Michael available the additional remind will opening information the site call are Investor also ppg.com. website, comments

of financial the the non-GAAP financial materials, on under presentation reconciliations results statements. updates GAAP no in website, which directly cause for company of prepared company's we may financial of -- provided to will The and call financial a appendix and contain may company's this perspective non-GAAP measures. presentation full to view the the the available and The and move operating statements to PPG's has to Vince, effect Following Michael's performance. during these measures. also and events actual Both the materials risks, reflecting brief commentary on These comparable and to provide subsequent from company differ. The involve our obligation forward-looking forward-looking session. the the their quarter may on is subsequent update discussion uncertainties potential these current measures future contain most certain are which Q&A results a statements events year,

refer For SEC. filings to additional the information, with please PPG's

let introduce McGarry. and Chairman Michael Now CEO, me PPG

Michael McGarry

Today, fourth everyone. reported Thank and XXXX year results. afternoon, we quarter financial full and good you, John,

approximately continuing sales quarter, were $X.XX. fourth the net share from our our operations per earnings and diluted $X.X were billion, For adjusted

exchange raw continuing builds by were headwinds. translation Europe, materially EPS material Our foreign adjusted inflation, lower automotive and and China significant in cost impacted logistics and

and sales and meet net margin expectations, not our EPS momentum recovery. our we adjusted did operating results growth While our continued

Although our realization strong during quarter, of progress the cost additional continued price and in further to continue selling legacy we management. we experience inflation made

local fourth quarter, local X%, price increased our about the marking For of sales the currency improvement. in seventh of the quarter nearly currencies or higher consecutive supporting X.X%, increases selling sequential sales

previously architectural volumes our were business. the about communicated X% in flat, sales Our assortment coatings and U.S. down changes were excluding DIY customer

the dollar during impacted Foreign was currency $XX impacted Sales translation as U.S. and million, several sales million. strengthen about the by continued quarter USD to major was currencies. by income against slightly pretax to unfavorable unfavorably approximately XXX were

the quarter. quarter with outstanding to the volume growth In consecutive fourth business in to Moving percentage some second trends Coatings continued results the deliver teens. Aerospace low segment, in Performance of

coatings the stores. destocking with We and sales finished in hurricanes closed change. assortment in and due refinish company-owned coatings. architectural in the consistent Asia due believe to to with Automotive our course, the comparisons certain at trends third due last albeit We the in sales business year. from a fourth to first also about difficult the quarter year lower were there U.S. of volumes areas Pacific million, Overall, targeted rebuild of We was $XX to sales destocking had inventory the its expected, sales growth good as continuing marine activity customer demand impacted contribution to prior has it in we a Thanks sales year. stores continued, after We underperforming XXX more company-owned spike Canada, and prior from and lower, run protective decreased quarter the sales by DIY of U.S. stores, Americas the growth the better when the expect added customer about quarter, XXXX. stemming in than and level growth lower

delivered capping PPG-Comex certain a model. delivery solid another We quarter, to off also for another geographies moved also this great business. year

which production PPG-Comex bringing total segment, In very activity Coatings the impacted Automotive X,XXX. soft sales the down automotive over the successive XXXX, quarter, and builds for single-digit percentage China appliance volumes in stores coil, industrial general in were consistent growth demand. by were up our sales business volumes in China. industry global sales mid-single-digit, was with volume their added general XXX industrial industrial sales was Industrial the our in each in new our month to For lower softness other lower year, industrial also volumes including builds during were regions. lower Europe. negatively also reporting were quarter, The XX% weakness major nearly Overall, global impacted -- as weak industry is extrusion with our subsegments. In quarter. in Globally, China low automotive in demand by this a achieved in

and low U.S. the and America. percentage, higher by a single-digit coatings volumes packaging volumes Our driven grew Canada Latin sales in

year-over-year is have costs increased solid from Prices quarter and both $X.XX raw prior prior total cumulative after As This to year. we earnings our about fourth perspective, X.X% per a in about more of third an on technology diluted years. the In moderate modest than $X.XX, reporting year-over-year the consecutive inflation material From sequential material the we said reflection conversions with was of the the basis. X% with lower a earnings industry of we flattened growth XX%. increased with contributions expect level than quarter, growth quarter which and on of raw share the of delivered basis ninth segments. year-over-year a our more is adjusted a in quarter,

increases still further further prioritize cost customers to selling as incurred quarter with secured date. initiatives We we we we'll first working continue the our inflation on XXXX, price trailing for material and raw have during the price to have are

our business successfully reduced and $XX the general aggressive our restructuring from quarter selling savings percentage addition cost costs actions continue than as points. sales we of in to fourth and management. progress by XXX of to In initiatives, selling, able more make were XXXX, increase achieve administrative to basis a We price million through

we're both more report as able both well increase milestones to China. as automotive China to that We are price raw are our OEM below These but prior margins, significant recovery, are increases in and and price inflation. margin material on OEM to are well to way pleased required offset

continuing continuing assortment conditions U.S. OEM like and from than in change prior or quickly was full higher our from year. billion comment the to were I'd X% Now basis, $XX.X our growth partial business. year on architectural from year DIY results more our than market weakening full sales On approximately customer year automotive This a impact operations despite realized unfavorable operations.

Our was higher selling aided X%. sales also growth by about prices of

year earnings full XXXX, despite the $X.XX, For adjusted cost the significant year diluted raw logistics incurred higher and material year. throughout than share prior inflation was per

to year billion XXXX shares. shares share $XXX included million In average more actions. total XX our over quarter, In XXXX. lower nearly fourth addition, benefited earnings impact repurchase diluted quarter, past than nearly ongoing $X.X quarter per of This the of outstanding the stock share or than X% of full fourth in deployment of from repurchase the PPG million the our were our bringing

drive operational execution. to continue We

integration from and a our XXXX; technologies, as continuing totaled several and in achievement businesses; general growth and beginning cost including savings new the deliver new our of previously percentage continued acquisitions selling, commitments, X sales XX prior have on us products points. commercialization and restructuring acquisitions acquisitions. since or of above-market reducing now which the $XX of included We actions costs million of administrative completed allowing delivering XX Some announced more successful by program, our current to basis year; year for of announced our announced significant about the full of

the customers with In our addition over to items, strengthened world. all these operational we relationship key

move we proud at with into this further Depot been we've benefit are deliver and example, as an expect very XXXX. As opportunity will the Home that The given we

generation with generated We also our continuing the for from $X.X operations strong continued year. billion about cash

In nearly repurchases our billion cash returned allocation dividends. in addition, $X.X we and consistent our share with with capital shareholders to commitments,

XXth of payout year payouts Regarding marked XXXth consecutive increases increase proud dividends, year in annual share of after X% are XXXX we XXXX. consecutive dividend and that per annual the September the a

while heightened XXXX, the we in we are that confident grow global a growth. will XXXX, of of level over economy As uncertainty there's level start the

we half of first as and the China such demand in industrial impact pressures negatively short-term slowing addition, activity the sluggish will XXXX. see in In Europe that

have We minutes. objectives, few to our details XXXX which financial provided in cover further Vince a will

Growth in U.S. me Let level. continue interest positive XXXX. cover at rates a a albeit slower We experienced likely Favorable regional Canada, to economic briefly decline of Regional Asia Latin Mexico. to automotive in and impact rates in our with expecting softening in in the anticipate auto lower first in addition slightly the industrial automotive in half in China growth are growth expected be XXXX year, growth. XXXX. and expected end-use varied flat to are build Economic rates Europe expected XXXX. expected subregion be drive sales than continued America, as growth our anticipate to the is economic level in trends production to higher moderate the in we Higher of will up is expectations to growth at U.S. country. by expansion to market and for market America, we builds reflecting South half also and the In in builds improvement XXXX. modestly projected continue. we're in housing And to second modest be expect U.S. growth

coatings We'll reducing OEM all structure industry our elements within additional build will slightly We growth-related rates focused for our ensure actions pursue more to expect landscape execute positive. overall we growth we to control XXXX, very our manage of automotive expected initiatives. restructuring forecast growth remain our competitive. remain cost on as a to that and business economic challenging in modest are With aggressively continue

current at least quarters. raw material to expect through inflation X We at first persist levels the

to price with XXXX. customers for We increases work will in our additional selling continue

and Finally, with cash ended short-term billion of we investments. about year the $X

pipeline believe to and continue opportunities, many remains geographies our coatings active We end-use and acquisitions across acquisition are markets. that there

accretive pursue We to will continue acquisitions.

increased noted I and our the differentiated our industry to company's PPG well team, as well-positioned given product As to to remains press financially and as earlier broad deliver innovation value footprint worldwide, outstanding the engine. shareholders in today, experience, strategically customers release

We in delivering targets we on XXXX. are looking forward announced the to

Audit were an on investigation wanted we Board measures to to Before update taken XXXX. I Committee subject that in on have matters of accounting ask financial the remediation Vince assumptions, the address to the comment XXXX provide the I

measures previously investigation a and monitoring of that previously mentioned, have of I been and the an the in relating the SEC's remedial and everybody Attorney's leadership top the accounting with accounting I to cooperate by XXXX, efforts. implemented. in Office also now has can for me thank Pennsylvania. to This fully cooperating disclosed investigation I Western our team, that of the into supporting priority all matters involved been have end personally ongoing been fully and these for of U.S. have want remediation As activities my of we was continues the report have company that The to same commenced District as involved the matters is

have ethics further comments. and matters our these committed are I very and that investigations, are we internal values of and stakeholders. the to remain open actions stated we expectations with Since will both As fully before, meet external seriously these no consistent take and fully have

turn over Vince financial will I'll XXXX who assumptions. Now it cover to some

Vincent Morales

XXXX you, good today, we certain everyone. Michael, financial Thank Earlier targets. and afternoon, published

assumptions, few Additionally, years, various and XX. the XX of They're I XXXX. for a materials for full and financial assumptions today's will discuss quarter prior first in Slides year. presentation financial and the these and included to the on quarter similar located year both we've detailed

to realized the half architectural first unfavorable our excluding perspective, impact coatings we XXXX we X% to we about sales changes anticipate an expect the X% sales of X%. includes we be to annual assumptions, of EPS the of announced. XX%. with EPS that throughout will year. guidance With currencies the acquisitions customer From did the provide of growth -- growth, This the from also in Now and foreign annual includes It the in sales assortment to respect currency of EPS business year guidance, impact the full U.S. regard guidance. recently local translation,

the fourth the What Due in over note to predicated carry they us be comp. that first to in and carryover be from EPS headwinds, noted headwinds to shareholder the compensation our very certain variable important value XX% target incentive ensures growth XXXX. we incentive quarters, financial will alignment we to press our earnings-related EPS be the earnings of and and will management long-term as EPS XXXX, That portion is down first a minimum our release, expect is year-over-year in for third impactful expect quarters. As of and these growth very do second with the metric half of to we creation. hitting strong on

the XXXX cost prior increased to year segment aggressive year Naturally, selling expect these the full management. offset higher be pricing, than We we with for working year. to are margins headwinds full discretionary

not continued half of we XXXX. in well a the We fully half we'll the increases. we latter to offset these impact will into first in cost first material before 'XX, for have inflation of first headwinds part half in half XXXX first However, carryover XXXX. of basis, of until That raw all moderating the XXXX. for experienced of year-over-year In experience commodity anniversary XXXX of inflation able the be the 'XX, inflation. particular, prior we year On

in China a in been Europe. the discussed OEM by production prominently rates, industry automotive global there As most and Michael, contraction earlier has

XXXX, low second of single-digit growth in XXXX. the of global We half a percentage to in returns auto down the first expect before be production half

broadly, of part In growth more the to parts in negative economy the other low year. we addition, of experienced the Chinese also in and latter

expect as the We we Europe continue that through XXXX. XXXX, to of comparison to and second near of the will remainder in term. economic year-over-year we Unfortunately, Therefore, the economic of down 'XX half a XXXX. expect XXXX half we year. improvement expect that the the any European the be not in basis, to currently we activity in first of on lower demand and economic first overall indicators do in Europe turned continue half in solid, hope Overall was in into the in enter

U.S. We at assuming mid-year. obviously assortment customer to from the in we our large, is guidance. economic impacts any are This a PPG, anniversary fluid our Brexit situation. architectural not unfavorable Specific current will change business unfavorable in

between of As million, by quarters. about sales result equally half and second of the split a this, roughly net first a our $XXX will first be down

facilities. including closure X business, are of the We continuing to recent restructure production

third We are business that beginning targeting to the neutral basis in an in on be EBIT dollar quarter.

increased leverage to Additionally, expectation costs, we we we financial with reflective our stemming also We're cost in in our corporate achieve management of higher compensation the the incentive where increase year-over-year compensation in expect reduced. XXXX cash from throughout that based interest deployed on increase our in anticipating XXXX, XXXX, incentive resulting along will versus increase was interest targets, XXXX. the rates

currently full based unfavorable range X not and impact is Last, unfavorable a XX% below million tax ongoing XX%, of to to included in million to $XX significant to rate currency sales relating earnings. impact full from year translation in $XX on up our XXXX. expect is to year current exchange although $XXX our be a we translation XX% We on million the just Finally, anticipate rates. for $XXX million this the guidance, --

half first Given and in half first headwind XXXX translation half and currency that EPS. a dollar our XXXX, in strengthened U.S. the is the to the of weakened second XXXX primarily of sales the impact

XXXX. this to currency $X.XX, $X.XX this guidance the of the to quarter Embedded provided impact an foreign guidance currency reconciliation first is your This foreign EPS impact expected guidance. include translation. the and unfavorable for does year share our of to in for full per from quarter $X.XX to back in today We aid also is guidance $X.XX

the earnings translation both full sales impact provide in each and currency to our the and past, As of we quarter. will EPS foreign

remarks. assumptions financial in would summary is again, operator, a questions? presentation please your our appreciate included mentioned, materials. of PPG. these for I Once open our This concludes line And As interest the prepared you now, in we

Operator

Instructions]. [Operator

Panjabi Ghansham first Baird. question Our from Robert of W. comes

Ghansham Panjabi

first that the you there surprised macroeconomic and any basically of of in or slowdown to where upside quarter? thought volumes you off, in region. the context XQ came it markets Europe on sales at higher in end the guess, a Were I the in the beginning

Michael McGarry

No.

I think Ghansham. consistent, was pretty it

raising out past I we there in some We getting down think we've that flowing were now so back. the that and and price, tried is still aggressive we volume raising been to because see competitors on signal volumes our of in that price.

we volume in As architectural Europe. positive had you saw, in a

to in architectural have as a well. in We expect quarter first positive volume

that were fairly in things I consistent So manner. think

Ghansham Panjabi

my half half's? next cost the of XXXX, million well? And half back share first FX. break sales the then, And sort also, And Okay. the to year you the that $XX Can price you on is versus in how savings materials, back versus for we should of second guess, I X% ex volumes? in of half layer raw to growth question as outlook X% out -- next specific can that

Vincent Morales

and in start, may I'll Yes. Michael here Vince. This well. chime as is

had pricing this level XXXX. -- something guidance, We're received that look you we again, X% year. pricing If the in same in in somewhere We a the we're expecting in targeting as sales comparable over tempered the by past change. what recover years. our order some do just that's mentioned couple is in raw I earlier, assortment to range expect growth volume which of material We inflation the at

be growth So metrics acquisition how year. are From And in certain financial that we presentation. depending of range, end included X% be a some break. will perspective pages restructuring on then, in sales put rata to volume have in net that's X.X% throughout pro markets we savings, probably the the the to going that our

assume. So what I would that's

Michael McGarry

add is, to And QX, Whitford QX. Ghansham, close to and in the we're thing Hemmelrath close right I expecting in now, only would

Operator

Roberts comes next Our question of UBS. from John

John Roberts

proposal find areas some Is your to likely portfolio proposal? non-core review Trian Trian you narrowly from the split industrial? underperforming architectural and Are separate focused on from to

Michael McGarry

this to work I as looking certain ongoing say, And our use you underway. and PPG would XXXX. a have at, we transparent be within signaling we that but good portfolio. we say at can we're we're our And of to complete make value is this that always not one at we Well, take has everything way we shareholder and intent would aligned since other, first always This wanted to that businesses. "Is improve tell We're of countries look mix that been, most money?" the was or always shareholder always ways an you We a creation. I for the thing is all, John, look the there's what just that that look of know, sure

John Roberts

that secondly, those I China, inventory yours, And think is in tanks think. I OEM are eco-tanks you do then, in the have auto in idled?

that else? so close going this you that the somewhere down you're paint to back And does tank, much? customer your the when reuse does how volumes take Or and drop work

Michael McGarry

idled We of that's maybe they extended shut been but an hundreds tanks. have one paint. down is No. that don't out There's one China for own guy rounding of in any there. not even period time, plant But

guys are just a at these taken rate. little They've running downtime. a more bit slower So

far, of So seen the the in we've well XX% continuation across rate minus industry. entire QX, ourselves a as both build as about industry,

So after get to we Year. that Chinese -- expect Chinese the better after New

some the And what We some that so have up been we going anticipate incentives. they it, we back that rate. be know better have there XX Obviously, are half call But to they a lowered do visibility the that banks some than capital of don't strong now, there's yet. indications reserve frees days first, exactly let's the QX can right use. into. That

Operator

of question Our Deutsche comes from David next Begleiter Bank.

David Begleiter

positive rather maybe now pricing QX? on we first raw. than just year-over-year the Is versus Michael, see QX margin comparison will

Michael McGarry

up But I actually raw exceeding material define catch it to remember, had have how from Well, QX it, XXXX. depends all the guess, raws. In price inflation XXXX, Dave. you we we

is but are because QX price. level. course, continue in And inflation QX, XXXX So get even will are And a we still less to going grow going inflation. moderating the at to gap we still up, inflation forecasting bigger of lower

we're the returning XXXX. goal for all in by create material inflation would margins. obviously, our say our fourth value everybody raw to So late they I trying to since pre-inflationary And to shareholder capture that the quarter began is

David Begleiter

And it. acquisitions deployment. just buybacks XXXX? Got target for capital on in What's your and

Vincent Morales

Yes, David. We didn't a give target.

to did reason years. we've given the us of past of the we target giving the the give didn't target at excess sheet. do an past If were lever the couple tried look cash acquisition on historically, to going so balance for years the confidence We we that you cash deployment XXXX. Part couple to we is our deploy down of wanted end work, of that of

we have going give investment-grade economic at going As economically here on we target analyze sit and sheet, a to term. to We're balance to going we that's -- we're today, and a have cash premium in not climate. solid a think going we're tight in what's deployment the today's sit near and

sure That's preference acquisitions. have a the so, today. here Our in last pipeline. through we'll and in X acquisitions XX announced acquisitions days or still We have remains the do very we by I'm pipeline the active evidenced call we in the talk

Operator

Koort Our Goldman next Sachs. question of comes from Bob

Robert Koort

or in where much going the you Or can there front we we a the of hit Michael, non-BPA here? of BPA-free talk about How packaging stand to penetration are you on in lull to still convert? markets? is

Michael McGarry

give to to Bob, converted The guys. that. we in the XX% conversions probably let's flavor think, I then, food some converted, comments, my are I call to of it, guys. beverage like opening tried of We've XX% slowing. of And XX% new the amount

So there's just I that alternative They're also we're folks still there, being being, out say, everybody the are would products in they're the offering. they're the that other challenging taking. on left that besides their route but cautious are more

say going single where to the mid is been single would the digits we low where digits to previously. to we're And as we've so probably opposed high be

Robert Koort

lead then, I tend arrow, businesses. future long some that deceleration you'd some follow I but both marine you that? mentioned long In be is had the How aerospace, and I that far maybe up. time And growth rate to if Those how very band growth. you've confidence in the could see sustaining? mean, strong in see do really

Michael McGarry

new ever that the than high amount we flying. airports better significant. China economy people are in and planes lot they're planes on the of to the very have are The of only flown the of And X% number talk level. of is it's significantly a is in plane. process aerospace, Probably the what's go on amount the -- about fuel confidence going don't metric of building one a into say, would of I Well, the people China,

this so we strong. anticipate be And to continuing

military course, getting the is Of stronger.

So positive I signs. think those are all

I months to see that thought we We orders being extended all to was start the we bottom 'XX. pretty through, took my think XXXX cycle. we're with a we this tried quite was more And current time took start. period August, of time. TMC, convey of market the good do previously So for we We horizon, after get XX off to good orders. a I July it of or XX paint to than

So I think a recovery still we're the are shipyards Korea financially. of in the in in hurting beginning The slow business. shipbuilding

locally. So Chinese are getting they're support better. doing still the But shipyards

So I anticipate that beginning a recovery. this the should of be multiyear

Operator

question Markets. comes RBC next Alex Yi of Our Capital from

Alexander Yi

is Yi for This on Alex Arun.

on like it second just guidance, it your your imply deteriorations. sequential what's Could on So goes wondering, up back give you based half, I the that? on full sharply. based insight XXXX in QX to was some it driving to guidance, just year appears seems maybe

Vincent Morales

Vince. is This Alex. Yes,

of in in my the in assortment to in, said the remarks, -- better first expect I in half of I anniversary in do the that half headwinds year, a year. opening change. QX We the variety the mid-year. back half Those first get include the we of think, we As the have opening do automotive globally and

from of the growing and year. to talked several 'XX. have that pricing those we're currency of about continuing translation in Plus, place, the first middle have benefit We we we half the restructuring. most And throughout other again, of have in impacts anniversary all as we and get headwinds approach

us So be back those be confidence big that the than better would half the factors that will half. give first the causation

Alexander Yi

Maybe just between seems architectural split on announcement and going divestitures be it's address a there it guys Any seems you could that? review, And we other any further any follow-up Okay. like expect? that see leverage would like the it the coatings. to industrial other on strategic beyond is

Vincent Morales

business-by-business, today. press a release. our questions evaluation evaluating Michael at No. region-by-region. one the Again, targeted We've is out put press look in always But We we by to the we what that product-by-product, few in second ago. commitment announced evaluation a we're the complete that the portfolio quarter. just strategically it release addressed

Operator

question Fischer next Our from of Barclays. Duffy comes

Patrick Fischer

for annually. Question your goal just XX% around EPS your

top that typical EPS year, to what consistently at growth, number you do do of do -- to XX% or looked If type need you a line and inorganic, you you drive organic get think? between

Michael McGarry

Well, there's multiple factors will drive Duffy, I growth. that would that tell EPS you, XX%

we probably X% that have growth, and talked earlier, Vince range. to the First, X% volume about

You to a positive. that's be Obviously, going got price.

You are got raw right that now. materials moderating

-- count the share got down. You've is

got costs, then, that's You help in the from impact going to each number are to you to things And And be acquisitions. us those XX% the going lower. of build positive one are have there.

Vincent Morales

couple over mentioned, XX we're over of in last X/X look period in and you match if We've done longer averaging doesn't Duffy, Michael years. for And of the terms a in over time it inorganic in of the XX organic, last We've any so our year, as this ability the is company, again, X/X particular typically decade-plus. grow. to acquisitions, done

X/X. would that inorganic whether on be Organically, volume it's materials, that the with would growth, raw piece. the So going whether depending on price, what's it's be

Patrick Fischer

already they 'XX? of on acquisitions project, Okay. is the in top have you kind And then, the far, to in with so that line much announced timeline been how adding assuming that feather deals or the

Vincent Morales

Okay.

would they look in don't you that $XXX in required we materials, and and If close, you marker. the and presentation there But assuming expectation Duffy, acquisitions our between that's our million top expect That's control. year. the the which the somewhere we got through put process, million $XXX go obviously regulatory to we line give that calendar would to announced add

Operator

Zekauskas Our question Jeffrey from next of comes JPMorgan.

Jeffrey Zekauskas

various you of talk You're that your Will work decision-making you bankers? conduct outside process? contemplating you split of How mechanism your the an company review? with into about side. an a industrial consumer hire consultant? Will Can and you will

Michael McGarry

Yes.

So inside to look and for historically. Jeff, And important we're us it's using also resources. outside both

these have synergies we've at practices, done that. We'll all we've So if their we've we a us. that the we'll acquisitions the of obviously, super of be taking of externally created, back Directors. at, have created, the look PPG. plus you a those They at sales examples how growth look questions they'll and outside other And looking that experiences obviously, also that go as And best feathering so see to we're own be experienced Board performed.

think pretty I exhaustive it'll review. a be So

Jeffrey Zekauskas

One categories financial operating the sales as a that. of that cash in percent wasn't flow on mentioned wasn't in goals, your comment of a there

past think it? than of of is think PPG's addressing? that area X operating little competitors. sales as years, cash you isn't percentage an I a a needs your lower the Or Is that flow bit Over some

Vincent Morales

definitely have the Jeff. Unfortunately, is XXXX, been little of ended back the back worsened on or that in improvement we little the the attributed a a capital in We Yes, We metrics. weekend. Vince. This half X-day part X- Yes. targeting bit in metrics to a working of -- bit. year, our in

than are receivables process. hoped. our payment we had did normal our We So continue higher

make we normal our So payments did schedule. through

But definitely back working for So a right on get basis. our were senior the I payables a and both capital, they for Michael direction. lower in XXXX and here working that's stretched and as focal definitely comparative in point capital we have moving the targets team

Operator

Juvekar Our next P.J. Citi. comes question of from

P.J. Juvekar

strategy. question about store A opening your new

areas. stores You you're you're stores, some closing in mentioned that opening new some some

in want in growth open 'XX? on And do how do to plan XXXX to that 'XX many a you and So stores basis? net you accelerate

Michael McGarry

Yes.

do I in So P.J., global architectural talked about we we've the past, as think, a run business.

to over the the Europe, it'll will to in XX range. probably, we In be range. have store XX XX that in Mexico, In in XX be it So XXX. U.S., somewhere

So we're X. have we at but firm in number, X least it's -- Australia, to don't a still

can are be So kind think those the numbers expecting. I you of

P.J. Juvekar

industrial PPG then, go want This from first And that the Okay. the about, split you splitting you. it we're hearing back and into is talked about time to I segments. architectural to

the are business they're substantially what do dissynergies to create different if split? different splitting? So expect multiples, the you multiples of And

Vincent Morales

today. our going to is on P.J., release. over going to this Vince. multiples. to the or what of markets. We're job trading the We're We're that. That's we that. are to We're not said, determine speculate the equity that evaluation and of complete not synergies going phone dissynergies evaluate is going the in Again, commitment do what analyze to again, press the

Operator

Hocevar of from question Research. Kevin next Our comes Northcoast

Kevin Hocevar

What's year, where the current half. first in for quarter expectation -- digits the year in little full it and full are then then can single raw quarter the low of for for inflation think back about favorable mitigating as and materials material raw rates maybe a as if tell the mentioned you second the turning bit think in the best at? we it now what's you I

Michael McGarry

Yes.

one We Kevin. turning second correction, the Just favorable didn't say half. in

is right But -- Obviously, single-digit of our with a the current this Again, year. Our single-digit digit very but year. the et -- price is inflation cetera. full with more low of is beginning dynamic again, especially inflation in for year now oil, low low expectation that of situation front-loaded. for expectation single the the the averaged

Kevin Hocevar

been year. logistics Okay. freight then, a this and have headwind Got I And you. know

I quarter. think, last inflation this to type quarter, you're guiding mid-teens

freight the year? inflation was in expectations this what your from overall And So what's XXXX? for that

John Bruno

Hey, Kevin. John. This is

averaged we -- little a There of XX%. in So bit benefit a that over was QX. well over

transportation availability we're having keeping crude higher. still are Some lack of oil issues area. of certain that elements and other started that the prices But impacting prices

inflation that expect area still into XXXX. as we we go So in

Operator

comes Our of Don Financial next Group. Carson question Susquehanna from

Emily Wagner

Don. Wagner This for on is Emily

raw of we price with out in but cost inflation of terms magnitude know recovery you points? it's there savings? expect to kind XXX roll see of the what's in loaded, back-half and could how to gross staying XXX basis Just contributions And material XXXX. I the from margin

Vincent Morales

gave Well, again, macro. we

quarter. quarter. it'll back-half each be But the moving to again, to We pieces the XXXX for in margins many going year. be expect too not full loaded. There's in and provide it We're up by parts

Emily Wagner

the Okay. tax take take would long coatings for production? long there producers? OEM, the how And increase And that to benefit auto how would auto incentive that to a were to then, if Chinese, within be

Michael McGarry

real-time. in deliver we Well,

X market, we just-in-time And probably sales it's Chinese saw the a they're did this, up improvement immediate XXXX when pretty to and X if in of about were delivery. pretty they rate. But to in there, we what saw days put incentives out So rates improvement inventory. in operating immediate they

quickly to have what just when that So translated in see actual incentives But effective. I you, sales. and has they're the into and are wait tell we'll very improvement would historically,

Vincent Morales

Emily, There If relatively in overhang to is I days, emphasize a isn't check. well are Michael up a but significant Inventories could, in few China. inventory want I what inventory just said.

a for long time wouldn't impact production. it So this to on meaningful have take a

Operator

of Crédit Parkinson Christopher from comes Suisse. question next Our

Harris Fein

qualitatively on where even environment in have or there growing, being housing confidence guidance that out I resi lower housing? have This gives that's into we from the is Harris seeing for your that expectations turnover? just what data is you either embedded Fein the are you're that ground that on Chris. U.S. activity an was you keep on wondering from there repaint can And just anything

Michael McGarry

Yes.

units over. have same, builds the about change one, have -- we X.X for we million million and X overall for turning So the new in

we're So difference. type I say, painter Res repaint undersized We're area. big more would us, we that in commercial and don't that much maintenance in market. a have for

on have their So impact There's and painters, us. order architectural book feel that comfortable that year. looks still significant our will amount anticipating a good with We're good. significant have will of not probably they a that very a backlog

Harris Fein

that to of projects had commercial kind just summer? the the a paint spring sort we see lot business any into recouping you in enter any Due did as season of lost of do get and of this pushed And kind and you keeping the November, with weather kind October we topic. out? see of during And

Michael McGarry

team excuse. to allow Well, use an weather we sales don't our as

So we're going it not use here. to

early tell trying back that. numbers anticipating that month important to every make kind QX. tell most I to single be way far, up number is exceptionally a to we're the is, seasonally slow. mid-single-digit All try by it's because to be to is that's And you to Our in customers too It's in are equipped us that of March they're and to January paint productive. would to day, sure

Operator

of Fermium Frank Our Mitsch next Research. from question comes

Frank Mitsch

the that January of differently. if little at pace Maybe you at I months? month, the that question What starting is business -- if can those I fourth ask Michael, out? about December, I of look in how saw, bit a as talk November, each you And -- look quarter October, by

Michael McGarry

that of a there tell much meaningful difference. you that I wasn't would

of be have You you you guesswork splitting to to -- out you got got it'd for days, more us, trying impact weather. than hairs figure I different impact, different would on different because that got regions, say,

into we're trend confident that So tell just going architectural go to is is a that continue. continue. next that do-it-for-me you and stores year trend going buyings in pretty to I we're -- The going is positive, our would to

Frank Mitsch

you. surprise, surprise, a ago. And had a but I bit guess, while you of quarter turned broader auto And than, mentioned positive Got down indicators other question. the guess, in Europe I was -- that OEM. a a

there. you've got concerns so And some

always economic you enter of in PPG a has of into terms been one forecasting that of the economically. here? on the best In ones activity, recession what's guys would gauge going terms How percent we chance

Michael McGarry

I'm not forecasting Frank, right now. that,

of by That are the a is in not fourth be we that's a recession. a country, Brexit. how it necessarily that's see wait unknown, course, thing. The but But factor. sign, a significant Even continues. forecasting significant but bigger the do Germany in We Europe, And and slowdown big not and could down see quarter. slowed we'll differences good

Frank Mitsch

at back region? China or an expectation how you And if more the have I same is you Year, are New that comes looking that post-Chinese look at guys Asia, do of

Michael McGarry

then the you'd me you. would if Well, happen an for tariffs, what have tell with answer I would

of is our Refinish of think, wants positive Aerospace we positive now, businesses. see a is in lot Marine a a a there. to certain there. -- there. I China right positive positives is

down. is confidence indicators, down. So but see we a is down. is down. OEM number Appliance consumer clearly, of Coil obviously good is

So market I a that money back. it have come And over they we mean, not come big I is it'll too to back. there. plenty know of think

And so consumer that confidence a of it's back. just matter getting

China. very a have we So long-term outlook positive on

Operator

Andrews question from Stanley. Vincent of next Our comes Morgan

Vincent Andrews

a on still decelerating negative confidence achieve you're to the gives be the down, get? you what have auto pricing got if that they've materials raw to you you going and able for that to has macroeconomy, you've we and Question peaked come builds need and

Michael McGarry

in first of environment the just price pricing today. catch-up, all, Well, of right? don't So is we real-time the

to have quarters. last We at X look how the been it's

Now inflation. it's quarters of XX

our see in They So understand it own and logistics numbers. that. They see numbers. in it their freight customers own their

how the isn't matter a matter It's So of if. of much. a question

Vincent Andrews

as influenced then, by the on Why the could net metric income Okay. you just or EBITDA count? isn't if EPS And as that did I to ask choose board share opposed the or incentives. something

Michael McGarry

EPS one Has always quite of period time. some for We've used of our as been metrics.

will upper wanted of didn't executive What And XX%. reinforce a the change. paid incentives on so end we the be do to out make that range the was we exceeding at

Operator

McCarthy Our next question comes from Kevin Research of Partners. Vertical

Kevin McCarthy

a in more the out pricing flesh you'd OEM if auto wondering was I Michael, perhaps bit detail.

And you in a realizations turned has that juncture? release this Are had market back positive in obviously the basis? seeing sequential press October. pricing You better on at

Michael McGarry

think I've point in positive clear price all We remarks. I Kevin, had make first. that regions, Yes. in to and that was opening tried on my OEM the

all our automotive; positive have we was, China, We segments which in X now had and were: So reporting remember, business positive China. price. A, challenges if price X even biggest B, you

both had positive. we So

QX, more to then we'll price So QX. we're more in get and going get going in automotive. We're to price get price in

the understand a for to in to So technology, they very price. guys challenges easy. sophisticated exchange it's access we obviously, do our want to pay and much that, not buyers, But they're fair these have and they willing large, are that And have.

Kevin McCarthy

cost on propylene I That's if on then, at down helpful. And has $X.XX least come November, since raw sharply the that styrenics? November, $X.XX resin materials. second the that is from shift or volatility may, top to in market, in down likely not for into of in and away U.S. of My sort in question, precipitate rather likely The of systems acrylics, December. question sourced is, a vinyl example,

Michael McGarry

with and ethylene. them resin looking a optimizing always And don't we're typically quarterly what's happening change basis, portfolio. propylene on Well, at our we

more are the them of and there. struggled consistent capacity I think, from still will long-term but that expansions drive we're coming more a that pricing more getting these to be on. there'll there propylene PDH run, They've out bullish in consistently perspective, plants

assume should to going shifting probably So not I think, now, we're systems resin systems. that right you be --

Operator

of from of question Bank Lynch. Merrill comes Steve next Byrne America Our

Ian Bennett

on what for review, hoping This kind of you know Ian are kickoff? And did you Steve. strategic that don't when to is already? learn that The

Michael McGarry

continuous like Well, a businesses said we do strategic our earlier, of I reviews all basis. on

know people feedback was investors let will. if was that take going evaluate. what we get we could that there to be. there need external don't you that that wanted all have consider. the be we we're seriously What to -- always best is no going don't do from always we really to to predict But and to outcome we're So the internally, We ideas ideas not we the going kickoff,

I think at look very the what's all take businesses decide forward. then want serious our to and a path and we best regions all our

Ian Bennett

about, the I would year full comments change. just XXXX very earlier historically, echo guidance that about think, detail drove I being guidance Okay. what more you and XXXX And curious And helpful. offer than the as didn't

Michael McGarry

have very moving a right? now, place. We over currency have right the we Ian, environment all choppy So

got You China.

got automotive. You

got tariffs. You

materials. raw got You

put to transparent those going I clarity And of wanted a things all so little of So of the and year year could think different, the kind half that the be on. that into we were and wanted were the bit knew you to second first we to that we more be that provide your models. half that

Operator

SunTrust of Sheehan James from is question next Humphrey. Our Robinson

James Sheehan

will of $X.X on make there shortfall quickly? in targeted deployment pipeline the Or up capital on provide you color deal relatively XXXX, $XXX Is deployment million. that you just guys billion of more plans? it capital that and You looks another fell can short about by like that

John Bruno

were going Jim. the we we to that is in talked that $X.X Yes, fourth announced billion. our met John. target. deals This include We was We about any in quarter

Whitford over that a and target. little we're, Hemmelrath, including So fact, in bit

James Sheehan

coatings, And fully X you've those over you got to held architectural last regarding captured industrial you synergies that has between something the Or all been and that it. Got would say X years? back? have

Michael McGarry

No.

Mexico I'll our plants business architectural significantly. X our We sales grown architectural capture Comex to on up protective closed a in And industrial. sales synergies. automotive take Mexico. We continue built mean, were a We've example, We've I in new as We ago. perfect the down America. right? grown in Comex years Central into more

up -- one just that's synergies industrial and mean, acquisition, since the architectural is business Comex and automotive of Mexican the and Our between businesses. I the illustration significantly industrial

James Sheehan

give on SEM acquisition? expect you the from you synergies color Could the some us

Michael McGarry

major Sure. ones. There'd two be

is one. easy materials one. raw course, an Of That's

one sales be would second synergies. The

there'll have U.S. a capability small and synergies. Very, little a little of pretty bit international be a of. SEM, aerosol. the course, some business. sales They're packaging very Canadian of to much So has reverse speak business a Also, They force. of

be So at, in-house currently that it. be sense outsourcing we'll for something that us to whether makes that move versus that us looking will

good they're be for should to be this the and a They're So very a excited company, acquisition part of PPG us. profitable team.

Operator

Your next of Jefferies. question Alexander Laurence from comes

Daniel Rizzo

on EPS should -- Rizzo range the This should that that or benchmark? buybacks is end for Laurence. the expectation to is Is as Dan we as accelerate were treat diminish, trends if a market a more commitment

Vincent Morales

No.

comp know right best the what again, in. incentive deployment. earlier. today our We there talked top us. stake times And EPS a we cash ground we're our an We now the out do range We to with on is guess That of about active mentioned end pipeline, in of our our put the range. economic to for focus today. put haven't maintain balance respect sheet would in metrics a that we as is I The have be priority

moving based as our again, certainly, today, the team. So talked of that's from of on guess call. it's pieces, management commitment and I'd a bunch there's a say, throughout the economy we But best the

Daniel Rizzo

from -- month-to-month then, wondering things changing was up patterns, seen mean, increase you know have volatility I with obviously XXXX. few gone months? I And right. All volatility I have order you past in are over lot. the seen if a has

Vincent Morales

We've issue. Everywhere a really Yes. a Europe. dramatic is I in I'd else, an little industry things customers. get seen seen place in winter. little market, would inventory automotive particularly management in by say, in that's what our as extended only PPG-specific shifts around the a choppy there's orders little bit in Things call China, we've year-end issue. the not where a That's Again, the get but downtime. choppy

other uncommon than nothing there's So in automotive.

Operator

Our McNulty BMO of comes Markets. from next John Capital question

Colton Bina

the there auto impacts it of On offsetting destocking? saw quarter, is John. refinish, weakness Bina some the positive This being for the were the flat U.S. in from with you Colton what on for

Michael McGarry

the positive. it. mean, Mexico quarter where flat. is slightly -- a I Well, global about was slightly came overall, was it I expecting refinish was China in say, was positive. we're Europe market. India would positive. was

Operator

of comes Mike Our next Seaport from Global question Harrison Securities.

Michael Harrison

pricing like it aggressive in look the markets, three about commentary architectural, I can be And at buckets, at expect seeing to into to industrial talk continue auto on just XXXX? getting from in maybe was you you pretty sounds wondering you softening if OEM when on how and pricing be be we're to wondering, aggressive as But bit on certain you'll you your maybe your some then maybe think approach demand front. all. wondering, able a you're rethinking little just pricing

Michael McGarry

price. of because recovery have not and we are in the significant it XXXX, fourth We capture backing need margin quarter off our still start that So on of we XXXX. to the

that. we will on have furthest good expect so So amount in that had Automotive continue the sales increases to so focused the would of pressure. is teams significant behind, We've and our is And that industrial are that businesses, helping price getting the see continue. then, to are from all standpoint, getting about players and in more we're serious finally an traction. marketplace to architectural pleased the globally, that

any that have letting material accelerator raw the anticipate by point, fact significant don't I given we off this a at still the inflation So capture. foot

Michael Harrison

you've to volume been on price. And business, the is like were it Europe saying you me very sounded had right. you architectural because All that losing then, aggressive what been

the been be Is some to Or come in pushing is at variable you've explains that main price to that what volume what's play Europe? else seen back. improve business competitors may happening and Now your there? starting that

Michael McGarry

That's I are well. have key mean, not very that markets only performing the right? we certain variable,

record had Our Romanian year. a business

Slovak solid. little we a were better retail were expected. Czech, businesses than Surprisingly, good. France in -- was was Our The we retail Benelux surprised,

a what, anomaly wait short-term or that and was if that's a we'll see positive. So but

business So France. a click is into the we'd trade still still That number. is back like our to see big positive challenge biggest

gaining We it's now. but are Brexit really share choppy Ireland, U.K. and right with in the

any time. not drawing at we're be going conclusions So to in this point

Operator

Silversteyn from of comes Buckingham next Our Research. question Dmitry

Wahid Amin

This is Wahid Amin on for Dmitry.

slower on break DIY question in do market hold do And bullish whole a a with you DIFM? a see up you quick sales. towards outlook your Canada the shift on little much pace in bit? the U.S. that for outlook half And a Just in that and XXXX? note, the same-store that Can of latter you

Michael McGarry

Yes.

going of to So trend do-it-for-me over line DIY. the continue is

be that volume line is The It's going going to is and price. combination to both. So change. going trend a not to sales of be same-store

would to a I PPG anticipate will for So in be continue that that, XXXX. story good

Wahid Amin

I All ask more. if can right. And one

million that towards quarter? sales. to million talked little that. that or $XXX a bit? more Just see towards half in on you color materializing You've second XXXX? about acquisition the latter added first breaking mind you toward Is $XXX Would Do that more any the of

Vincent Morales

Yes. year late quarter. we when sometime target acquisitions based to between full close. Whitford, expect the we to Vince. Again, middle Michael as the This mentioned, the for is expect pending on to first That's close

we acquisition, fourth We Those second We expect Hemmelrath quarter... in the acquisitions, don't quarter. to timing. the as two have the on in close visibility much plus Whitford which closed

Michael McGarry

SEM.

Vincent Morales

quarter. the I'm fourth sorry. that we SEM, I closed apologize, in

close. when those acquisitions on based year the throughout grow will that So

Operator

comes question Daniel Redburn. next Chung of Our from

Tony Jones

Tony Redburn. quick It's Jones two from ones had I left. just

significantly So one the was that costs. on QX. to SG&A up? next pretty trend back OpEx, Is and They Or likely down were R&D quarters? in sustainable few in

Vincent Morales

No.

translation SG&A. percentage comparable on year. currency of are costs, SG&A all the basis basis, have points they sell we anomalies We absolute about But were they look run prior lines. quarters effects throughout you local, do year-over-year were to an the on but driven down more were a If basis, currency the basis. buy, by sales in through down make, again, we that consistent And percentage P&L quarter at sales we were again, of on lot the a most XXX on a quarters pretty by translation. Since of

Tony Jones

And final just one. one

So also back competitor Will a examine a Just a for strategic review. potential the merger the the to synergies value from like second creation step? coming maybe study other post-breakup? or with

Vincent Morales

put on another derivative. We're we what today. to the we We're the portfolio is in not press going going study release. focus have our to Again,

Operator

any for our question-and-answer to turn Bruno conference would session. like over back John remarks. concludes I closing the to This

John Bruno

in thanks, time everybody, Andrea, and PPG. you, for Thank interest and your

have Fourth contact concludes our Investor department. any XXXX please further you Full Call. Year Relations questions, our If Earnings Quarter and This

Operator

for today's concluded. The conference now you attending Thank presentation. is

now may You disconnect.

PPG Industries (PPG) 17 Jan 192018 Q4 Earnings call transcript