01—Abstract
Summary
Summary of the 10-K filed February 15, 2024. Cited figures are marked; the original filing is the authoritative source.
PPG Industries, Inc. manufactures and distributes paints, coatings and specialty materials through two reportable segments, Performance Coatings and Industrial Coatings.
For 2023, net sales were $18.2 billiona, up 3% from 2022, driven by higher selling prices, with lower sales volumes partially offsetting. Income before income taxes rose to $1,748 million from $1,381 million, and earnings per diluted share from continuing operations were $5.35, compared with $4.33 in 2022. Adjusted earnings per diluted share were $7.67, up from $6.05.
The company reported a $190 millionb non-cash pension settlement charge and a $158 million goodwill impairment for its traffic solutions reporting unit, which was partly driven by challenges in Argentina and the divestiture of its European and Australian traffic solutions businesses. Cash from operating activities was $2,411 million, compared with $963 million in 2022, and the company ended 2023 with about $1.6 billion in cash and short-term investments. Total debt was $6,050 million at year-end, and the company used $598 million for dividends and $86 million for share repurchases during the year.
Management expects a 2024 effective tax rate of 23% to 24%, capital expenditures of about $600 millionc, and continued softness in architectural and industrial demand, with growth expected in aerospace and automotive OEM coatings. The company also announced a strategic alternatives review for its silicas products business. The auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on the financial statements and on internal control over financial reporting as of December 31, 2023.
Environmental reserves totaled $227 milliond, with reasonably possible unreserved losses estimated at $100 million to $200 million. Asbestos reserves were $48 million.
02—Key points
Key Highlights
- Net sales of $18.2 billion in 2023, up 3% year over year, driven by higher selling prices (+5%), partially offset by lower sales volumes (-2%).
- Income before income taxes of $1,748 million, up $367 million from $1,381 million, mainly due to higher selling prices and lower raw material costs.
- Diluted EPS from continuing operations of $5.35 versus $4.33 in 2022; adjusted diluted EPS of $7.67 versus $6.05.
- Operating cash flow from continuing operations of $2,411 million, up from $963 million in 2022.
- Charges in 2023 included a $190 million non-cash pension settlement charge and a $158 million goodwill impairment for the traffic solutions reporting unit.
- Segment income rose to $2,675 million from $2,042 million, with Performance Coatings at $1,709 million and Industrial Coatings at $966 million.
- Shareholder returns included $598 million in dividends and $86 million in share repurchases; the company marked its 52nd consecutive annual per-share dividend increase.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, PPG Industries kept $0.08.
- Revenue$16.24B100.0%
- Cost of revenue−$9.68B59.6%
- Gross profit$6.56B40.4%
- Operating costs−$3.89B23.9%
- Operating income$2.67B16.5%
- Interest, other & tax−$1.41B8.7%
- Net income$1.27B7.8%
Where FY2023 revenue went
$16.24B- Cost of revenue: $9.68B, 60% of revenue
- SG&A: $3.40B, 21% of revenue
- Net income: $1.27B, 7.8% of revenue
- R&D: $446.0M, 2.7% of revenue
- Interest, other & tax: $1.41B, 8.7% of revenue
Kept 7.8% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 15, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $16.24B$15.61B | +4.0% |
| Cost of Revenue | $9.68B$9.97B | −3.0% |
| Gross Profit | $6.56B$5.64B | +16.4% |
| R&D Expenses | $446.00M$457.00M | −2.4% |
| SG&A Expenses | $3.40B$3.04B | +12.0% |
| Operating Income | $2.67B$2.04B | +31.0% |
| Interest Expense | $247.00M$167.00M | +47.9% |
| Net Income | $1.27B$1.03B | +23.8% |
| EPS (Basic) | $5.38$4.34 | +24.0% |
| EPS (Diluted) | $5.35$4.32 | +23.8% |
| Shares Outstanding (Basic) | 236.00M236.10M | 0.0% |
| Shares Outstanding (Diluted) | 237.20M237.30M | 0.0% |
05—Questions
Frequently Asked Questions
What drove PPG's earnings improvement in 2023?
The company attributed the increase to higher selling prices across all businesses and lower raw material costs, partially offset by higher selling, general and administrative expense and lower sales volumes. Raw material costs were still high versus historic levels but moderated compared with 2022, reducing operating costs by more than $500 million.
What were the major non-recurring or unusual charges in 2023?
PPG recorded a $190 million non-cash pension settlement charge from transferring certain U.S. retiree pension obligations to insurers, and $160 million in impairment and other related charges, net, which included a $158 million goodwill impairment for the traffic solutions reporting unit. Other items included $30 million in environmental remediation charges and a $20 million Argentina currency devaluation loss.
What is the company's outlook for 2024?
PPG expects softening global economic activity, with volume growth in China, India, Mexico, aerospace and a stabilizing Europe. It anticipates subdued global architectural coatings demand and lower industrial production. The 2024 effective tax rate from continuing operations is expected to be 23% to 24%, capital expenditures about $600 million, and restructuring savings about $35 million, with cash outlays of $80 million to $90 million.
How strong is PPG's balance sheet and liquidity?
PPG ended 2023 with cash and short-term investments of $1,589 million and long-term debt of $5,748 million, plus a $2.3 billion unsecured revolving credit facility with no amounts outstanding. Its total indebtedness to total capitalization ratio was 42%, versus a covenant maximum of 60% (or 65% after large acquisitions). The company also borrowed an additional €250 million under its term loan in January 2024.
06—Continue