01—Abstract
Summary
Summary of the 10-Q filed April 19, 2024. Cited figures are marked; the original filing is the authoritative source.
PPG Industries, Inc. reported net sales of $4,311 milliona for the three months ended March 31, 2024, compared with $4,380 million a year earlier, a decrease the filing attributes primarily to lower sales volumes.
Income before income taxes rose to $538 millionb from $353 million, primarily due to the absence of a $190 million pension settlement charge recorded in the first quarter 2023. Net income attributable to PPG was $400 million, or $1.69 per diluted share, compared with $264 million, or $1.11 per diluted share, a year earlier. Adjusted earnings per diluted share, a non-GAAP measure reconciled in the filing, were $1.86 versus $1.82, which management attributed to moderating raw material costs, partially offset by lower sales volumes.
Cash flow was weaker in the quarter. Cash used for operating activities was $60 millionc, compared with cash from operations of $85 million in the prior year, reflecting unfavorable working capital changes. Capital expenditures were $256 million, and total capital spending is expected to be approximately $600 million in 2024.
Cash and cash equivalents fell to $1,181 milliond at March 31, 2024 from $1,514 million at December 31, 2023. Total Indebtedness to Total Capitalization under the Credit Agreement was 43%, against a covenant maximum of 60%. The filing also states that PPG is reviewing strategic alternatives for its architectural coatings U.S. and Canada business and its global silicas products business.
Management expects aggregate organic sales in the second quarter 2024 to increase by a low single-digit percentage compared with the second quarter 2023. The Board authorized an additional $2.5 billion share repurchase on April 18, 2024, on top of the existing program, which had 5,936,211 shares remaining at quarter-end.
02—Key points
Key Highlights
- Net sales of $4,311 million, down from $4,380 million, with the decline attributed to lower sales volumes; Performance Coatings sales were $2,614 million and Industrial Coatings sales were $1,697 million.
- Income before income taxes increased to $538 million from $353 million, mainly because the $190 million pension settlement charge recorded in Q1 2023 did not recur.
- Diluted EPS from continuing operations was $1.69 versus $1.11; adjusted diluted EPS was $1.86 versus $1.82.
- Cash used for operating activities was $60 million versus $85 million of cash from operations a year earlier, driven by unfavorable working capital changes.
- Strategic reviews were announced for the architectural coatings U.S. and Canada business and the global silicas products business.
- Additional $2.5 billion share repurchase authorization approved on April 18, 2024; PPG repurchased 1,061,901 shares in March 2024 at an average price of $141.29.
- Total Indebtedness to Total Capitalization was 43% as of March 31, 2024, within the 60% covenant limit; the Term Loan was increased by €250 million in January 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, PPG Industries kept $0.10.
- Revenue$3.85B100.0%
- Cost of revenue−$2.21B57.3%
- Gross profit$1.64B42.7%
- Operating costs−$978.0M25.4%
- Operating income$666.0M17.3%
- Interest, other & tax−$266.0M6.9%
- Net income$400.0M10.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed April 19, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $3.85B$4.38B | −12.1% |
| Cost of Revenue | $2.21B$2.60B | −15.1% |
| Gross Profit | $1.64B$1.78B | −7.8% |
| SG&A Expenses | $850.00M$992.00M | −14.3% |
| Operating Income | $666.00M$635.00M | +4.9% |
| Interest Expense | $55.00M$59.00M | −6.8% |
| Net Income | $400.00M$264.00M | +51.5% |
| EPS (Basic) | $1.70$1.12 | +51.8% |
| EPS (Diluted) | $1.69$1.11 | +52.3% |
| Shares Outstanding (Basic) | 235.60M235.80M | −0.1% |
| Shares Outstanding (Diluted) | 236.90M236.90M | 0.0% |
05—Questions
Frequently Asked Questions
Why did net income rise despite lower net sales?
Income before income taxes increased $185 million to $538 million, primarily because the $190 million pension settlement charge recorded in the first quarter 2023 was not repeated in 2024. Cost of sales decreased $151 million due to lower sales volumes and moderating input costs, while selling, general and administrative expense increased $72 million.
What drove the decline in net sales?
Net sales decreased $69 million, and the filing attributes the decline to lower sales volumes (-2%). Performance Coatings sales fell 0.5% and Industrial Coatings sales fell 3.1%, with Industrial Coatings also affected by lower selling prices (-2%).
Why was operating cash flow negative this quarter?
Cash used for operating activities was $60 million compared with $85 million of cash from operations in the prior year. The filing states the $145 million change was primarily due to unfavorable changes in working capital in the first quarter 2024, including higher receivables and inventories.
What is PPG's outlook for the second quarter of 2024?
The filing anticipates aggregate organic sales will increase by a low single-digit percentage compared with the second quarter 2023. It also expects continued benefits from moderating input costs, with several businesses implementing targeted price increases, while global industrial production is expected to remain at a low level.
What are the strategic reviews PPG announced?
During the first quarter 2024, PPG announced it would review strategic alternatives for its architectural coatings U.S. and Canada business and its global silicas products business. The review will assess whether these businesses are better suited to grow with a partner or different owner, or to operate within another company, as a standalone entity, or in a joint venture.
06—Continue