The conference call for PPG's Fourth Quarter and Full Year 2024 Earnings has commenced, led by Breca, the conference operator, and Alex Lopez, the Director of Investor Relations. Key PPG executives, including CEO Tim Knavish and CFO Vince Morales, are present. The call will review financial information released on January 30, 2025, and include a Q&A session. The discussion may include forward-looking statements subject to risks and uncertainties, and the company is not obligated to update these statements. The presentation also features non-GAAP financial measures and related materials are available on PPG's website.

The paragraph discusses PPG's fourth-quarter and full-year 2024 financial performance, highlighting changes to financial reporting due to the divestiture of the Architectural Coatings U.S. and Canada business. PPG recorded growth in adjusted EPS from continuing operations and segment EBITDA by leveraging technology-advantaged products, structural cost measures, and moderated input costs, despite challenging macroeconomic conditions. The company saw record results in aerospace, automotive refinish, and Latin America architectural coatings, though organic sales declined modestly due to overall weak market conditions. Tim Knavish, PPG's Chairman and CEO, also offered condolences for a recent tragedy in Washington, D.C.

The paragraph discusses the company's strategic growth and restructuring, highlighting the divestiture of certain businesses in the U.S. and Canada to improve financial performance and focus. It notes the growth in markets like Mexico and China and sectors such as aerospace and packaging but acknowledges declines in auto OEM and industrial sectors. For the full year, adjusted EPS grew by 6%, and the company achieved top-tier EBITDA margins due to portfolio optimization and organic margin improvements. It emphasizes the strong performance of technology-advantaged products and services. Going forward, the company will report its Architectural Coatings businesses as a separate segment, Global Architectural Coatings, while maintaining the current structure for Performance and Industrial Coatings.

The company has improved segmentation for better investor visibility, achieving over 20% EBITDA margins in both Global Architectural Coatings and Performance Coatings, while Industrial Coatings managed a 16% margin despite challenging conditions. Each segment offers unique advantages, driving innovation and growth while enhancing shareholder returns. The Global Architectural Coatings segment boasts strong brand presence and distribution in over 15 countries. Performance Coatings focuses on stable aftermarkets with specialized products and digital solutions, whereas Industrial Coatings provides technical products and services with customer-centric field teams. In the fourth quarter, the company achieved a 6% increase in adjusted EPS, notwithstanding a difficult environment, with robust sales growth in aerospace, protective and marine coatings, and traffic solutions.

In the ninth consecutive quarter of margin improvement, the company achieved a 400 basis point increase since 2022. The Global Architectural Coatings segment faced challenges from unfavorable currency changes, notably the Mexican peso, and declining sales in Europe. However, strong demand in Mexico and effective cost control enhanced the segment's full-year EBITDA margin by 70 basis points. The Performance Coatings segment saw a 4% increase in organic sales in Q4, driven by Aerospace Coatings' strong growth and a substantial order backlog. Despite a decline in Auto Refinish sales volumes in the U.S., the segment benefited from share gains. In 2024, the company expanded its services and installed 600 more Moonwalk systems globally, boosting subscription revenue. Protective and marine coatings also experienced significant growth due to rising global demand and market share gains.

The company experienced its seventh consecutive quarter of year-over-year sales volume growth, with improved Segment EBITDA margins due to strong pricing and volume. However, demand in the Industrial Coatings segment was hindered by weak global industrial and automotive OEM production, especially in Europe and the U.S. Nevertheless, sales declines were partially offset by growth in Latin America and China. Decreased raw material costs led to lower prices in Industrial Coatings but are expected to stabilize in 2025. The Segment EBITDA margin declined slightly due to lower volumes but was mitigated by cost controls. The company ended the quarter with $1.4 billion in cash, repurchased $250 million in shares, and paid $160 million in dividends, totaling $1.4 billion returned to shareholders in 2024, including $750 million in year-to-date stock buybacks.

The company reports a strong financial position, enabling it to allocate $400 million for share repurchases in Q1 2025, despite a slow start due to challenging demand in Europe and global industrial markets. Although macroeconomic conditions are tough, the company is optimistic about achieving low-single-digit organic sales growth for the year, expecting better results in the second half as it gains $100 million in its Industrial Coatings segment. The company plans to execute its Enterprise Growth Strategy, focusing on organic growth, cost reduction, and manufacturing productivity, aiming for $175 million in savings from strategic actions, with $60 million in 2025.

The paragraph outlines PPG's financial strategies and outlook for 2025, emphasizing disciplined cash deployment for growth, potential M&A, and shareholder returns. PPG anticipates full-year adjusted EPS growth of 7% despite currency and tax impacts. EPS growth is expected to be more pronounced in the second half of 2025 due to global industrial demand fluctuations and U.S. dollar strength in late 2024. The company highlights a sharper focus and stronger growth and margin profile, aiming for profitable organic growth and shareholder returns. PPG appreciates its employees' contributions to 2024's success and remains committed to cost management and productivity to sustain momentum. The paragraph concludes with an invitation for questions, with the first question about a new $100 million industrial win.

In the paragraph, Tim Knavish discusses the company's strategy for handling slight increases in raw material prices in 2025, primarily due to tariffs affecting materials like TiO2 and epoxies. The company's guide anticipates low-single-digit inflation throughout the year, factoring in these tariffs and their mitigation efforts. Pricing adjustments are expected to be flat or slightly positive in the first quarter, as some business segments follow traditional pricing calendars. The industrial segment will also experience some carryover effects in raw material pricing into the first quarter.

The paragraph discusses the company's expectations for pricing and margins for the full year, with a focus on flexibility in response to competition and tariffs. Vince Morales mentions that the supply chain remains a buyer's market for coatings commodities, and that segment margins are anticipated to increase by 50 basis points for the full year but decrease by 150 basis points in Q1. He notes that raw material inflation affects Q1, but pricing is improving as the year progresses, with an expectation of a flat to low-single-digit volume decline. Tim Knavish adds that the Industrial Coating segment is particularly sensitive to volume changes, with improvements expected in the second half of the year. Chris Parkinson from Wolfe Research joins the discussion.

In the paragraph, Tim Knavish discusses the growth strategies for PPG's three new business segments. For Global Architectural Coatings, growth is tied to factors like housing and GDP, with additional potential from market share gains due to their strong positioning. The Performance Coatings segment is described as largely an aftermarket business with steady demand; here, PPG aims to increase market share through new technology innovations, such as in the Marine aftermarket. Lastly, for Industrial Coatings, growth depends on industrial production, particularly in the automotive sector, with additional share gains anticipated through technological advancements. Vince Morales adds that he wants to contribute additional insights.

The paragraph discusses the company's recent successes in the industrial sector, highlighting growth in market share within the packaging and performance coating segments, particularly through the use of digital tools that generate subscription revenue. Tim Knavish notes the company's strong outperformance in U.S. collision claims, having gained 2,500 new shops. In response to Duffy Fischer's question, Knavish also remarks on the expected earnings pattern for the year, indicating better performance in the second half compared to the first, as aligned with forecasts for EPS or EBIT, close to last year's figures.

The paragraph discusses the company's financial performance expectations for the year. It indicates that the first half, particularly the first quarter, will be weaker compared to the previous year, but the second half will be stronger. Overall, the company anticipates a 7% operational EPS growth for the full year, despite a $0.33 impact from foreign exchange rates. Historical quarterly EPS figures for the past two years are provided, showing a decline from $7.87 in the previous year to $7.42 in 2023. The company expects volumes to grow in the latter half of the year, with benefits from restructuring efforts and other cost-saving actions.

The paragraph discusses a $400 million buyback in the first quarter and the impact of the sale of North American architectural operations on earnings per share (EPS). Vince Morales confirms that proceeds from the divestiture were received in late 2024 and will be utilized immediately, aligning with the buyback commitment. Tim Knavish affirms that the buyback is accretive and reiterates that their M&A strategy remains focused on organic growth rather than leading with acquisitions, although they remain open to evaluating potential targets that could add value.

The speaker discusses their financial strategy, highlighting that in 2023, they paid down bad debt and began buying back shares. They continued buybacks into 2024, spending $750 million. In the current year, they started Q1 with share purchases and anticipate strong cash generation, providing them with financial flexibility. They are considering acquiring assets, particularly a promising Brazilian asset, but are cautious about ensuring any acquisition aligns with their growth strategy and uses shareholder cash wisely. They believe their stock is undervalued and want to ensure that any acquisitions do not detract from organic growth. Emphasis is on determining the right asset, timing, and price for potential acquisitions.

In the paragraph, Tim Knavish and Vince Morales discuss the company's outlook and performance expectations. Knavish emphasizes that the company aims for an 8% to 12% EPS growth, dependent on macroeconomic factors. He highlights progress made in improving their portfolio, such as eliminating underperforming businesses and focusing on organic growth. Morales adds that two of their segments have strong EBITDA margins of 20% or higher, and they expect improvement in the industrial segment, which has been in a global recession. As volume returns, they anticipate better margins. Stephen Byrne and Kevin McCarthy join the discussion, with McCarthy inquiring about expected volume trends through the year, noting that Knavish anticipates flat-to-down volumes in the first quarter.

In the paragraph, Tim Knavish discusses the company's expectations for volume growth over the coming year. The first quarter is expected to be challenging with negative volume, similar to the trend seen in Q4. However, from the second quarter onwards, the company anticipates a gradual improvement, with volumes stabilizing and growing in the low to mid-single digits by the second half of the year, ultimately achieving positive volume growth for the full year at low-single-digits. They are not expecting a quick or strong recovery, particularly in Europe, but rather stabilization in various markets. The growth is expected to result from a mix of minor gains in industrial segments and shares in key performance and global architectural coatings, rather than significant leaps. Vince Morales also acknowledges and reinforces these expectations to Kevin.

In the paragraph, the discussion highlights the business performance in Q1 2024, noting strong growth, particularly in China and the packaging sector. The difficulty in making year-over-year comparisons is mentioned due to such high growth. As the industrial business showed global decline in late 2024, they don't expect major growth in the first half of 2025. Tim Knavish, responding to Michael Sison's question, states that there are no current plans for divestitures within their Performance Coatings and Industrial Coatings units. He emphasizes their satisfaction with the current portfolio and highlights the strong performance and positions in sectors like Aerospace and others within Performance Coatings, underscoring the business's consecutive growth achievements.

The paragraph discusses the performance and strategic positioning of a company's various business segments. The traffic business in North America is performing well, mostly in the aftermarket segment. The industrial business, considered high-tech, is not currently as profitable compared to others but has potential for growth and improved margins as market conditions recover. The company has taken actions to improve its EBITDA margin by 220 basis points, enhancing their overall business portfolio. In a subsequent conversation, Patrick Cunningham from Citigroup inquires about the Architectural Coatings EMEA sector, noting weak demand due to low consumer confidence, except for some growth in Eastern and Central Europe. Tim Knavish responds, acknowledging weak demand but highlights strong performance in Poland, the UK, and Ireland.

The paragraph discusses the company's performance in Europe, highlighting weaknesses in France and the Nordics while emphasizing the team's effective price-volume management strategies over the past decade. Despite gaining market share in some performing countries, the company does not anticipate a significant recovery in Europe but rather a stabilization due to factors like easing inflation and potential increases in consumer confidence. The paragraph also notes past impacts from COVID, which accelerated activity that affected 2023 and 2024 volume figures, and provides a performance overview for Architectural Europe, which showed a decline followed by stabilization.

In the paragraph, Tim Knavish discusses the company's strong performance in Latin America, highlighting robust GDP growth and consumer confidence, especially in Mexico and South America, where automotive and industrial businesses have excelled. He mentions plans to leverage their Mexican network to distribute more products. In India, the company is pursuing growth opportunities through a joint venture with Asian Paints, the leading paint company in the region. Finally, while not detailed in this section, the focus is also on understanding demand trends in China amid potential trade policy changes.

The paragraph discusses a joint venture with Asian Paints focusing on industrial and performance businesses, where they utilize technology and expertise to leverage Asian Paints' brand and reputation. The business in China operates locally in segments such as auto, aero, and industrial, avoiding real estate. Despite challenging market conditions in 2024, the business achieved growth each quarter, though at lower rates than in the past. The company has adjusted its expectations for China's market recovery, viewing it as a gradual process rather than a quick rebound, which benefits their supply-demand dynamics for raw materials. They are satisfied with their 2024 results and optimistic about 2025.

The paragraph features a discussion about the Chinese auto market, focusing on improvements and future expectations. Ryan Weis from KeyCorp asks about developments in the market, to which Tim Knavish responds. He highlights that China manufactures about one-third of the world's cars, with most for domestic use, noting a 19% increase in Q4 auto retail sales. Despite economic challenges, the auto industry remains critical to China's economy and receives government support. Knavish expresses confidence in continued governmental help through 2025 and 2026. He also mentions that their company is gaining market share with Chinese domestic car manufacturers, indicating positive momentum in the local market.

The paragraph discusses the state of electric vehicle (EV) production and sales, highlighting that while EV sales may not meet expectations in the U.S. and Europe, the market in China is growing significantly, with 37% of cars being EVs by the end of 2024. This presents opportunities for companies like PPG. The conversation then shifts to the operations of COMEX in Mexico, with Tim Knavish explaining that nearly all products distributed through COMEX are for domestic use in Mexico, minimizing tariff risks. Products are used within Mexico for construction, nearshoring, data centers, automotive plants, industrial plants, road traffic, and vehicle refinishing. There is an ongoing program expected to expand further in 2024.

The paragraph discusses growth strategies and capital expenditure (CapEx) plans for 2025. Key growth drivers include their world-class distribution network and expansion in Mexico due to nearshoring. They have 5,200 distribution points for refinishing products as growth platforms. Addressing a question about CapEx, Tim Knavish states that the current higher CapEx spending is temporary, largely for catching up on postponed investments due to COVID-19. The company aims to return to a standard CapEx spending of around 3% of sales. Current elevated spending addresses growth in Mexico and additional capacity for Aero products due to increased demand.

The paragraph discusses a company's financial strategies and investments, particularly focusing on its capital expenditures (CapEx). The company has been investing in its U.S. refinish factory and digital capabilities, achieving over $1.3 billion in digitally enabled sales. In 2025, as part of their self-help program, they are planning to consolidate their factories in Europe from three to one, which will require additional CapEx to accommodate increased volume at the remaining facility. Although these investments are currently not profitable, the company views them as beneficial for shareholder value, driving organic growth and improving margins. Additionally, the company's architectural segment's recovery is expected to yield good leverage, especially in Europe. The discussion indicates that the segment is primarily concentrated in Mexico and Europe, with a smaller presence in China and Australia.

The paragraph discusses the company's financial strategy and performance across different regions and business segments. It highlights that while volume stabilization alone, without an uptick, is considered a success due to self-help and pricing strategies, any increase in volume would further enhance leverage. In Mexico, the company's operations are well-utilized, with incremental earnings primarily driven by variable margins rather than fixed cost leverage, as they are largely sold out and additional costs are managed by concessionaires. In Europe, they have underutilized capacity and any business growth will increase margins significantly since no additional SG&A is needed. Vincent Morales explains that the architectural business has higher gross margins and requires more SG&A support, while overall high incrementals are expected across regions. In response to a question about pricing across new segment structures, it is noted that, over the past two years, legacy performance pricing increased by 7% with a split of 5% in 2023 and 2% in 2024. It is suggested that the performance segment's pricing could be higher than the architectural segment.

The paragraph features a discussion led by Vince Morales about the pricing strategies and market conditions for different business segments looking towards 2025. He mentions that in the industrial segment, pricing can increase if there's raw-material inflation and that there is additional pricing for advanced technology. In the performance segment, pricing is strong due to the impact on customer productivity. The global architectural segment's pricing depends on competitive market conditions but is generally stable. Overall, performance has the best pricing, architectural pricing is steady but good, and industrial pricing depends on the environment. An operator then cues a question from Arun Viswanathan of RBC, who notes past predictions of low-single-digit organic growth being affected by volatility such as inflation and interest rates, and discusses expectations for a softer first half in 2025.

In the paragraph, Tim Knavish discusses potential risks that could impact the company's anticipated low-single-digit organic growth. While they demonstrated a 3% organic growth in 2023, current projections are slightly negative, largely due to external factors such as foreign exchange impacts. The company has secured deals worth $100 million, suggesting confidence in future growth, although timing may vary based on customer execution. Despite building strong organic growth strategies, the company remains cautious about external risks, particularly geopolitical uncertainties and international relations, which could affect growth projections for 2025 and 2026.

The paragraph concludes a fourth quarter earnings call, where Alex Lopez expresses gratitude to participants for their interest in PPG and reinforces the company's confidence in meeting its full-year guidance based on current knowledge of their commercial and launch pipeline. The call then officially ends with the operator's message.

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