PPG - Earnings call transcript Q4 2020

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Operator

Good morning. My name is Amy and I will be your conference operator today. At this time, I would like to welcome everyone to the PPG Industries’ Fourth Quarter and Full Year 2020 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the conference over to John Bruno, Director of Investor Relations. ahead. go Please

John Bruno

fourth and John Amy your everyone. again, to Once interest financial year Thank conference results Director good of is call. our you welcome Bruno, PPG appreciate and Investor this full in XXXX you, and morning, quarter Relations. continued We

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

XX, closed XXXX. the to information after on financial Thursday, markets January Our comments relate U.S. released equity

We commentary our on ppg.com. for available detailed comments provide have Investor The the will opening webcast brief and the Michael also slides posted additional make presentation accompanying and the support are Center site website, of call on to this slides shortly.

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

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

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

Michael McGarry

welcome call. loved I our I everyone. you Most everyone healthy. remaining to earnings your quarter you, Thank fourth and John, morning, are and and would hope safe importantly, XXXX ones like good to

supplement to comments some released results provide we detailed the me let last evening. financial Now

year-over-year sales $X.XX, were increasing fourth XX% for diluted strong We growth share adjusted record consecutive segment. per share diluted industrial coatings from our billion operations about continuing were net by and the year. our $X.X driven second For reporting from than our prior our sales delivered quarter earnings more by per earnings adjusted and quarter,

In continue records countries. well, sales most businesses quarter coatings exceptionally global addition, to fourth prior earnings in eclipsing and our architectural perform

also consecutive organic business. European quarter second delivered We for the our double-digit growth of architectural

PPG architectural aggregate XX% global segment these achieved of digital with ongoing Our global margins In notably, and XXX automotive strong digital delivered that to quarter. digital sales our face The business improvements our will higher were cost were invest to mobility. also these businesses in about were to we basis as coatings and architectural aerospace organic the sales pandemic more the growth supported the refinish by advancement by points headwinds, prioritize XXXX, businesses than up fourth XX% in areas year continues of the coupled management We continued margins our and and continue were initiatives. and significant impact demand than about travel higher most prior with of capabilities.

year-over-year outpaced on production industry auto quarter, automotive with rates. businesses fourth were general XX% demand China nearly the in businesses well industry During and above basis. sales we both OEM significantly a our growing industrial OEM, In

economic and China advantaged the us in service continued growth to well capabilities technology robust. footprint, strong serve where most Our is

quarter. regions aerospace about cost the overall savings. additional of still quarter the cost throughout cost to savings. $XX addition, prior more we $XX with savings structural million improved year and lower during growth And while the delivered And quarter. an returned sales the the also million to Latin American business, than interim We In delivered of in region, our sales the U.S. year-over-year in European coatings during due

support quarter in the as than cost our third end-use cost to achieved in lower were incurred the sales the million several markets. Our improvement we savings $XX of certain interim we

We will at XXXX. of and make $XX in savings expect maintain permanent first million quarter cost $XX of to year interim the least full the these cost million about savings for

managing which record an $X.X cash Our year. allowed capital uses excellent achieve team operating for in a XXXX, to working job us billion flow and cash has done the of

about Our operating allowing the factor reduced percent was of sales working the hand cash as a Ennis-Flint businesses capital during to XXXX. on performance one with basis key of fund entirely This points in month acquisition by in XXX outstanding December. us

other we value acquisitions. benefits shareholder acquisition, incremental of Ennis-Flint Each creation. the companies PPG to completing to recently to that some brings further these strategic addition, lead In announced will

are issues in there cause first shutdowns that and disruptions. quarter, end-use will markets restrictive in more to demand some certain ahead coatings countries Looking short-term certain few challenges, including chain the supply likely

We’re also costs. raw materials elevation and experiencing costs, particularly of logistics

remain industrial, create general these to uncertainties automotive demand is quarter, architectural the XXXX businesses. and first While issues economic half optimistic the the some activity we in OEM, robust, several about packaging continue including to as be of coatings underlying our markets of end-use expected and first in

also and to reporting reporting the the started We Performance Industrial segment, will the which pursue confident be further year selling segment, have in Coatings of price price selling remain in the Coatings progresses. quarter increases realized achieving in as first increases

differences up with low-single-digit first For the aggregate business volumes the to quarter region. sales to percentage be are projected company, by and a flat in

help inventory an drive progress including XXXX, growth, we through and in benefit end-use markets. restocked remain further our multiple levels of that eventual several earnings as sales we will As catalysts anticipate low

product service refinish benefit from end-use automotive as and increases coatings ultimate are travel the positioned the well we Second, congestion customer our recovery capabilities. air and in markets and aerospace to with world-class

the acquisitions organic as to our as continue the we technology-advantaged that our other core businesses progresses. customers supplement our products. and excellent start we growth will accretive with benefits anticipate benefit These provide incremental in In support services year addition, will to

by project per continuing increase a XX% earnings than momentum. For adjusted the basis, share diluted we on strong year-over-year quarter, to earnings our more

down we announced, deployment debt anticipate to cash to quarter. hand We the debt have be use balance cash consolidation. second to pay near-term then intend by free industry our the acquisitions our be of from end complete of and combination which for reposition a these we and Our funded to flow future primarily the sheet priority by cash on will generation acquisitions

believe As We we due PPG��s start an a worked synergy a it commercial project efficiently in intact. on offer it this of a important, situation keep the a issues believe return we but addition that stakeholders outcome, not We acquisition for legacy already acquire Tikkurila conducted best perspective, recently cooperatively acquisition has issues resolve that relates complementary diligence perspective. And will From From arose our integration we’ve issues, to team make and satisfaction process. that business the to only return strict in to equally significant Tikkurila. due the from extremely and remains business and agreements, -- that Tikkurila let continuity favorable a landscape or unit together benefit entire We me region. businesses able expect in closely strategic of not Keeping in comments few is to announced business commercial some the the all one diligence anti-trust are our both to and confident stakeholder any the about capture. will be need customers to PPG. to diligence these our as disrupt the execution place conducted. regulatory is compelling we most parties PPG fast will Tikkurila ensure the the don’t with the perspective, and due to the

established analysis. Additionally, we’re little diligence vet This from stable result and includes incremental sales were that European able in well the disruption very fact fully supplemented due expecting to cost holistic our substantial this synergies by transaction. we will synergies, in are and which operations the

quickly has existence many Europe many our us and for a We in well in has of have service very center this acquisitions, been regional size. prior also to will more integrate an shared integrated of and established seamlessly acquisition which years enable Eastern more that

will with shareholders. we analyze our opportunity our basis, excellent continue value Finally, post-synergy a and creation discipline. traditional for historical thoughtfulness to remains an On this this

far where addition currently doubt period process and company in engine of competing perspective, our other is PPG sustainability investors bid. conversion Tikkurila’s there are Lastly, ahead as is from coatings to zero offer tender any electric a to we hear enabling is our combustion as internal has the and initiatives Board and is customers that from open vehicles we are transaction an from our to that consistently, the many our autonomous initiatives. non-binding Due in this received technology

this to thank We will during our not call. global closing, and be any to want the I recognize PPG questions answer In team. able on matter

the PPG communities of another company’s great showcased the resiliency been responded serve true our and during our adversity. team and customers, to continuing I proud character Our one these lived with has how truly has has and of PPG times way. am

quarter allow results true you XXXX company’s in would continued concludes line of and to our us for fourth PPG. Thank please questions. for Amy, testament confidence a our you company. year And full Our an open This XXXX as and enter remarks. your capabilities prepared even the stronger are

Operator

your the Sison comes open. [Operator from is first line question Michael Fargo. Wells Your of line Instructions] with Michael,

Michael Sison

Hey maybe opportunities. here over of really total, good all run next them rate, you've terms together a talk the in guess guys, run had months? the let's nice What's X if of finding quarter. sort I of about synergy the in come acquisitions

Vince Morales

we well. information acquisitions We'll as close Yes, Vince. get more Mike, to you're is We what through these they Hope with do Ennis-Flint. this closing. doing similar to Good got them morning. give on some

XXXX give We well annualized as you specific we numbers. to have as -- some will

seasonality All of them have a profile. different

to it specific So hard again, would XXXX. to it as number give a be you relates

kind a target. most coatings As chronicled, acquisitions of I have as well think mid-single-digit it's synergies starting

depending some have geographic overlap, Some product overlap, their more, upon less overlap. have

we per as provide assured be again, acquisition. will more detail close So it individually rest them,

Michael Sison

are shifting your maybe what and talk past? of there potential and some and orange how you painters these it. the Got backlogs of whether And seen then that pro people maybe can asking coatings, maybe to about days? big the momentum the relative hot that are kind color is And architectural those in the when for are you've brown to -- seeing,

Michael McGarry

will more those positive our but them is and was into you significantly here business are not commercial, go DIY, and in anticipating maintenance, more if by sub Well, momentum, in one I'm what XQ. XQ to going them the residential, of tell of every -- of the being we one segment cetera. brown, into in each positive look U.S And orange Michael, each And versus XQ. et you segments, that XQ at I

going that new not homes. they we're permitting the on excited, well. multifamily as for Construction standpoint, as from So is quite as side fast obviously, challenges wanted

our Europe, XXXX. feeling And are doubt, very then of into painters we a very when large most coming without strong. flip having we're So comfortable over into still

The And well. yet in we GDP down then when economy double-digit liquidity out XX%. sell of in through a Mexico, And see is is January, first fourth the exceptionally strong. into same we had performed an quarter. of carrying growth trend we It's X% quarter, the days that had January. And X%. we the and Their saw good. strong our as momentum flip continuation Mexico, you is concessionaires very from You plus minus into that XX at

we're And so about positive very architectural in what global business. seeing I'm our

Michael Sison

you. Thank Great.

Operator

line line Your from the Ghansham with your is open. next comes Panjabi of question Baird. Ghansham,

Ghansham Panjabi

you. Thank guess, comments higher going pricing initiatives there everybody. some your Michael, on morning, Good and Europe to and back I offset pricing industrial, to costs.

industrial still expecting kind slide prices selling segment. of for the at the deck, you're stable Looking coating

year about curious that Is that you're referencing? is a there Thanks. build associated lag with that? the think should So How to what as just we progresses? as

Michael McGarry

industrial Well, always the see because more as price performance you we to you and there's know, in challenging can't historically, side. our materials, Ghansham, And until pricing side raw as raise can lag it. a the it's, customers X than on X-month know,

more raw because environment so higher, purchasing were that's you a about think of especially that's over tradition. when their spot much kind And materials China, there,

Europe. already announce have So in in started the to we we price increases in increases We've other saw announced regions world. price

XXXX. We are well ahead of

were of If you XXXX, fears. remember some peers of because or distracted our either acquisitions

are of well so, ahead that. were And -- we we

going row positive a the going you're quarter see positive price to I'm price price, so, that you're see to had for -- in the XXth to We've QX. XX quarters very price. positive comfortable company in And continue

And so, inflation low I'm we're single-digit not anticipating. the that worried about

Ghansham Panjabi

curious you see do in constraints normalize? world impacted, color Got just I it. is thoughts. supply us give Which you much. know this to that on can dynamic? point. more And in then businesses you choppy just chain terms of the being Thanks at particular your the timeline the on so But referenced,

Michael McGarry

in the those and by December. are it the two number still backlogs COVID finished of We're of our backlogs are strong, customers because Ghansham, significant having very of biggest but impacted that right running businesses. A with Yes, labor, businesses, are now in industrial. issues the automotive end We very the those Demand with businesses pandemic. is choppy. is

from that got emergency interim. a of people because shut in fact, was In one their of run our large an down, we to the could paint days and whole ago COVID our call couple shop we automotive customers it in bring

So, out that. automotive them we, run. semiconductor to on of course, want space, the they that's There's supported the in there issue all

So ran customers Christmas, was many over our which unusual. quite of

low is demand inventories coil of So quite are there many low. automotive, and Whether inventories. spaces or thinking there's about in you're these appliances or

we having plants. very to full be run contingent comfortable. labor When But predict people their we unfortunately, going be labor. can't to So with feel to able are

Ghansham Panjabi

you Stay Okay. very much. well. Thank

Operator

Research. Fermium Your line Frank, of comes from Mitsch is your with line open. next question the Frank

Frank Mitsch

Penguin cool. on pretty helmets. good That's and Yes, the congratulations morning,

to of Looking the this margins. could to very follow-up seems take the your performance hopefully I through be of quarter in fourth these forward a abnormal. a saw a businesses the this, with was there. decline one bunch Typically, see. you wanted game on if see Got two days that decline you coatings questions quarter. moment the wondering from in fourth talk person. or large to We'll do sequential to third details seeing you the regarding the the and But a I bit quarter.

Vince Morales

we're is impacted the a opening by quarter. weightings typically change businesses seeing quarter-to-quarter. refinish. our It are Michael to Yes, that most volume the aerospace of are in in Vince. as from relates trends throughout Frank, this perspective and the really The Their the two demand stable comments referenced are businesses there. most Those businesses, that don't significantly year

and as architecture coatings are businesses other performance The seasonal. very such

much So in they're and aerospace in refinish, while we QX, amount same -- a queue were is with traditional in down higher. similar XX% QX, waiting in QX

as in segment. much would XXXX percent a it the XXXX, been higher So, of have would total have higher, been much

So even QX refinish heavier had that QX demand fact though margins. the bigger in and that on aerospace sales the we and QX, a had weighting of good a architectural is impact

Frank Mitsch

you for you. Obviously, be transactions cannot fore there Thank other Got occur, pipeline? you I would Should about understand sort in But your Tikkurila. active can talk come back reason transaction been doesn't you've [ph]? the talk whatever that And you. of share or might about investors recent if past. the very that M&A expect buybacks into

Michael McGarry

back in I think be October, the now, heard you've we exceptionally disappointed I'll in back XXXX. Frank, say same fourth quarter say in this Well, me shares thing buy the I'll it’s any January. if

active pipeline acquisition in this work robust Our to and area. remains continue remains and we

the I'm so half further confident have back that in feeling we announcements And of year. will the

Frank Mitsch

so Thanks helpful. Very much.

Operator

of Your next line your open. Goldman. question is Bob the from Koort comes with Bob, line

Bob Koort

to environment it it weaker. make hikes. [Technical much. tell very the responses Wondering sense going to and maybe you any, could if that price and maybe is demand there? what Thank me some difference difficulty] you easier quite relative Is which if makes, 'XX, to quicker,

Michael McGarry

The They're products. make industrial it that I businesses we about don't it where Well, their are They're I a is for wondering in quicker. daily now know have asking right orders basis, these benefit easier. in think calling queue. are the customers Yes. backlogged. on certainly

So that's one thing.

a downs, they're fully and The so price are technical any doing is is thing so help. environment. is desperate The thing asking for different this they be recognize to last going that second for they

there, comfortable that get the this more we're are have got seeing. them that we And I to And go industry the sees so, to a pushing never case, they they lot our them ammunition price. same get feel thing in when bright. go salespeople But are happy out tell

Bob Koort

wondering of Can get that up ask park over market? the playing drivers years? several on see the secular our and occasional you car refinish questions growing assistance We investors from you about the I might next threat driver out How do vehicles. versus bang that the new introducing

Michael McGarry

slow the in cars grow. me, fact first and Asia would rate in excuse new marginally in year about grows in grows right India. but I continues Same China. the Bob, Europe, park thing Eastern Eastern the it the Southeast U.S China think car million in now and in -- China. Europe, I mean, every with Well, XX it scrappage and start It that to grows

and the these grow. a continuing autonomous, they're So of developed as other kind car any countries, on lot know, to these countries. expensive is a of And park those safety are put features, in things the you cars, of to too lot mostly

don't about worry we much. to that So as have

The other economy we difficult in up we much you that Europe, work-from-home than time loosen, quickly, the and because much come up saw more we as Europe there. every to in know, in quarter, the rather thing the you would it's people, congestion restrictions are work-from-home smaller fourth saw, -- I loosen tell especially is houses

quickly. very rebounded congestion So

Our minus, were minus the minus down it was XX. XX-ish, quarter refinish in fourth let's call but claims

we've improvements business So significant that because made of the pandemic. some in

And well so you we should feel in feel -- I have clients this hand. that comfortable your should think

Bob Koort

so Thanks Great. much.

Operator

line P.J. your Your next from line question of comes Citi. open. with the P.J., is Juvekar

P.J. Juvekar

good Hi, morning. Yes.

Michael McGarry

morning, P.J. Good

P.J. Juvekar

Michael, by starting quarter? the in coatings, strength in DIY organic XXXX Is in what And in behind face tougher architectural sales second in does low comps Europe, was up I were especially when driven DIY? that teens? think

Michael McGarry

And that we've a the and of X think, countries, of X X DIY, DIY-ers that lot lot improvement I strength. and new years and benefited return have there, There's a DIY But Well, in you Number know in as And position certainly there was a professional improvement strong well. is some to Europe. network significant very in in a as weren't whole so significant there Europe. one from sustainable. is our also we ago.

not third quarter. a until the comps say do get something do So the tougher I comps good. and fourth in the tougher, get but I would And think of this that's Europe start is

quarter, So you Europe. the very in had significant second as lockdowns know,

the QX, so, QX going half And the have still will numbers positive very year. back into of

Vince Morales

painters, doesn't Europe, to, in have as they much commercial the U.S. as alluded for P.J., do Michael professional the And specifically, exposure

they same U.S. commercial downdraft that So residential U.S., in We're are weakens comparables, a activities. the repaint some Europe on the seeing but there's and the the working versus

P.J. Juvekar

That's interesting paints. that traffic secondly, And really an seems like in then acquisition helpful. Ennis-Flint,

can autonomous your has, grow, you. Michael, could you Ennis-Flint going industry. traffic road good can revenues said Thank that think, grow a these million. How And $XXX markings. pain result, I need be growth business a fast of sales think, as forward. I traffic solutions cars

Vince Morales

asking again, I'll Michael Ennis-Flint. let growth frame question P.J. for Thanks the the answer Yes. question. But, let's

I million very think Canada. a is as you annual sales in good It seasonal is imagine. $XXX business, a It's predominantly target. can U.S.,

U.S So, the certainly -- effect. we we do parts winter a of that are serve have

So we QX, profitability typically Michael, -- in business. of given nature see seasonal you the maybe of and majority And nature the can. the QX the

Michael McGarry

I -- are stripes wider. you close would what trends we're P.J, attention of is, the to the to the some the is Yes. make tell secular two one, paying that states looking

thing stripes, And foreign X-inch stripe. doing the stripes. from distance is So the a between they're the reducing they're other

the I is And of going number able one. get be thing in think, have to pre-formed of Plus, better with products. them that's that to help our as a we're interesting network, So they distribution other I well, products. and that's this that thermoplastic products think to

this continuation growth this. of about be a a excited difficulty]. going I would not we're straight [technical up So a kind continuous of going is to be It's growth. But to anticipate

P.J. Juvekar

Okay. Thank you.

Operator

is the comes open. Exane. Laurent question your Laurent, Favre of next from Your line line with

Laurent Favre

competitor Canada? -- become was cost could talking in lines. for -- I to significant I've I question what another that's we you of U.S frame Are you I morning. and guess, have international a, the and Good about expansion. us, outside try wondering the on if increase Ennis, was on just got material Yes.

Michael McGarry

definitely be cost will it material Well, a increases. not

heard as making and Europe, is And have our as number may making not plants. You traffic know, sophisticated have industrial a paints. you paying we Mexico in of

win we distribution be a winners ourselves and will things in making be consistently municipality the aligned It a So and government with focus will bids not get space sure it like cost that. issue. issue, the that bids contracting and

our where will be. focus that's So

we'll our country-by-country in do methodical of because start basis PPG-Comex. look a strong our it be disciplined will in with a at Team. Mexico on And base it very manner. and Europe, a then So and

Laurent Favre

about examples? for you slides then Thank I in you. all few us a the Michael, benefits talked think four give you ESG acquisitions? Could And

Michael McGarry

Yes, and well. happy as I'm to in chime can John

this So, the first help is think autonomous to driving if the you about help the going Ennis-Flint, mobility. one,

my mentioned ahead everybody remarks, far I of as So in space. in is opening this PPG

So that the would first be one.

I you that polyurea would think and environments to one ensure the want be the flooring cleanest food you you plants, technology, with reduce of if number do they second technology tell Worwag, the that illnesses is automotive The the that's Worwag about VersaFlex. you systems, is I one VersaFlex, environments. another in what say can some would benefit. the potential for really with would water-based. in And those thing area parts ESG have nifty

been our be drive remarks move as of That's also when other more so are countries. we've suite water-based they to And Tikkurila with has will I as And about you Not faster XXX% to people trying space to sustainable technology water. you anticipate only think more away Russia bring materials, from which especially much base, transfer to and what a more powder, it push then full products, know, solutions, the quite we'll one switching but know, clear. Eastern we have efficiency. more raw to We our plus. bio get industry that solvent to I will continue on European in think to

Laurent Favre

Thank you.

Operator

of from Deutsche line your the open. Begleiter comes David question next line David, with Bank. is Your

David Begleiter

is QX above you. QX on the XX% Thank QX. just about Michael, guidance, typically

I drivers was What to the think are guidance about X%. for this historical X% from key year that divergence patterns? down

Vince Morales

is This well. Hope are David. you doing Yes, Vince.

very pandemic QX. the QX a -- from activity to strong prior hard match typical years. is I had think from the push We to seasonality due into

customer high production architectural do QX to in we We -- QX. in availability alluded of traditionally higher would Mike see a lines. seasonal than As some sales about see had concern

from QX do we the So flip will of into QX. some activity feel

global reference, a million of about off off drop you X you QX. QX from We're businesses. in David, in to some expecting give million Japan, And point globally production auto type cars car excluding QX. that typically million same Just to QX pattern X of exists globally, drop a industrial cars see to from

just a to historically due So from I perspective the shifting seasonality associated think around compare it's with difficult pandemic. to

David Begleiter

same question, of kind at year. performance coating same volumes, X% Got just was last -- do comp. an looking the I it? And It have easy down

I guiding think to down it Why not still be at coating year-over-year. from or least you’re even performance year-over-year volumes? it would up flat be

Vince Morales

Yes, terms heavily quarter March. last impact strong the commentary, from are those first fairly as and the patterns was QX. impacted the in end expect said, and year two didn't have in had refinish until consistent QX, in virtually in aerospace, tail decline, opening And volume no of of we Michael businesses,

two and difficulty]. those [technical businesses are that So big businesses

Operator

line is Jeff open. JPMorgan. comes from the [Technical with your line of Zekauskas difficulty] Jeff,

Jeff Zekauskas

very much. Thanks

are of You're XXXX. have what there’s objectives the an reach compensation. financial management performance -- idea goals? for company? you Can not targets there in must give But providing order And those guidance people you surely targets to be for us what for there internal for

Vince Morales

Yes, is Jeff, Vince, this again.

that would judgment. to targets based at react or Board and today comp established will fluid. will be do and the any their we for Obviously, fluid. have XXXX, Similar XXXX salesperson year the given targets established in traditional was very very We management also internal every compensation. certainly think compensation, we on have other committee for company, XXXX. we accordingly our fluidness But look

Jeff Zekauskas

or pound was material materials, than in up year? included raw inflation Propylene raw of or your smaller was a Okay. your something vision that yesterday. Or that $X.XX for larger Was it expectation? settled this

Vince Morales

You said right? propylene,

Jeff Zekauskas

Yes, I did. Propylene.

Michael McGarry

Yes.

plus propylene and also of supply the propylene buy buy by don't raw derivatives, it's We work itself. input. material we and obviously, way So, demand derivatives propylene derivative driven underlying the the the

not hit away. us would that right So

So that would comment. be the first

is, second have comment material XXXX. raw anticipated we The into inflation

the lot anticipate of we minimize and try readjusting in buying were position strategies formula to increases higher So impact of our to fluctuations. XXXX kind ourselves and of those in a that

Vince Morales

seeing year. Jeff, inflation add I'll the that Yes, coming low we this into single-digit are

due issues pandemic. the with our which dealing workforce some are transitory are, same that suppliers our of feel customers the they're some restraint of of having we that's Some to

we out We characteristics items by progresses, there our to alluded as supply Michael So the be the in year limiting base, pricing. wayside. of the supplier some of of the And predominant most there's will supply-demand think at these fall markets. will just some these point good as factor of know

Jeff Zekauskas

going year? draw? Is squeezed So that that should conclusion the think you we this don't you're to be

Vince Morales

single-digit for think our QX inflation forecast We is -- likely low QX. single-digit low is and

Jeff Zekauskas

Okay, great. you Thank so much.

Operator

Your next Parkinson the Credit Suisse. question line line from Chris your with Chris, open. comes is of

Chris Parkinson

how an basically you do progression? of just to And framework, Is Thank be continue you. but on -- Q&A, even you kind volumes, 'XX. the each act these this any investors to it any very your things price, or We should the even cost do could one price thought on are only but controllable into your 'XX, not this costs there control just job and Thank weighing you managing and costs on discuss of ongoing margin programs they're -- only your it's between pandemic, on there the is there in processes cost variables? improving other just much. mid throughout basis. appears saw intersegment be mix Can balancing programs, just your own

Michael McGarry

historically Chris, the is that's I would a And Yes, been as for this PPG that's have tell do we yesterday, mentality Michael. day. improvement -- our are than continuous the that how every that we you weigh managing better company. we today

up. even why initiatives, continuing the though cost And go said in quarter, to have volumes still first would so that's we we

will we productivity. travel. one. there that we Technical services That electronically. are teams to are to be going How We be from know providing that to drive continue customers, let's is we accountable call that our providing be going our of holding it, We some continued manage to internally. a, cost savings are

We have initiatives. more digital

it's to is there to us productivity think think I is initiatives than it going be I when I about So we less paint long-term for more expensive make long-term, underway. -- And think today. have

Chris Parkinson

tailwind in what a And the for Thank just Got your robust 'XX. timing. just then prepared on restock, could solid Can you also perhaps, on a few customer times much. from quickly And expected comment in remarks currently hearing comment very you which various potential channels? you're a it. you just your mentioned be

Michael McGarry

will The ones restock; we biggest two have the that to is refinish. Yes. first one

So get they're exceptionally and caught extended where they work-from-home don't all can't with low running move want period with inventories. They work-from-home product. an to

I fourth X% So importantly, sub-segments, We aerospace. that's dropping. much had mean, into one. one orders orders quarter. in of see more quarter various in sub-segments our the normal we down break get the our the fourth that it first I But how into got but only the I we won't

clearly much Now than is the running industry that. higher

to destock continue have So up. a rate. That's at to build going significant to

So about how we're aerospace we and people thinking starting that the ready are ensure And to probably start I'm to be restock will of in will then it going doing for significant. and will start that that we're be thinking that that back accelerate. coming that QX in do half

should that's You our be that for think probably haven't we obviously first That's that the their customers, I saw And we're the talking first they’re today there sign. you from increasing they the so anticipate to will Airbus information one. but the made public, signs because announcement build other rate AXXX. have

Vince Morales

relative the levels to know our hand levels we a our in industrial car all over get very running the terms. Yes, low were outs if do Industrial product are if pandemic-related. sheet the you backlogs in go are Chris, and balance of stock can't we inventory mouth their microcosm, historic have just very with because our U.S. certain at inventories to customers low And customers. you Again, segment, at and to certain Many look to places. we as

progress to XXXX, as we year That example. very shelf. of across Most a restock had expect did our So last be XXXX. year customers traditionally it industries But we. inventory of a through was strong we another again, there would the variety that on do a be as in depleted

Michael McGarry

running December. to I us Chris, we stain in maybe history And stain in that plant my remember our can put never a perspective, in December. in of ran plant

Chris Parkinson

you always. Great color as Thank much. very

Operator

your is Your John, open. next UBS. the from line John with line of Roberts comes question

John Roberts

down Thank began last you. of China February shutting in year.

acquisitions. basis, down relatively the even basis, then looks that a and to and as third. to first comps pretty go X-year the to If kind right your think in of but still of X-year I see second I of versus years here to the lot about X 'XX, easy flat instead, the the that a start on So that's benefit quarter look going X-year are back it we there. in on still get okay you a ago markets quarter and comp you're like with at first way be look if is into your the quarter Is first some China

you're of going the so basis? be to you're flattish be going to maybe kind in half on And first -- X-year a

Vince Morales

You're only, total you talking are China talking PPG? John, or

John Roberts

PPG. No, for the total

speakers] So … first [multiple of total quarter PPG

Vince Morales

a -- to basis, down still digits low PPG guide will PPG on mid-single Yes. for Total be with the total volumes X-year comp sales gave. we

is acquisition, there other Now such as is positives currency favorable.

to As Michael volumes quarters XX pricing, sales basis had be X-year straight mid-single we but to, down digits. of will low a stacked alluded on

John Roberts

there about them on talked the like that's inflation. more raw of you granularity overall different many chains derivatives Maybe propylene. Ethylene are all then and TiOX, VAM, urethanes propylene-linked? a little material they're not Okay. value And bit

Michael McGarry

vast Yes. our about I slightly into down higher, in going When we the seeing not flat. not say negative were XQ, step we them of probably mean, look have half that And But to prepared would different we procurement or them XQ, I are are at so categories. marginally see some we that inflation. we break up significant for. are of majority XX

nervous up, up, are trying guess solvents are I to packaging of in would So are we I'm sequentially, strategy XXXX. isocyanates this, take is able up. XXXX to what year because manner of that this tell you not course be we to try forward all are procurement we have is to anticipated we the epoxies in about But into a we our and advantage into tried what that going carry and had up,

John Roberts

you. Okay. Thank

Operator

question your Vincent Next line comes the of is with from Andrews line Stanley. Morgan open. Vincent,

Vincent Andrews

issues you'll the could just auto ask I in quarter. Vince, other I I you there auto the areas where that that up into fully that made may you the everyone. entirely some you say autos first on see in Thank the would on customer production, be spread some XQ. be some made balance morning, be be anticipating shortfall XQ into and the side there get could If year? think heard good further the up to shifted year? out in in or the be it XQ can is something Are calendar of And

Michael McGarry

Vincent, this decided is auto biggest their Michael. in I the unknown guys with own dealers. do say would that what the is to have

an something low. you you They're making because choice is cars, to Dealers on As and come a what's happy lot. money don't you you have know, the do. new historically into facility of have lot now don't are inventory and dealer right which on auto buy they very is

I companies of doing is to back do to try the on XQ, what lots think they inventories keep now. dealer they're the or doing car to starting do rebuild levels So half old XQ due the back and great they unknown

unknown. that's So I think a big

anticipating to there to latency there used to back catching But more go still is the are decide we So levels if up. they they inventory old have.

Vince Morales

there. Vincent, is a XX% demand up year-to-date. I came demand Europe. out numbers are there sales U.S., is good very constant, demand out one over in China car There The is the January today for and in The think strong

for automotive. So we demand good end out market there's know there

Vincent Andrews

it's maybe you. to helpful. I XX%. Thank you just back that very guess, That's on back -- China are And or flights to aerospace, noted

case as frame in anything of behavior anything that take So seeing that’s sort forward? U.S. the come world when the and forth of study the are they rest interesting less? you of sort recovers you plan back? look might aerospace and anything China? will of if help at buying as might in different anything Are back, And how us they so Pushing how that are more, -- come aerospace business a customer Europe buying out, the we

Michael McGarry

Yes, recovery. two-stage Vincent, what to the would first I tell thing it's you, remember a

international flights XX%. down domestic XX%, up are flights are but So

So flying they're China. of outside not

limiting anybody -- flying and in. really So they're

the biggest So challenge that's now. right

the opening is people distribution vaccine and one say the in for to factor So the recovery I'd number look up their borders.

close So domestic are, are their and to attention inventory those. would product are I they side, happy would levels demand and call, normal. Right now I they pay their on real buying

Vince Morales

change could expand are very for airline inquiries of up see airline do some see is you to online the the level. do periods, not depressed step metrics demand did around we is both out vaccination. up. know want in that and we a trend QX the travel, for We and who QX U.S. to debatable. folks just online were travel continue out they They Europe, significantly if other inquiries was obviously from there versus Vincent, are impact In there we holiday and wise or whether travel, watch. in And for positive travel, We But the sizable upwards. welcoming a

Vincent Andrews

guys. very much, Thanks

Operator

question Markets. Viswanathan comes RBC of line is from next Arun Your your the open. Capital with line Arun,

Arun Viswanathan

trajectory? you realize margin do it put these percent increases Good I margin In percent from wanted nice in Industrial, of prior price Thanks. you can caught relates And comment guess, I feel you've up Thanks. had some growth a also your Do performance even progress obviously, morning. we as you've market. to just challenging get expect and fully 'XX further Great. you as the well? question as again. some that margin you're And go you to inflation through to on like there? up here, maybe

Michael McGarry

I We answer higher as have never in that would my say up. have area. to always, caught a always that expectation we that,

people good And so materials are we strong is have more work raw demand can to do. is, and news coming up. see The

be should ahead of we this on the get to able curve So one.

whenever we we’ve will as we’ve advantaged a announced far aerospace price increases back, announced in architectural, be know, that for price in performance, refinish you in comes positive increases technologies so us. -- and we it already demand as As have

So pretty I in think this area. good we are feeling

Vince Morales

me let Arun, Yes, just add.

all improvements made our throughout due strong very to cost the I think that leverage due several as to management you've structural cost years, discretionary XXXX, we we've volume heard us on any expected our past of and improvement. talk

the I the had in and impact were Industrial segment. digits that witnessed that Volumes you up the think on you QX saw line. it in mid-single bottom

strong volume balance as this should hope as the leverage both -- recovery very you in we the of pandemic segments. XXXX, So expect throughout, occurs volume

Arun Viswanathan

maybe in Okay. more That's the you helpful. profile for that's you Is either just kind buyback would necessarily a not don't be like And little M&A the necessarily into and same that maybe share acquisitions ROIC then aggressively? returns ROIC? pursuing provide a why kind general. And of kind think of bit of a of can calculus or buyback pursuing what’s share the mid-teens

Vince Morales

so and out ago a years record think regards look and examples. If of our dozen had the recent around put couple you we something with that, returns to or I I acquisition a think we’ve

that was of the coatings those no PPG, for of out only May highly that transactions And buyer. of or come we put these in cash really certainly the of very on think lot the cost in industry. I with on is but the the find capital you'll is it capital What XXXX IRR not synergistic the And behalf and of door these XXXX. by repurchase. transactions. synergies typically of excess fact driven excess share a A typically our it's for return are well

typically of because a a good very acquiring typically risk low you lot And these we're assets. are get So return. not

aware, Arun, the asset-light. coatings As you're well is industry

good at very those potential. months. years. of we been typically And acquiring with timelines assets typically at few we're acquisitions done And XX synergies early. XX a very PPG XX very those So less XX we've or And have acquisition are synergy the than lot extracting past

-- We cash of all synergies, to few very, again are extract able door. out very the those very with

So in our share space, for dynamics themselves to lend higher those repo. a return space, the typically profile coating acquisitions versus in

Arun Viswanathan

Thanks.

Operator

line McCarthy your Kevin, Research Your next the Kevin open. Vertical with from comes Group. line now is of question

Kevin McCarthy

outlook you inventory general. How seasonal grow effects would U.S. My of can question coatings. coming architectural versus can your like, comparisons talk hearing partners not more XXXX everyone. directionally through DIY Maybe Yes. Things to year? business versus Europe? levels, you from you relates you the Good your for channel in this morning, whether in or the are compare and some challenging what

Michael McGarry

of without bemoan new would kind we didn't age say in that the the get that always have. have in I their that our the is excited What past of painting to that most kids Well, Kevin, grow. will DIY to because we I'm people a We by about summer. U.S. generation let seem DIY-ers every continue fact

there are as they out they own their now painting work-from-home. So homes

That positive. be The will a to a positive. will that's continue So housing grow. stock

trends you attention Europe. I that's So to think that all-important be should paying in

time in at those a we has wasn't that manifested and time four same period at walls think as itself inside much of looking all significant some repair homes there historically that the people were that through remodel home U.S. now very long where I has and the went in numbers. happened

So see. and know think I Obviously, all into for QX, QX, will people think QX a wait how of trend than trends I this we the lot I last industry. positive see comps. will let's And be and longer But think. we DIY wait is these to going but positive long-term, are QX,

Vince Morales

velocity. more taking Kevin, residential Yes, a painting the U.S., place paint, add robust footage square one a I'll cycle moving repaint, In positive that's with repaint into typically smaller de-urbanization more favors the from typically single-family trend. home, favors and

Kevin McCarthy

and on And is elaborate is share much what of shows ask levels. Michael, industry Okay. your average shifts That’s and the You helpful. inventory Can remarks, Asia rates your how heat versus growing related about to you above dislocations? OEM. and significantly pointed some to auto EMEA. above you've around labor say mentioned And driving in in that? SMEs wanted then low production I I think map you're out prepared

Michael McGarry

have the is one first Well, better that technology. we

winning net positive are you if for new our been wins number so our at year-over-year, us. we very new look -- has So that wins, a

the space. guys this is in wow, The being service paid of in mean, saying, second need one value out been of are because tech I has just now our the really important, you team here. pandemic, people I is

And very space. divorce I think start we we are very, to the that one to rates discretionary in continue And to early is piece where third business. see up. to are that’s are And starting build mobility we we win are but getting of are because stages, the long-term we when going to this is, the going pick ourselves so wins --

Vince Morales

I'll Kevin. add other one Just well, as

as couple acquisition, solidified got at you well. If did of of our many in some Hemmelrath these products acquisitions we we've the ancillary Worwag We've relationships the past of look customer years, pending. on acquisition

with this plants. value-add need our been that’s through Michael that’s breadth they their in spades especially where those mentioned, customers. to our coming through like times velocity expand customers. So as strategy technical to And in The

Kevin McCarthy

Perfect. much. Thanks very

Operator

Your next from with Mike, Securities. question Seaport Global the line Mike is Harrison comes your line open. of

Mike Harrison

Hi. Good morning. Wanted to ask about activity. the M&A

start at sounds four pipeline got what integrate you've once? of brewing, year, deals additional ability concerned it maybe several some deals like at to the rest you about to have the and about a you If in the do point acquisitions little for that? How do your get think bit you

Michael McGarry

about tell let you just and it we going years radar. X X that six me Mike, had or at even was ago, blip once, the not a on

in years. last We XX have the XX done acquisitions

clamor in so job It's to integration in have many director. highly company. people the that We prized a be the PPG

you businesses. pages have we’ve different dog-eared in well-worn VersaFlex, automotive. mean, now is you in is left got playbook, and a acquisitions, right, I these a will and in with we have what right going architectural, they're Tikkurila on think will Worwag, PMC We if And do. be so be about you something which this

-- is business. a I'm about So completely worried not Ennis-Flint new

a us, not challenge for is this So yet.

very comfortable I'm So, in this space.

Vince Morales

at we point governor are Yes. great Mike, bandwidth. It's a the a all of at we at with is of we acquisitions, challenged something point could what that be question. diversity some these know this given But do. not

Mike Harrison

or to the that’s the that side, going on thoughts you've times on Can you some than right semiconductor lot on referred specifically or a whether details rather really I then headwind auto impacting now of whether couple be that some give some of And a headline significant think issue. OEM shortage you've right. don't given a production risk thoughts it's please? rates. you And All think

Vince Morales

being availability. that on itself. production for or too markets. think only now. that customers depths days I -- its developing digits is still machines that most don't are or this this story. industry, understand be. in to down of do chip, just extremely tight. industrial this is the But more a two supply or We It's refrigerators, Mike, may will based requires it's come, hard have don't to it's supply and the can grow because a intermittent not the reportedly terms We It's how three base at and taking to up one resolve we passive Anything There Yes, single us or see on impact in know when issue point, it There percentages that like availability. not single-digit in it's down they washing of it's markets, but in well-known these automotive, lines several shrink. or prolong ability know but coming lines, more supply is

Michael McGarry

making up they're add day Mike, they Thursday, on Friday what get any on missing they them They're is, I can. running would chips to and Saturday, they're Saturday, that that Sunday.

they're is running what basically mouth it So is. to hand

Mike Harrison

All right. That's helpful Thanks. color.

Operator

line line your comes next Jaideep question with from Jaideep, of Your the On is Pandya Field Research. open.

Jaideep Pandya

Thanks.

is on question acquisitions acquisitions guys have a years. First of doing in the topic. I few guess, you been last lot

from Now at or stop to are this also planning they apparently wants some do Europe and to acquisitions least. company buybacks

a second may the then sort of quarters -- go going inorganic flat. it Performance that you think really year it case-by-case XXXX business. your So, guys a and eek phenomenal therefore, do ended was actually you doesn't basis, on acquisition and From growth, companies point year was you sort looking average years, up, for of are of you? the feel multiple refinish on given in the Coatings that is to this and you, or almost around coming as is profile more and down my multiple arrow therefore, question of And down concern the in is do pipeline industry coatings return the the next

in structural U.S. it had, you therefore, savings was a So Europe, Mexico inflated it away? shouldn't profitability improved bit these just DIY get there cost or interim keep because Thanks. and has of that curious, can carried you and and

Michael McGarry

two-question space start in the you really you acquisitions acquisition. who with might limit. unique to think returns have with The unique that well. I -- that first is in are me let as Well, exceeded our And really compete

or answer. is there wrong right no So

is risk, the return higher the for the be. theme that general the know needs higher to -- the You

to the -- unknowns, that. need the And to more the and returns higher cover so be

going mentioned a that structural to I costs volume have to the line, earlier, say return do we think I it's know we varies and always From no additional really answer except forward. lower is is So I would the considerably in And Vince standpoint, just performance that's when to or there answer. right I wrong do discipline right itself this bottom the continue. and leverages on comes think, ability it nice going like think a

Vince Morales

Yes.

I think, over Jaideep, as we've talked …

Jaideep Pandya

lot. Thanks a

Vince Morales

are models talked the years, as model. variable … we cost the over coatings

So even to are proven ratchet and volumes able again that's down, cost a variety XXXX, been QX especially factors, QX. in once though down of are in we

ratchet So carrying alluded could some of And then variable the we permanent. XXXX to into cost. that in Michael opening down as comments, make that, maintained hope to we’ve we

Jaideep Pandya

lot, Great. on Thanks a and good luck Tikkurila.

Operator

line question Rizzo your with comes Gentlemen, your Jefferies. Daniel, the is final Daniel line from of open.

Daniel Rizzo

for Laurence. guys. Hi, on I'm

ones. quick of couple a Just

there is just wondering on if limit was I willing are go acquisitions? to opportunities, M&A these upper the all the mentioned an to make you You leverage

Vince Morales

we Yes, been as strong lever history we where of I company. has or want a our to up set do times transaction here well investment-grade Look, Dan. chronicled be think a are There to transactions. well,

the Our acquisition. intention would opening back poise ourselves to to for the said Michael immediately be, down next that in as comments, ratchet

to hard we these number, like grade Given but to again, it's specific a of the strong investment deals, different pinpoint sizes is and where natures live.

Daniel Rizzo

the New the year Chinese some the just, over mean, might that's where was those you the which region? unusual. running thing And time quickly, were of continue mentioned see I I was possible your customers of this around might in year for if you last in Okay. China you in then obviously Year Christmas, that same usually wondering see that the pause trends

Michael McGarry

answer We China. will he that let because Bruno John in spent years four

So, John, view? what's your

John Bruno

expect them Dan, I holidays. to fully their take

Daniel Rizzo

much. very you Thank Okay.

John Bruno

You are welcome.

Operator

time. Bruno, at There the this you. Q&A over turn of Mr. are back call no questions to End I further

John Bruno

their and Thank for PPG. you, in like interest I would to everyone Amy. time thank

fourth quarter have concludes any further Have questions, IR good day. contact a our earnings you call. please This department. our If

Operator

conference today’s call. concludes This

You may disconnect. now

PPG Industries (PPG) 22 Jan 212020 Q4 Earnings call transcript