01—Abstract
Summary
Summary of the 10-Q filed October 17, 2024. Cited figures are marked; the original filing is the authoritative source.
PPG Industries, Inc. reported third-quarter 2024 net sales of $4,575 milliona, a decrease of 1.5% from $4,644 million in the prior-year quarter, primarily due to unfavorable foreign currency translation and divestitures.
Despite lower sales, income before income taxes rose to $611 millionb from $557 million, driven by improved manufacturing productivity, certain overhead reductions, and lower depreciation, amortization and net interest costs. Net income attributable to PPG was $468 million, and diluted earnings per share from continuing operations were $2.00, compared with $1.79. Adjusted diluted earnings per share were $2.13 versus $2.07.
For the nine months, net sales were $13,680 millionc (down 1.6%) and diluted EPS was $5.93 versus $4.97. Cash from operating activities fell to $1,074 million from $1,513 million, which the company attributed mainly to unfavorable working capital changes. Portfolio and cost actions were prominent.
PPG agreed to sell its silicas products business for approximately $310 milliond, with closing expected in the fourth quarter of 2024. On October 17, 2024, it agreed to sell its U.S. and Canada architectural coatings business to American Industrial Partners at a transaction value of approximately $550 million, and it expects a pre-tax loss of approximately $300 million on that sale in the fourth quarter. On October 16, 2024, the company approved a cost reduction program targeting about $175 million in annualized pre-tax savings and a pre-tax restructuring charge of approximately $250 million, with a net reduction of approximately 1,800 positions.
Balance sheet and legal items also merit attention. Long-term debt was $6,138 million at September 30, 2024, and total indebtedness to total capitalization was 44% against a covenant maximum of 60%.
PPG repurchased $511 million of treasury stock in the nine months and paid $464 million in dividends on common stock. A Brazilian court entered an award of more than $700 million against PPG as the nominal defendant in the Di Gregório case, a liability PPG says is assumed by Westlake; PPG has sued Westlake in Delaware, where a trial is set for December 12, 2024, and PPG believes the risk of loss is remote.
02—Key points
Key Highlights
- Third-quarter 2024 net sales were $4,575 million, down 1.5% from $4,644 million, mainly due to unfavorable foreign currency translation and divestitures.
- Income before income taxes increased to $611 million from $557 million, and diluted EPS from continuing operations rose to $2.00 from $1.79.
- Adjusted diluted EPS was $2.13 for the third quarter versus $2.07, and $6.49 for the nine months versus $6.15.
- Cash from operating activities fell to $1,074 million for the nine months from $1,513 million, due mainly to unfavorable working capital changes.
- PPG agreed to sell its silicas products business for approximately $310 million and its U.S. and Canada architectural coatings business for approximately $550 million, with an expected pre-tax loss of approximately $300 million on the latter.
- A cost reduction program approved October 16, 2024 targets approximately $175 million in annualized pre-tax savings, with a pre-tax restructuring charge of approximately $250 million and about 1,800 positions reduced.
- The Di Gregório litigation involves a Brazilian court award of more than $700 million against PPG, which PPG says Westlake must satisfy; PPG believes the risk of loss is remote, and trial is set for December 12, 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, PPG Industries kept $0.12.
- Revenue$4.03B100.0%
- Cost of revenue−$2.38B59.1%
- Gross profit$1.65B40.9%
- Operating costs−$962.0M23.9%
- Operating income$689.0M17.1%
- Interest, other & tax−$221.0M5.5%
- Net income$468.0M11.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 17, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $4.03B$4.64B | −13.2% |
| Cost of Revenue | $2.38B$2.75B | −13.5% |
| Gross Profit | $1.65B$1.89B | −12.7% |
| SG&A Expenses | $848.00M$1.05B | −19.0% |
| Operating Income | $689.00M$698.00M | −1.3% |
| Interest Expense | $67.00M$64.00M | +4.7% |
| Net Income | $468.00M$426.00M | +9.9% |
| EPS (Basic) | $2.01$1.80 | +11.7% |
| EPS (Diluted) | $2.00$1.79 | +11.7% |
| Shares Outstanding (Basic) | 233.30M236.20M | −1.2% |
| Shares Outstanding (Diluted) | 234.30M237.50M | −1.3% |
05—Questions
Frequently Asked Questions
How did PPG's sales and profitability perform in the third quarter of 2024?
Net sales were $4,575 million, a decrease of 1.5% from $4,644 million, primarily due to unfavorable foreign currency translation and divestitures. Despite the lower sales, income before income taxes increased to $611 million from $557 million, mainly due to improved manufacturing productivity, certain overhead reductions, and lower depreciation, amortization and net interest costs. Net income attributable to PPG was $468 million versus $426 million.
What divestitures did PPG announce, and what are their expected effects?
PPG agreed to sell its silicas products business for approximately $310 million, expected to close in the fourth quarter of 2024. On October 17, 2024, it agreed to sell 100% of its U.S. and Canada architectural coatings business at a transaction value of approximately $550 million to American Industrial Partners, with closing expected in late 2024 or early 2025. The company expects a pre-tax loss of approximately $300 million in the fourth quarter related to the architectural coatings sale.
What is the new cost reduction program and what will it cost?
On October 16, 2024, PPG approved a multi-year program with anticipated annualized pre-tax savings of approximately $175 million once fully implemented, including $60 million in 2025. The company expects a pre-tax restructuring charge of approximately $250 million in the fourth quarter of 2024, a $120 million non-cash charge for accumulated currency losses, approximately $100 million of incremental non-cash accelerated depreciation, and other cash costs of approximately $70 million. The program is expected to reduce net positions by approximately 1,800, primarily in Europe and the U.S.
How strong is PPG's balance sheet and debt position?
Long-term debt was $6,138 million at September 30, 2024, and cash and cash equivalents were $1,251 million. Total indebtedness to total capitalization, as defined under the Credit Agreement, was 44%, below the 60% maximum required by the covenant. PPG was in full compliance with its restrictive covenants as of September 30, 2024. Commercial paper borrowings were $408 million, and the $2.3 billion revolving credit facility had no amounts outstanding.
What is the status of the Di Gregório litigation and what risk does it pose to PPG?
A Brazilian court entered a May 21, 2024 award of more than $700 million against PPG as the nominal defendant. Westlake has since said it believes simple prejudgment interest applies, which would put the award below $350 million, and that it will appeal without posting bond or paying the judgment. PPG contends that Westlake assumed the liability under the 2012 Separation Agreement, has sued Westlake in Delaware, and believes the risk of loss associated with the matter is remote. A trial date of December 12, 2024 has been set.
06—Continue