PPG - Earnings call transcript Q1 2021

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Operator

Good morning. My name is Jerome and I will be your conference operator today. At this time, I would like to welcome everyone to the PPG Industries First Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. you. Thank Instructions] [Operator like Relations. the now John over Bruno, Investor to would conference turn to I ahead. go Please

John Bruno

Thank you, interest good XXXX Bruno. welcome Jerome, and to financial We is again, you appreciate John results this conference your first continued our in call. and morning, PPG quarter everyone. Once

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

XX, the to the closed financial information We comments U.S. and after commentary markets provide will April our investor website, on relate shortly. released on ppg.com. are equity accompanying Thursday, opening website the Michael make additional The call comments on for XXXX. of slides and detailed to posted support slides brief Our presentation available this also center the

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

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

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

Michael McGarry

our ones welcome XXXX everyone. like remaining to first loved safe call. hope healthy. your most you John. I But are Good everyone morning, Thank I importantly, quarter and you, and earnings would to

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

earnings our $X.X per continuing operations were sales at For were a record diluted net record And also the first from were billion. and a adjusted about quarter, our share $X.XX.

XXXX, first quarter was the impacted Our year's adjusted higher of EPS due was last to than quarter pandemic-related partially by impacts. various significantly first

comparing financial operating industrial reporting sales strong and and this nearly results first excellent was adjusted with higher results, performance driven year-over-year We EPS year-over-year in all growth than comparison percentage of metrics Industrial by businesses delivering various versus coatings pre-COVID OEM, automotive the XX% also growth. our double-digit with impressive XXXX. quarter will be general equally This was packaging sales Coatings the pre-pandemic segment

continued activity automotive their growth strong were refinish end-use quarter by and And we in restocking aided beginning market the a U.S. to global architectural sales strong coatings recover, trends. partially business customer had as Our in some that is

as were on net margins strong growth. of two the aerospace. our we pre-pandemic factor significant fully to these year-over-year years PPG past from in businesses despite levels, restructuring delivered at this amount savings cost multiyear benefited We The not programs including a margin higher segment several quarter realizing from such high is primary First leverage volumes sales increased leverage. results have operating returning as we contributing us outstanding key sales in to achieved a

expecting inflation experienced logistics the the across and environment of had during material quarter. all selling In quarter. the addition, an inflation us increases further we the Coming additional With significant of price second process we secured have a solid higher we a selling achieve are cost increases during year, helped backdrop, raw businesses. price into ones and of price were acceleration prioritized in and increases inflationary already our This executing has year-to-date.

prices. quarter higher XXXX selling our was consecutive of of As a reminder, first quarter XXth

year XXXX. of execute programs, our million target total structural of the million and savings an to continue realizing of our full cost-savings $XX $XXX also We maintain on savings incremental for

we these first $XX In working quarter is savings that strong the equivalents. least $X.X savings This the XXXX. gross-up preparing We balance generation of cash the with a be Contributing are first XXX-basis better typical operating million acquisitions. of which and a the about and make first full improvement we quarter quarter. ended of is the billion cash cash a for in in year-over-year Tikkurila year for of cost to retained at cash cost our addition, balance able and as $XX million Worwag to this confident about we'll interim drove during remain quarter, closing cash point than permanent operating capital interim the

the with weather is In has business, expectations the also quarter. availability. despite heading which raw The material our in to Our book a the the Traffic order quarter further new recent second strong acquisition. four we and And and completed quarter, accompanying slides are the Ennis-Flint our acquisition, first information performance we on perspective into quarter. performed challenges VersaFlex In our Solutions expected the for of presentation significant material, to the the second completed provide acquisitions. acquisitions Tikkurila a included several Worwag our acquisitions and be in earnings number and to business to

in breadth, areas synergy mature capabilities higher capture in four us that benefits our We've PPG, coating and back-office strategic to regional items best-in-class geographic as our to global acquisitions to bring from allow and like highlight. Some such I'd low-cost continued all product and deliver verticals, line to expansions. past excellence centers acquisitions believe Each than of our of procurement the deliver strong participation competitors. extensions incremental synergy

realize recently digit to our synergies acquisitions, synergy than single expect sales, For of high of higher we industry historical announced capture.

have shared our recent We that at least acquisition closed We acquisitions for been performance XXXX. we have XX acquisitions than XX most last also estimates, basis In months. achieved points in and May aggregate, in XX most update an average included our synergy capture about higher. our provided to higher we initial

acquisitions, be XX. of eight historical post-synergy recently drive these By rate of creation. their total cumulative these from four synergy and And expect realization. shareholder the once annual the run announced PPG's accretion they help will is and multiple. multiples post-synergy $XX each at acquisitions of of below to below All an fully acquisitions earnings The value end business base the average $XXX for all integrated. XXXX, will the acquisitions million of we multiple were is five-year for provide million about of synergies All

our of projections, initial many a further line targets for these with these acquisitions suited us well growth. initial sales As although synergy from top synergies, only benefit to drive include are modest

various We Tikkurila acquisition acquisition highly finalize recently with the completed expect customary strategic second period the regulatory is We across the architecture coatings May extended XX a quarter. until be leading offer tender approvals. Tikkurila to in to countries. positions

many We'll have our previous to I cross-sell our acquisition. opportunities complementary grow to to in through Comex said January, channels similar sales I see earnings. legacy characteristics and further significant As products

initial exceeded well acquisition economics. has acquisition Comex Our our

to Moving current outlook. our

have We to Many architectural order at and broad-based customers to strong of very our including continue this coatings continuing end-use books, they we see demand -- have in and globally, second continued and well strong the into activity. are minimum. and a global many demand robust industrial pattern markets indicated OEM XXXX half global anticipate of

a customers so many we component year of raw expect to to capabilities is and channels item occur and in One production their as of progresses. we addition, or coatings selling spot few of of direct shortages, our note are choppy, restocking materials. important outages schedules our inventory some the an are In input experiencing remain experiencing eventual

our from sales these expect As curtailments of a our chain disruptions result, unfavorable we supply impacts some both at production and some direct customers.

to estimate due million is impacted issues. these best in quarter to by current expected million to Our are the that second $XX sales be about $XX

is We expect the these that in due we're event as of sales second included guidance. to this our XXXX to the Uri. impact deferred second weather half named quarter be I already mentioned previously, thus, occurred and financial in commodity inflation quickly XXXX, experiencing Also,

of commercial securing we increase fully materials rapid As both in this selling result successfully increases. and raw teams a price our and have mobilized additional inflation logistics, are

have head cycle, to on the inflation half start of raw fully and offset We XXXX. very second cost good we in expect this material a inflation

leverage you've current from come global on we demand will a as PPG, to are provide real-time and These positive operating growth. the sales growth, cost expect we management, disruptions maintain And on overall remain to continued which across view along committed temporary. Finally, that supply. The strong many throughout is be coatings of we organic demand This in expected continue growth robust which broad-based opportunities with XXXX. our markets us most beyond. conditions, and with technology products, leading to continues the strong end-use to provides XXXX and strong advantaged

a the to For be second strong business low differences aggregate to is expected momentum. and to $X.XX, projected the compared be expense, amortization excluding up earnings $X.XX XXXX a Adjusted to basis teen company, sequential in with sales by first between earnings, of percentage on quarter quarter by region. continuing volumes the are

from either impact include As acquisitions. this guidance not Tikkurila a does any Worwag EPS reminder, or the

cash the acquisitions which Our be by during has closing, character our end near-term these of want by second team. hand has recognize complete we anticipate be of cash it our and combination quarter. The the will times to global than announced, to deployment the of of and have on to debt priority In funded PPG shone we adversity. thank never brighter I employees a

please questions? purpose our shown prepared line a confidence And communities have in your our you Thank you our serve and common beautify people great PPG. continuing would drive remarks. now, to Our for world. This to and the the for concludes customers, resiliency, continued protect Jerome, open

Operator

Billy question with Your Instructions] comes [Operator the BMO. Caleb line of first from

is line open. Your

John McNulty

Hi, John this is McNulty.

So continuing issues. still front. you've raw of material a And that see pricing, material price the peak you've -- speaking about? increases you a chain speak pockets need on It or of raw pressure to some are raw seems you it little still can there offset that material pressure? there's Are of still to bit some to you yet, you're supply seen question level seen you the where like have have that that been rising then

Michael McGarry

further. getting availability great, that I have is a you could Michael. basis. John, is mids nets But would tell better. few not on and peaked. that It's here be increase it's material but probably we see this There that a prices is getting daily could raw what most better

And working that. positive to QX, on QX. had in positive we expect in Our price X.X% more hard and teams we have price are

positive So but encouraged had and at it. QX. automotive in to price, it's probably And hard in to get, we're have need we're PPG business a coatings much including every business, early I'm coatings for say working on bit business positive our that every to we how by is what little price track most

Operator

next Your Panjabi of the Ghansham comes Baird. line from with question

open. is line Your

Ghansham Panjabi

Good pricing you're raw previous cycles? rodeos with now And rate you. can despite I historically, with costs cost align versus have paradigm related second seeing the us the everybody. quickly inflation, strong massive maintaining guess pricing decline guess on mechanics at obviously Thank how new asking good volatility, I'm of including you to to material morning, inflation what been for a some when read very peaks. costs approaching pricing has moderated as that, coatings post industry through even cost we're the I point? so industry, whereby quarter take previous just guidance Thanks much. will more start about because the I

Michael McGarry

is inflation Ghansham, would I raw what into year. you that coming material we the anticipated tell

the teams as increases is that selling, doing high had we so And as think, And products put value. additional alert out of so thing surgical capture a we're to services. better on second value a job, new And on year. to as better get I price we we're job to in our do trying pricing roll the well early

customers it doing valued I help running. pandemic, our of ability was And a services. much capturing we're get the job them think up value better those clear for During and our lines how their to

any PPG things inflation. at as wasn't to I important. those going Clearly, So it to is that anybody the shock to raw material freeze lead each of this think additional was happened,

need And Texas they we a alert immediately teams about their raw so start into our we customers freeze, high talking going all to inflation. to on sales immediately, material as saw deep that

our that's were you one think are of XXXX distracted. and the if I -- remember competitors things of different, some 'XX, there

inflation think going that not top regular on clear material doing completed. is I so raw is everybody a being of price. raising that a obvious pressure. be And were value. They practice. You will as top had This is after be anything a Valspar and acquisition were trend business lot of this. Hopefully, Akzo Valspar more ongoing the wasn't to this on of under

our So addressing I that this. confident teams I'm would are tell just proactively you,

Operator

question of next the comes Koort Sachs. Your line Bob from Goldman with

open. is line Your

Bob Koort

is close on paint key appreciate about I then And more check Europe? didn't efficiently? the And talking on segment I was wanted season the morning. And Good the all peak can't you. that recall one maybe secondly It off and you there the Northern of missing some Thank in I that slide part around when guess expansion. helpful increased the that very aggressive That you transparency attributes Tikkurila, trends. deck. the the guys in more was Ennis-Flint, to So deals geographic is of I noticed ask best the there. or you maybe internationally of getting year opportunities if there. risk I

in I the past? misunderstand that So did Thanks.

Michael McGarry

Bob, is -- share bit a in Europe. aspects. No, regional a of of a in bit got in It little some does has Mexico, little share have bit Ennis-Flint has and little Argentina, a little in Australia bit

are focus will It accelerate right help for us that information be a We strategy that now us. digesting all at prime a looking that. will

have made We as some can you headway, Mexico. in already imagine,

leverage quickest. this, is the Europe. the and all Probably area be will the will that that team PPG-Comex Our strong that's area, next over

think I are these positives. all So

But it's bigger get of will overtime. So a piece it. it small

Vince Morales

answers, was PPG, on necessarily company. the before Tikkurila question, for expansion that for geographic acquired really the Michael the Bob, And not slide

gives So in significant definitely we very have Tikkurila us minor geographic Scandinavia, presence. where expansion

line So was chart on benefit. PPG's item really that around that

Michael McGarry

Nordic as best It the can a in the August Russia, more months are you April one. and imagine, And compressed quarter. through fourth paint season And the September. down than then, is and slows definitely typical in

rather we'd clearly, closed than get thing sooner like so And this to later.

Operator

Your question America comes of the Stephen Securities. line with Bank next of from Byrne

is open. Your line

Stephen Byrne

You synergy these four percentages have these for EBITDA acquisitions.

depend do slide you metrics? also as the post-synergy pre- these the where be meaningful. imagine growth? say, relative I VersaFlex you really that in that could other to would perhaps would But Like it metrics either between you this Ennis-Flint, whether cross-selling one or costs you I'm could post-synergy VersaFlex, Bob's supply include businesses benefit impacts, on, revenue your you that would business. Vince, that you split include ability curious I with the your accelerate on assume those to from sales And question, and there to them? globally. is multiple and Just is into cut on your if expand comment your made comment, show that ability assume that do, the glad you in the in I on chain to then Do would could the technology

Vince Morales

the in deals ones pending. Most that his a we've this is completed we deals, Typically, these here said in Michael Steve, as Yes. well Vince. as opening as have most very, of as top very the comments, these line have ones of minor synergies included.

cost a So come of and on synergies do most synergies the traditional. I typically Comex mentioned top acquisition we in where traditional our metrics side. project, further are cost on think project are a But primarily. than There the people Michael the from have synergies the the in most line few completed. based space, us for ones

important I is one. think day also these what's some of come

look of acquired at these acquisitions synergies us we products But as not expansion spot you're the of big again, certainly in that's footprint. the buckets. economics. chart, companies' one PPG's these synergy driver this of across terms typically again, these provide day So help And the on project in all

Operator

line comes Mitsch from Your Fermium with next Frank Research. the question of

line Your is open.

Frank Mitsch

were I'd and you seeing as you X% congrats embedded of underlying XXXX Michael, where versus remiss your to is was And first the are related a on didn't that told you the areas mentioned curious good along you below XQ Thank your a Saturday; quarter of to could to take if that restock? in volume to volumes in [indiscernible] that a pass Because how that. levels. so me what morning. be period? indicated I that if pre-pandemic $X.XX give stand place XXXX I on I'm some client relative relative couple that demand. believe guidance, restock $X.XX you much And you to discussion result is

Michael McGarry

Yes. do had more that more market Frank, that little really saw XQ. say refinish winter. The to fact would we there's a restock in normal I in that U.S. anticipated the had restock the we with very

And get caught didn't if return-to-work had to a so guys the we want situation.

whatever I to So going done, they've they're do. restocking think,

the standpoint, of we're for that I say volumes XXXX, that XQ would driven still aerospace. below primarily projecting or XQ So and are the slightly that's at by from

to So aerospace the that still pretty aerospace mediocre. honest, the was encouraged mean know virtually be February that we depleted have they was March Frank, January for I'm about, is And chain. what pretty completely and guys in have But I inventory. encouraging. nothing

start and they're ordering to will a So point, things at going better, as be positive. that get some start to

and basis, March, We seen yet. have But tick encouraged a here. MRO imagine. in haven't I you up sales regular that can track on by April continued the do We to it very was as

OEM going expect be will to But to change side we better. not aerospace the that's flat soon. MRO Now because be anytime

So we MRO doing military well. to improve. have is starting still

that a regard should you real So as positive.

Vince Morales

other of automotive XX light in their exceptionally inventory. channels inventory, the inventory agencies in is light example, that past the couple months. in know They are is a or much think terms is XX U.S., the And buy historical We rental very We know for didn't XX. We of trends. U.S. inventory. mid-XXs of market somewhere typically car days globally the which the light are

to think full auto tailwind. once So a will run again, it's be good out we available production,

industries XQ inventory to produce many as light architectural to due the inventory, chip a wanted inventory, those some are we industrial are, and season. of QX as weren't shortages. the as markets we company, The in And other light much we able for

that across we inventory many we So of markets there's replenishment end the do feel supply.

Operator

the Your John with next comes Roberts UBS. of from question line

is open. line Your

John Roberts

talk you in the pre-pandemic, it's looks quarter that since some volumes tell we maybe XXXX will about well XXXX be And X% like Can architectural, to second percent. like Kind of DIY hard a are above the are and or Versus you. businesses couple down below Thank up far overall been is that? above pre-pandemic around pre-pandemic levels moving a lot. refinish? of above how

Michael McGarry

We're but in place, China. below still Yes. We're every in below refinish.

Australia I low. is reported -- is mean Europe one last So U.S. X%. down was remain down. definitely will even claims low. last

continue going to that's So under. to be

slide as I far into the well, there each in -- I think put it. we'll get hope we a as by I of businesses.

Packaging is That's be automotive Industrial up. that's the down. to And down. marginally negative think So, should -- the one I be then think be about rest But up. chips. will them be to ones OEMs be should due most other the all of really should aerospace. should

Vince Morales

to we expecting below are just slightly John, in levels. Yes. But -- below slightly I volumes want -- XXXX QX,

-- So of again, do end we recovery there's these in most still outstanding markets.

Michael McGarry

architectural, don't very a see strong. Even to we In slowdown April yet. continue be

participate the we side globally around So architectural be the market to every world quite continues strong. in in

Operator

question line with next BNP. Your Favre Exane Laurent of comes the from

Your line is open.

Laurent Favre

at Hi. Good follow-up actually us what it little bit for a on least I of to versus you. you It's DIY if North and on America morning, could directional that in question do Thank all. me. color was for give Europe, it me. in do wondering you're seeing on a especially

Michael McGarry

be thing We Same plus DIY, Laurent, double double the in up in to Europe. strong, quite plus. thing digits continues than the were more in Australia. Well, digits U.S. Same

this continues be much market, has DIY of but not it's to it So strong. for Mexico and us, been is -- a

lockdown, you of any are course, trend. change continue well So in the throughout not anticipate summer. we're And will Europe, this seeing we as the aware, in with that continued

Operator

comes Morgan Andrews Stanley. line with of question from Vincent next Your the

open. Your line is

Vincent Andrews

comments raw XH? by just XH much. or the But half believe the clarify for for on means I said offset pricing that of very I of you year. understood end that raws I whether entirety want materials I expect to wanted to back to the sure of the just your XH. you in Thank you make

Vince Morales

Hey, Vincent, is this Vince.

hope, point, the materials view somewhat we at QX. as this raw at into Our are, that high carry will they watermark of

materials in of different expect by offset certainly, outages have part We is pricing are segment expect to seeing entirety, and businesses raw some materials our our in differ. spot But will the we that patterns. will And normal April into Then raw expectation. in and we May. its second continue these through we'll seasonal definitely half -- seasonally, these

Operator

David question comes Begleiter Deutsche next with Your of Bank. the from line

your You may question. now ask

David Begleiter

on Michael, you. Thank savings. just the cost

becoming how need more are accomplish the On still color and without you they're the in that? the where Tikkurila, rest that you they that to on a temporary could costs are of approval close and approval. Russian little you I hand? can believe they company you on was permanent, give If And what just you. Thank delayed, approval as

Michael McGarry

and expecting close So the to we're easy. That's wait all one approval Tikkurila at once. do. We're going is for to what Russian

As businesses your you are second the Vince, first well that your tell -- confident would far to... feel you I I don't that prepared. I And question, if know want as

Vince Morales

Yes.

cost, things. the David, on considerably. down travel Obviously, think of is we've couple I

in cost parts learned expect We've freezes had discrete the have without We've We the operate certain of businesses. world stay other items to to certain that in some we headcount. of out. on headcount

terms exited. of to have portion, world. of architectural our consolidation example, -- some finding are We of talked we're digital warehouses other is in some done expect of footprint different overall, we're which of cost working we've footprint In warehouses and given reducing our at piece for mortar. our terms we of level looking different work given highest our we that terms ways are architectural is don't about in we've that the our And Europe, levels. the inventory bring in parts overall that lower back of digital, lower bricks inventory And those in of

respect these costs. business you So in a it's our see is benefit earnings. spread with the to really of could Every leverage in alert high And out.

That Our XX% came volumes X%. around at leverage. a were up

So every statement. every being and mindful very the sees we're cost of our that, of on business line item income value

Operator

Fargo. Wells from of Sison Your next question comes Michael line the with

open. is line Your

Michael Sison

start to the Hey, guys. Nice year.

margin what uncover dollars and exactly growth percentages -- that then price year? just is increase I the of maybe curious your have much to the sales How either And -- versus that be inflation low XQ how gross you or of to I'm think for for is in delta volume? going said XQ, you and digits. outlook sequentially double terms in In much

Vince Morales

and But on are a start But then year-over-year. we basis Michael some we I'll certainly segment due do ability you again, composite thanks. gave and add by shortages, color. well more as as in bit percentage can business our the be both to number. higher to the again QX run. Mike, inventory pricing still mixed a to customers expect than and The volumes

hopefully, can So vet out you a expect be you what from to perspective. volume

Michael McGarry

I Michael, consistent, be drivers the volume just to the be would side. are industrial And say, the segment to of primary on higher going

and April strong, automotive May remember, were many are you year, and business companies last the doing quite As completely segments well. shut remains down. Packaging industrial our in

Vince Morales

Mike, noted, We more have wasn't sales for And add maybe had comments. disruptions one if to in $XX Michael the probably to we opening his bit it just thing. million of supply would little XQ noted $XX a that in that million more

Operator

question next JPMorgan. Your with the Zekauskas line from comes Jeff of

is line open. Your

Jeff Zekauskas

Thanks very much.

Your XXXX. I were XX%. think in EBITDA first And margins XX% in were quarter, about the they

kinds all material raw inflation. got You've of

want to them are be. volumes back where you to not really Your

what's EBITDA you get of long-term normal, made Once some look back is like basis? do XX%? the what your and price acquisitions. Should Can goal? your And it increases on than a normal PPG that? What's better you roughly margin? You've businesses to the profitability be

Michael McGarry

PPG's is yesterday that Jeff, better tenets we think, every I one day. do Well, today of the than

exceed peak right target So is now, margin. XXXX current well our to our

I We're there But is these side, to not go you'll we do. more to our work want So industrial our We're on Coatings at to drive that, overall, segment. look data in think point. what well that see if above margins have to continue one going anticipate we're and you Performance you do should so that higher. back

think hit I the you aspects. on right all

have better it We're able out. have going be we products place. pricing get are coming that in And we once to retain leverage. to We new

So quarters we're a doing a excited that's EBIT. we're I think of quarter. record we And I record mean row adjusted quarter. in that We're well. record quite three second had forecasting a

about So we're happy that.

Vince Morales

I calls part a just could couple our on I add, to prior I last typically significant in -- company as fixed still the I'd year. have are bringing And and Jeff, activities the say this year these you've specifically and you a this our come quarter, our think more of think, stack. times of asked, equation thing the fourth done That's have as still next if conference that and in restructuring equation margin. on on the this acquisitions, margin contributor We at And we cost part Yes. a profile. to of elimination the here, in hit is they we've multiyear early is below we go,

So synergies that the extract until some margin the acquisitions. to temper benefits average of these will from we're able

Operator

comes question McCarthy of VRS. next with Kevin from the Your line

Your open. is line

Kevin McCarthy

the the really issue production semi share expand In words, wondering was I an industries issues Michael, well? morning. that your internal short we of an chain some hear that if the other that both is what Good Is chip side, and of rates? supply might Or in internal on are seeing PPG? you perspective? it about you lot for from as shortages. has impacted that a on you're the disruption that the external impacted customers other are externally, it supply? And Then seeing buys lion's PPG in is

Michael McGarry

the we're and nats acrylate, challenged So I minor operating specialty in very certain all are make There's small MMA, I understand, of right nits business. you and batches paint, chemicals hand-to-mouth. VAM, of now, maybe really proxies, wouldn't those butyl word isocyanate, chains to the side, shouldn't use need that internal packaging we -- our things understand but mean, some on real Kevin, supply especially

between to has sure they everybody So materials the around plants raw we need. everything make are shuffling

say They shortages. shortages. So, had chip The the they on plastic do that is the I guys, seat shortages. automotive have automotive issue guys our would primary also side, except the for had

we So getting get it's it day, they great, better. Epoxy and getting see emulsions are we're expect not better. up is really day. We struggling to right but more now. do But every every loosen

to materials, we're our So be we better raw get news we're of competitors many anticipating But especially we'll sure struggling smaller in get as competitors, than these able our our service raw customers. which to spaces, doing good better pretty that they're we're materials. the is

suppliers So our of we're customers, good taking doing a us. our care job good and of care of taking are

Vince Morales

it's Traffic add guidance do But And shortages shortages. seeing our may businesses. architectural just that's a we're affect I'll from one baked Solutions. comment. And our We shortages, for internal our into we They're that have From to some primarily perspective, QX. transitory. where the be business these internal in expect

Operator

question Citi. from of the line next with comes Juvekar Your P.J.

Your line is open.

P.J. Juvekar

Yes. and of exposure compare at And you was in those helpful, those in you to about M&A, you what risks you In talk end margins multiple have Eastern how Russia? which morning, the the FX that? Europe regions Can Good all to Russia on Thank And in and in are about operations Vince. Tikkurila already was risks that Western your respect Michael high there Hi. Can Europe? you. and showed do in historical chart quite compare and Tikkurila's the Russia? any And talk just in regions with returns industrial. range.

Michael McGarry

the now. in automotive. we're aerospace. much Well, fairly like We're number-one right any in look We're -- in at presence foreign packaging, in certainly number-one FX our sizable the We number-one we'll have refinish. in of We're do a currencies. premium number-one Russia

But our specific is can't business Europe. still a We're as talk their Russia. in in have at I overall below look sizable time are about we're Because they're their pretty close. margins competitors, until would you we doing margins to margins, such we what So we you used presence. tell if what

right materials. beyond us an bring to some to the the in materials. of because there's countries, to opportunity levels. those the that also go be up think warehousing, And opportunity that So an They're raw of the that's synergies PPG now struggling for with we with raw going to

pretty improve quickly I their once to be And able we'll business we that anticipate close. so

Operator

Your RBC Markets. of Arun comes the Capital next from Viswanathan line question with

is open. Your line

Arun Viswanathan

results. Thanks. great the Congrats Good morning. on

to the get wanted Just on your thoughts margin.

kind you So similar? versus there way performance. leverage characterize looking came some us should Thanks. if from, pretty you that? obviously, remain of the those strong in Is some a what increases of cost to kind And quarter? to of the understand reductions how expect maybe could we ahead, the price of upside selling say, volume Or portion kind buckets of help versus

Vince Morales

talking our time volume we've benefit out. leverage. had of versus majority the leverage. year-over-year Look, all for you. X% XXXX We from and quite from hear costs been We've to great came Arun, the about the taken Yes. some volume

So had to line. bottom I percent said, dropping a XX-plus significant, the that

the you gap on of modest. do remainder you just could If the was that, the math see

continue into we in profess in especially our expect these key consistent cost that of volume very Again, recovery, future, well of in subsequent talked we aerospace. our and against. businesses would terms that's have are management. about management, doing of multiyear to some I I benefit again, provide quarters. here the like earlier we have us But So execute have more still also We teams do to the structural to that going the stack performance discrete cost

Operator

Duffy comes Barclays. line question of Your from next the Fisher with

Your line is open.

Duffy Fisher

Good morning, folks.

meaningfully be maybe like of in million was first back better with time half half hole XX% This through second If just XXXX year, each your you the of period. that versus that XXXX, first for revenue million, look than talked you either and it looks $XX half second go or about QX, $XX should that half XX% rebound, year. the in for first the kind

today you kind basis? the on the second help walk a like top what on with line things us acquisitions, So through, first view versus of half the can excluding your half look might

Michael McGarry

continue. So our is Duffy, tell would confident we're you I that momentum that going to

about automotive businesses, the of -- walk if are inventories so So through think you some right, you low. exceptionally if

call. that I covered think Vince detail earlier in the on

second So for have a we're than going to half normal better automotive.

heavy-duty coil whether that's Packaging, slowdown you they also. any in Our segments no do of well industrial as or very see momentum. think to packaging the there, in other we so equipment these continue segment, or

talked all packaging In second of that will in anticipate new better. certainly is that I come spend I year, just about the a it don't the it's not bit I'm professional in, commercial by architectural, get the kind And big of oil lot but Aerospace you slowdown get seen of starting fact that half XX as -- but we're number better, better. should It's plants should that some matter we Again, seeing earlier, of industrial. side the And do still a the get guys we of of quite a in not do really we've a and the it the see DIY. will And when. light, excited if, at we little of matter capital. market plants, to yet, then anticipate -- no fact, if be good look well. that

they get So if will start our serious about protective business spending capital, to better. get

perspective. half So think the that segments we should quite good volume of have, honestly, I when a the I various have year from look at back we a

Operator

line On comes Research. Pandya question next with from Your of Jaideep Field the

is line Your open.

Jaideep Pandya

you. Thank

tell aerospace, could of us, just has the of much been you fleet on grounded. so sort Just

a up fleet time a terms never you do much And in for do Protective sort been on a just side? the protective in such happened to the explain just the so MRO bill fleet of expect what us what this on new flying, XXXX, back U.S., when terms can XXXX of and what of with grounded. the do expect military & then expect probably infra long note, in that because side. has impact on you similar long, recovery in percentage of has goes And this on you regards So in has then build an sort pickup of you Marine

the a how can infra us you PPG's just is Thanks that exposure what If protective on the would lot. benefit remind and business?

Michael McGarry

these I'll try Okay. here. questions capture all to

business. So we first. That's, in XX% let's aerospace military of the do the it, let's one our Military, easy no side. see call slowdown

is the more important program continue gaining most builds along. We're The Our F-XX. share.

on share the more have transparency. We

transparencies. We share on have more the winglet

because ground good planes the on about From commercial sit that. the for feel to a be visibility honest, had we've never quite is year. we So side, limited quite our

storage of the of how still before going is an put into What so MRO, somewhat how of come somewhat storage still them And put they to out they into checks unknown. an unknown. were they do they're is and storage

do is business the MRO up. that is So for what our picking aerospace see activity we

when the are they have when giving are lease -- to -- they is paint what's the We source, getting planes to interesting some of back put them white.

So sales. And repainted going of when out we have the again, to so been getting rebranded some of back course, they of those source, they'll paint come be they're lease again. be white

a be So will happens, positive as us. for that that

things on the lot infrastructure, require I protective a touch will whether of that tell building that bridges that the support coatings. in needed, question to that's need the markings be we that's the would you and they infrastructure; Your whether If painted. will road that be will trades industry,

So will I for say any be would as a regarded infrastructure PPG, positive.

Vince Morales

some add just color aerospace. I'll the on

waves. If it of the expect we return about in drivers to you volume, think

Michael drives the remarks, and I in certainly upticks levels. significant landings. to domestic The pre-pandemic aftermarket. But about That's what think the prepared flights. wave, U.S. is the first below We're seeing we which that his seeing alluded We're in still takeoffs care

and important in the is takeoff the us. and takeoff very in landings countries, more So other and U.S. landings internal to

second wave until And return of a expect at which we business wave, earliest, international see we The don't be travel. the travel. would is the later this then third year

of the So do feel aerospace for the we a opportunities MRO there's step-ups in couple industry on side.

Operator

question Your with line Laurence comes next of Jefferies. Alexander from the

is line open. Your

Laurence Alexander

of that do environments, do in And can this to shift customers? by for morning. And innovation secondly, year? XXXX? are there What's be will seeing the time? into translate Good your What next share a thrifting the year? this pressure in a prior was cycle. into expect cost how kind inflationary you inflation for in XXXX, you And from you What labor expectation of driven lot gains building

Michael McGarry

a labor to typical X% business. for always is of traditional PPG productivity. to I number. kind put That's is about seeing. would our But not the piece Well, what piece Labor huge What your we're of of through X% talk into our first. let's model that is offset goal

drive always their forward year-over-year. teams to that. are have a to offset They plan manufacturing additional to productivity Our come challenge in

productivity about from So that would be the first thing standpoint. a I would think

Operator

comes the with Securities. Global Seaport Mike of line question next Your Harrison from

is line open. Your

Mike Harrison

morning. good Hi,

you industrial business, at down impact should that Thanks. Is $XX are like the sequentially, the think income Is about was on just income? million, if caused discretionary the decline look year million. Maybe this were coming that get $XX that What pricing more down sequential sales industrial we Within as margin the operating trajectory some back? operating rest thoughts of of in over costs against and demand some Ross? this disruption? recovers we how

John Bruno

Yes. line. inflation chip the Mike, is sequentially. this saw issue things. We impact in I the And that material on would John. saw raw side, But we auto was OEM an two robust then demand. still the highlight top

So call be that would the out. would I other part that

Vince Morales

oil earlier. and see following it see did could items, up chronicled I add rapid, there. the mid-quarter. if We And weather inflation Typically, much don't obviously, especially was But inflation, side, that just a very just mid-quarter. we see Yes. we tidbit did spike events the some around raw material

from We're now, one, light light in So in world. want wanted we in seeing, to again, that offset earlier Laurence, we but started fully go do we're weren't to Michael think to get second again, to we're alluded put impacts was the our questions. thrifting. -- which inventory. ask anywhere some are We back customers in QX. really as inventory. able any business significant not pricing, of Right two you We to thrifting. really to our architectural I the didn't to,

selling as shelves. have they our of buying from well customers as customers what the on are most So us

because product be we in event big to don't availability. a So QX expect for of that just

Operator

I'll time. to are Bruno, There at All back this you. Mr. no right. further over call questions the turn

John Bruno

Thank interest And who I'd continued your you, on in our to thank for everyone Jerome. like call participated PPG. and today

any have call. questions, you department. please Investor This Relations our concludes first If earnings me contact further the quarter in

Operator

This concludes today's conference call.

disconnect. now may You

PPG Industries (PPG) 16 Apr 212021 Q1 Earnings call transcript