01—Abstract
Summary
Summary of the 10-Q filed July 19, 2024. Cited figures are marked; the original filing is the authoritative source.
PPG Industries, Inc. reported net sales of $4,794 milliona for the three months ended June 30, 2024, compared with $4,872 million a year earlier, and $9,105 million for the six months versus $9,252 million.
Income before income taxes was $693 millionb for the quarter, up $47 million from $646 million, which the company attributed primarily to moderating raw material costs partially offset by wage inflation. Net income attributable to PPG was $528 million, or $2.24 per diluted share, versus $490 million and $2.06 a year earlier. Adjusted earnings per diluted share were $2.50 for the quarter versus $2.25, per the company's Regulation G reconciliation.
Cash from operating activities fell to $305 millionc for the six months from $621 million, primarily due to unfavorable working capital changes in the second quarter. Capital expenditures rose to $374 million from $242 million, and the company expects total 2024 capital spending of approximately $600 million to $650 million. Cash and short-term investments totaled $1.2 billion at June 30, 2024, and total debt-related covenant ratio was 44% against a 60% limit under the Credit Agreement.
The filing highlights a significant contingent liability: on May 21, 2024, a Brazilian court entered an award of more than $700 milliond, including interest, fees and costs, against PPG in the Di Gregório litigation. PPG states that Westlake, which assumed the liability under a 2012 separation agreement, has said it will not post bond or pay the judgment, and PPG has filed suit against Westlake, believing the risk of loss to PPG is remote. Management also noted that the company is reviewing strategic alternatives for its architectural coatings U.S. and Canada business and its global silicas products business.
02—Key points
Key Highlights
- Net sales were $4,794 million for Q2 2024, down 1.6% from $4,872 million, due to unfavorable foreign currency translation and divestitures.
- Income before income taxes rose to $693 million from $646 million, driven by moderating raw material costs partially offset by wage inflation.
- Diluted EPS was $2.24 versus $2.06; adjusted diluted EPS was $2.50 versus $2.25 per the company's non-GAAP reconciliation.
- Cash from operating activities declined to $305 million for the six months from $621 million, mainly from unfavorable working capital changes in Q2.
- Capital expenditures were $374 million for the six months versus $242 million; 2024 capital spending is expected at $600 million to $650 million.
- A Brazilian court entered a May 21, 2024 award of more than $700 million against PPG in the Di Gregório matter; PPG has sued Westlake to enforce its assumed-liability rights and states the risk of loss is remote.
- Share repurchases totaled $312 million for the six months, and the Board authorized an additional $2.5 billion repurchase program in April 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, PPG Industries kept $0.12.
- Revenue$4.24B100.0%
- Cost of revenue−$2.45B57.9%
- Gross profit$1.78B42.1%
- Operating costs−$989.0M23.4%
- Operating income$796.0M18.8%
- Interest, other & tax−$268.0M6.3%
- Net income$528.0M12.5%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed July 19, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $4.24B$4.87B | −13.1% |
| Cost of Revenue | $2.45B$2.87B | −14.5% |
| Gross Profit | $1.78B$2.01B | −11.0% |
| SG&A Expenses | $858.00M$1.07B | −19.7% |
| Operating Income | $796.00M$787.00M | +1.1% |
| Interest Expense | $62.00M$67.00M | −7.5% |
| Net Income | $528.00M$490.00M | +7.8% |
| EPS (Basic) | $2.25$2.08 | +8.2% |
| EPS (Diluted) | $2.24$2.06 | +8.7% |
| Shares Outstanding (Basic) | 234.50M236.00M | −0.6% |
| Shares Outstanding (Diluted) | 235.70M237.30M | −0.7% |
05—Questions
Frequently Asked Questions
How did PPG's core operating results change in the second quarter of 2024?
Net sales declined 1.6% to $4,794 million, but income before income taxes increased $47 million to $693 million. The filing attributes the profit improvement primarily to moderating raw material costs, partially offset by wage inflation. Diluted EPS rose to $2.24 from $2.06.
What is the status of the Di Gregório litigation and how could it affect PPG?
A Brazilian court entered a May 21, 2024 award of more than $700 million, including prejudgment interest, fees and costs, against PPG as the nominal defendant. Westlake, which PPG says assumed the liability under a 2012 separation agreement, has stated it will appeal but will not post bond or pay the judgment. PPG has sued Westlake in Delaware, and states it believes the risk of loss is remote.
Why did operating cash flow decline, and what is the capital spending outlook?
Cash from operating activities was $305 million for the six months versus $621 million a year earlier, primarily due to unfavorable working capital changes in the second quarter. Capital expenditures increased to $374 million for the six months, and the company expects total 2024 capital spending of approximately $600 million to $650 million.
What is PPG's liquidity and debt position at June 30, 2024?
PPG had cash and short-term investments of $1.2 billion. Total long-term debt carrying value was $6,381 million (excluding finance leases and short-term borrowings), and the company was in compliance with its covenants, with Total Indebtedness to Total Capitalization at 44% against a 60% maximum under the Credit Agreement.
What strategic actions is PPG considering?
During the first quarter of 2024, PPG announced it would review strategic alternatives for its architectural coatings U.S. and Canada business and its global silicas products business. The company said it will communicate the path forward once determined. In the second quarter, it also completed the sale of its traffic solutions business in Argentina, which resulted in a non-cash loss.
06—Continue