PPG Industries(PPG) - 2024 Q4 - Annual Report

Financial Performance - Net sales for 2024 were approximately $15.8 billion, a decrease of 2$162 million to $1,852 million in 2024, driven by lower raw material costs and restructuring savings [112]. - Cost of sales, exclusive of depreciation and amortization, decreased by$426 million to $9,252 million in 2024, representing 58.4$5.72 in 2024, up 10.9% from $5.16 in 2023 [136]. - Adjusted earnings per diluted share rose by 6$7.87 in 2024 compared to $7.42 in 2023 [141]. - The effective tax rate for continuing operations was 25.6$1.4 billion in operating cash flow during 2024, demonstrating resilience in a challenging macroeconomic environment [141]. - PPG ended 2024 with approximately $1.4 billion in cash and short-term investments, expecting strong cash generation in 2025 [153]. - Cash from operating activities for continuing operations decreased by$903 million to $1,391 million in 2024, primarily due to unfavorable changes in working capital [198]. - Cash used for investing activities decreased by$126 million to $399 million in 2024, a 24.0$125 million to $1,425 million in 2024, an 8.1$752 million in 2024, with $2.8 billion remaining under its current share repurchase authorization [152]. - Dividends paid to shareholders increased to$622 million in 2024, marking the 53rd consecutive year of increased annual per-share dividend payments, with a 5% increase in the quarterly dividend to $0.68 per share [215]. - The company expects capital expenditures for 2025 to be approximately$725 million to $775 million, aimed at supporting future organic growth opportunities [210]. Segment Performance - Global Architectural Coatings net sales decreased by 2.5$3,921 million, primarily due to lower sales volumes [158]. - Segment income for Global Architectural Coatings increased by $5 million year over year, driven by higher selling prices and moderating raw material costs [163]. - Architectural coatings EMEA organic sales were flat year over year, with higher selling prices offset by lower sales volumes [166]. - Segment income for Performance Coatings increased by$123 million year over year, primarily due to higher selling prices and moderating raw material costs [174]. - Performance Coatings net sales increased by 2% in 2024, driven by higher selling prices (+6%) and partially offset by lower sales volumes (-5%) and divestitures (-2%) [170]. - Aerospace coatings organic sales increased by a double-digit percentage, supported by strong demand and customer order backlogs [172]. - Industrial Coatings segment net sales decreased by $402 million year over year, primarily due to lower selling prices and lower sales volumes driven by lower industry demand [180]. - Automotive OEM coatings organic sales decreased by a high single-digit percentage year over year due to lower sales volumes and indexed-based selling prices [181]. Cost Management and Restructuring - A comprehensive cost reduction program was approved in October 2024, focusing on reducing structural costs primarily in Europe [128]. - Total restructuring savings were approximately$40 million in 2024, with an anticipated annualized pre-tax savings of approximately $175 million once fully implemented, including$60 million in 2025 [146]. - PPG incurred wage inflation in 2024, impacting operating costs, but raw material costs were favorable compared to 2023 [148]. - Selling price improvements were achieved across several businesses in 2024, with careful monitoring of costs planned for 2025 [149]. Foreign Currency and Market Risks - Foreign currency exchange rates had a net unfavorable impact on net income from continuing operations of approximately $20 million in 2024, expected to continue in 2025 [150]. - The unfavorable impact of foreign currency translation on full year 2024 Income before income taxes was approximately$20 million, attributed to the strengthening of the U.S. dollar against the Mexican peso and Chinese yuan [236]. - A 10% adverse change in exchange rates for European and Canadian currencies could reduce Income before income taxes by $429 million in 2024, compared to$402 million in 2023 [243]. - PPG had non-U.S. dollar denominated debt of $3.3 billion as of December 31, 2024, with a potential unrealized translation loss of$369 million if the U.S. dollar weakens by 10% against European currencies [245]. - The company is exposed to market risks related to changes in foreign currency exchange rates and interest rates, and may use derivative financial instruments to manage these risks [241]. Debt and Capitalization - Total indebtedness to total capitalization ratio was 45% as of December 31, 2024, well below the 60% limit set by credit agreements [221]. - Long-term debt obligations total $5,808 million, with$933 million due in 2025 [224]. - The total amount of unrecognized tax benefits for uncertain tax positions was $152 million as of December 31, 2024 [226]. - As of December 31, 2024, consolidated net assets decreased by$905 million compared to December 31, 2023, primarily due to the strengthening of the U.S. dollar against the Mexican peso [235]. - The fair value of foreign currency forward contracts was a net liability of $53 million as of December 31, 2024, compared to a net asset of$23 million as of December 31, 2023 [243]. - Interest rate swaps converted $375 million of fixed rate debt to variable rate debt, with fair values of liabilities at$16 million as of December 31, 2024 [246]. - A 10% increase in variable interest rates would increase annual interest expense by $3 million for U.S., Canada, Mexico, and Europe, and by$2 million for Asia and South America [246]. - The fair value of U.S. dollar to euro cross currency swap contracts was a net asset of $50 million as of December 31, 2024 [244].