The conference call for PPG's second quarter 2024 financial results is being led by Elliot, the operator. Alex Lopez, Director of Investor Relations, introduces Tim Knavish, Chairman and CEO, and Vince Morales, SVP and CFO. The company's financial information has been posted on their website and will be discussed during the call, along with forward-looking statements and non-GAAP financial measures. Reconciliations of these measures are available on the company's website.

In the second quarter of 2024, PPG achieved a record-breaking performance with sales of $4.8 billion and a 11% increase in adjusted earnings per diluted share. The company's enterprise growth strategy initiatives, including new products and technologies, upgrading manufacturing capabilities, and optimizing business models, have contributed to this success. Additionally, PPG has seen positive volume growth in six of its 10 business units and is gaining market share in various industries.

In the second quarter, the company's volume performance was flat year-over-year due to lower demand in Europe and global industrial activity. However, their European volumes showed improvement compared to the first quarter. Automotive refinish sales were down, but the company expects a strong second half of 2024. The company achieved its seventh consecutive quarter of year-over-year segment margin improvement, with a record segment margin of 18.7%. The company also benefited from stable supply chains and raw material deflation, offset by general inflation.

The company has published their 2023 ESG report and provided updates on their strategic reviews of the architectural coatings U.S. and Canada business and global silicas product business. They have made progress in driving improvement in working capital and have repurchased $150 million of PPG shares. The board has also authorized a $0.03 dividend increase. For the third quarter, they expect flat to low-single-digit organic sales growth, with strong results in Mexico and slower growth in China.

In Europe, there has been uneven demand across countries and industries, but there is expected to be modest improvement in the third quarter. The company predicts adjusted EPS between $2.10 and $2.20, which is 4% higher than the previous year. However, the impact of a higher tax rate will reduce this comparison. Selling prices are expected to be flat, with some pricing increases in certain segments. Raw material costs are expected to remain stable, with some deflation compared to the previous quarter. The company will continue to focus on improving operating margins through their growth strategy and cost control initiatives.

PPG's 50,000 employees are dedicated to providing top-notch solutions to customers and driving growth for the company. The success of the quarter is credited to the hardworking team around the world. The company is grateful for the continued support and confidence from investors. The U.S./Canada architectural business is attracting a lot of interest, but it is too early to determine if a sale will be the final outcome. PPG is currently working with interested parties and on track to make a decision on the future of the business.

Duffy Fischer, an analyst from Goldman Sachs, asks a question about the auto OE sector. He notes that the numbers shown in the presentation were worse than those from other service providers. Timothy Knavish, a representative from the company, explains that their projections are based on specific assembly plant schedules and that they have a strong position in Europe and China. He also mentions that the recent EV tariffs in China may be causing some caution among their customers. Vincent Morales clarifies that their organic sales numbers include both volume and price.

The volume trend in Europe during the second quarter was worse than expected, with June being particularly soft due to assembly plants adding down weeks. The Deco business in Europe also underperformed, but Eastern Europe showed strength. Overall, flat volumes were driven by the auto and architectural sectors.

The speaker discusses how the company has been improving sequentially over the last six quarters and is planning to have eight out of ten businesses with positive volume in the third quarter. They also mention that aerospace is a strong market for the company, while refinish requires a full year basis to accurately assess performance due to order pattern issues.

The company has been successful in gaining market share in the refinish segment through the implementation of digital systems. They have also seen strong performance in packaging, and are continuing to launch new products. The traffic business has also improved after being cleaned up in the past couple of years. The company has outperformed in Mexico, China, and India, with the exception of the deco segment. During the review of the U.S. paint business, there were concerns about potential disruptions, but the team has worked well with employees, customers, and distribution partners to maintain strong performance.

Tim Knavish, in response to a question from John Roberts, discusses the progress of the silicas sale and the rest of the specialty materials portfolio. He states that they are on track with the silicas sale and are seeing good interest in the architectural and specialty materials businesses. He also mentions that these businesses are high-technology and have been a good growth engine for the company. In response to a question from Stephen Byrne about how the company reports its financials, Tim states that they are currently reporting in two segments and that the specialty materials businesses would likely be grouped together. He also mentions that these businesses are important for the company and have a strong R&D capability.

Timothy Knavish discusses the potential impact of the architectural U.S./CA transaction on the company's business structure. He mentions the two groups of businesses, one that delivers directly to factories and the other that goes through distribution. He states that he is comfortable with the current reporting structure but will take a fresh look after the transaction is completed. In response to a question about raw materials, Knavish mentions sufficient capacity in the supply chain and the company's ability to pass on potential price increases, except for the auto OEM sector.

The company has a lot of capacity and is working to stay ahead of it. The industrial segment is more real-time and some businesses are able to get pricing faster. The auto OEM segment is typically slower but they eventually catch up. The profitability of U.S. architectural paints has improved in the last year and the company expects growth in the second half. The company is considering a full sale JV or partnership and will determine the best option based on the proceeds and long-term strategic value for shareholders.

In the paragraph, Mike and Tim discuss current events and the company's performance in Q2. They mention that volumes are a key driver of profitability and that they are pleased with the progress so far this year. A question is then asked about the lowered expectations for the second half of the year, which Tim attributes to the auto OEM and architectural Europe businesses. He clarifies that this does not necessarily indicate a recession, but rather temporary adjustments due to lower vehicle sales and higher inventory levels.

The speaker believes that the slight increase in U.S. inventories is due to caution from customers regarding affordability and interest rates. They do not see this as a sign of an upcoming recession. When asked about the outlook for the Refinish industry in the second half, the speaker mentions their confidence in gaining share and customer retention through the launch of their productivity and digital ecosystem in regions outside of Europe. They also mention that their penetration rates of these tools are still low, leaving room for further growth. The collision rates vary around the world, but they believe there is still a lot of potential for growth in their digital ecosystem.

The company is continuously adding to their digital productivity tools and is confident in their color matching and speed. They have seen share gains due to these tools and anticipate a strong second half of the year. They have already bought all of their titanium dioxide for the year and do not foresee any impact in 2024, but are considering potential higher prices in 2025. In the second quarter, their volumes in auto OEM in the U.S. decreased, but this may be a temporary phenomenon and they do not believe they are losing share in the U.S.

The company has been successfully reducing TiO2 consumption without sacrificing performance for the past decade. They also have increased sourcing flexibility and are prepared to offset any cost increases with price adjustments. The tariffs on TiO2 will affect all coding users, but the company has plants outside of the EU that are not impacted. In terms of automotive sales in the US, the company's sales were down mid-single-digits due to a decrease in production and some contractual price adjustments. The rest may be attributed to specific assembly plants and customer mix.

During a conference call, Kevin McCarthy from VRP asks PPG about their second quarter organic sales results and why two verticals, Architectural EMEA and Protective of Green coatings, came in lower than expected. Timothy Knavish explains that the results were impacted by worsening macroeconomic conditions in Europe, particularly in countries where PPG is number one, such as France and the Nordic countries. He also mentions that the recent election and turmoil in France may have contributed to the downturn in sales, but believes it to be a temporary issue that will improve as things stabilize.

In paragraph 19 of the article, the speaker discusses the company's performance in Europe and predicts sequential improvement in the architectural sector in the third quarter. They also mention delays in the Protective & Marine business due to various factors, but expect growth to resume in the third quarter. The speaker addresses a question about potential labor contract renegotiations and the impact on the company's costs. They also mention a reduction in corporate costs and potential changes in bonus accruals for this year and next.

Timothy Knavish explains that due to lower volumes, there have been some downward competitive pricing actions in the architectural EMEA market. However, these have not had a significant impact as raw material deflation is not as high as it was earlier in the year. The company is still reviewing salaries and benefits annually and has made adjustments to incentive compensation due to lower guidance for the full year.

The company is experiencing higher inflation in wages and employee benefits, which is affecting their portfolio but allowing them to maintain prices. The strategic reviews are on track and the company may receive cash later this year. The company's preferred use of excess cash is for shareholder value accretive acquisitions, but the pipeline is currently thin. The company has been buying back shares for the past three quarters and will continue to do so until potential acquisitions close.

During a conference call, Tim, the speaker, was asked about the company's aerospace business. Tim mentioned that they are selling everything they can make and have had a record quarter, but their backlog is still growing. He estimated that if they were unconstrained, their backlog would be around $300 million at their aerospace margins. They are currently working on incremental capacity additions to meet demand, but are also considering larger scale options. The demand is being driven by various factors across different sectors and products.

Laurent Favre asks about the impact of the recent events in France on industrial coatings pricing. Timothy Knavish assures that the pricing is mostly index-based and does not expect it to change significantly in the future. Dan Rizzo asks about the potential impact of higher tariffs on Chinese auto exports in light of Trump's presidency. Knavish delegates the question to Vince, but mentions that the company supplies the top manufacturer in China and they have been exporting a lot.

The speaker discusses the current state of EV production in China and its projected growth, despite recent negative headlines. They also address questions about the North American architectural business and the potential sale of its stores division. The speaker also mentions the company's future focus on industrial businesses and coatings, which may have lower valuations.

The speaker is not willing to provide specific details about the North American architectural market, as the company is currently undergoing a strategic review. They state that they will provide more information once the process is complete. They also address a question about the company's portfolio and state that despite a shift towards more industrial coatings, they are confident that the company will see higher margins and growth. They also mention the benefits of focusing resources on higher margin and growth businesses.

Jaideep Pandya asks three questions during the open line. The first question is about the packaging business and how confident PPG is in keeping the share that they have gained. The second question is about the architectural North America business and how PPG plans to improve profitability and make investments in the future. The third question is directed to Tim and asks about how PPG plans to incentivize the sales force to go for volume growth. Tim answers the first question by saying that they are confident in keeping their share gains and growing further. He also mentions that their technologies have helped them gain share in different spaces.

The company is considering a joint venture for its architectural business in the U.S. and Canada to increase velocity and volume growth. They have already made changes to drive organic growth and are seeing improvement in their industrial and packaging segments. However, automotive volumes have decelerated due to further shutdowns in June.

During the earnings call, the speaker explains how they would measure the exit rates for the industrial segment. They then thank the audience for their interest in the company and end the call.

This summary was generated with AI and may contain some inaccuracies.