PPG Industries(PPG) - 2025 Q2 - Quarterly Report

Part I. Financial Information Financial Statements Unaudited statements show decreased net sales and net income for Q2 2025 compared to the prior year Condensed Consolidated Statement of Income Net sales and net income declined in the second quarter and first half of 2025 versus 2024 Condensed Consolidated Statement of Income (Unaudited) | ($ in millions, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $4,195 | $4,235 | $7,879 | $8,084 | | Income before income taxes | $598 | $651 | $1,100 | $1,193 | | Net income (attributable to PPG) | $450 | $528 | $823 | $928 | | Earnings per common share - assuming dilution | $1.98 | $2.24 | $3.60 | $3.93 | Condensed Consolidated Balance Sheet Total assets, liabilities, and shareholders' equity all increased as of June 30, 2025 Condensed Consolidated Balance Sheet (Unaudited) | ($ in millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $8,190 | $6,557 | | Total assets | $22,099 | $19,433 | | Total current liabilities | $5,762 | $5,014 | | Total liabilities | $14,355 | $12,471 | | Total PPG shareholders' equity | $7,577 | $6,785 | Condensed Consolidated Statement of Cash Flows Cash from operations increased slightly, while proceeds from debt issuance drove a positive financing cash flow Condensed Consolidated Statement of Cash Flows (Unaudited) | ($ in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash from operating activities | $369 | $305 | | Cash used for investing activities | ($288) | ($370) | | Cash from/(used for) financing activities | $37 | ($185) | | Net increase/(decrease) in cash and cash equivalents | $291 | ($378) | | Cash and cash equivalents, end of period | $1,561 | $1,115 | Notes to Condensed Consolidated Financial Statements Notes detail divestitures, restructuring, new debt issuance, and a revised segment reporting structure - In December 2024, PPG completed the sale of its architectural coatings business in the U.S. and Canada, now presented as discontinued operations[23][29] - The company completed the sale of its remaining Russian business in Q1 2025, following a $146 million impairment charge in Q4 2024[31] - In March 2025, PPG issued €900 million in 3.250% Notes due 2032 and repaid €300 million of maturing notes in June 2025[45][46] - Effective December 31, 2024, the company revised its reportable business segments to three: Global Architectural Coatings, Performance Coatings, and Industrial Coatings[113] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes a 1% Q2 sales decrease to divestitures, which offset volume and price gains Results of Operations Q2 net sales decreased slightly due to divestitures, while adjusted EPS fell 5.5% from the prior year Q2 2025 vs Q2 2024 Performance | ($ in millions) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $4,195 | $4,235 | (0.9)% | | Income before income taxes | $598 | $651 | (8.1)% | - Q2 2025 net sales change was driven by: Divestiture-related sales (-3%), higher selling prices (+1%), and higher sales volumes (+1%)[131][134] Adjusted Earnings Per Diluted Share | | Three Months Ended June 30 | Six Months Ended June 30 | | :--- | :--- | :--- | | 2025 | $2.22 | $3.93 | | 2024 | $2.35 | $4.22 | | % Change | (5.5)% | (6.9)% | Performance of Reportable Business Segments Performance Coatings sales grew, while Global Architectural and Industrial Coatings sales declined in Q2 Q2 2025 Segment Performance vs Q2 2024 | Segment | Net Sales ($M) | % Change | Segment Income ($M) | % Change | | :--- | :--- | :--- | :--- | :--- | | Global Architectural Coatings | $1,018 | (4.9)% | $160 | (24.2)% | | Performance Coatings | $1,512 | 6.6% | $356 | 9.2% | | Industrial Coatings | $1,665 | (4.7)% | $227 | (12.4)% | - Performance Coatings growth was led by a high single-digit increase in aerospace coatings and a double-digit increase in protective and marine coatings[160][161] - Industrial Coatings decline was driven by the divestiture of the global silicas business and lower automotive OEM coatings sales, partially offset by high single-digit growth in packaging coatings[170][174][175] Liquidity and Capital Resources The company maintains strong liquidity with $1.6 billion in cash and projects capital spending up to $775 million - Cash and short-term investments totaled $1.6 billion at June 30, 2025[182] - Cash from operating activities for the first six months of 2025 was $371 million, up from $348 million in the prior year[183] - Total capital spending for 2025 is expected to be approximately $725 million to $775 million[187] - The company expects restructuring savings of approximately $75 million in 2025, with related cash outlays of about $125 million[194] Quantitative and Qualitative Disclosures About Market Risk The company manages foreign currency and interest rate risks using derivative instruments - The company is exposed to foreign currency transaction and translation risk; a hypothetical adverse change in exchange rates could reduce pre-tax income by $495 million as of June 30, 2025[207] - PPG manages interest rate risk by balancing fixed and variable rate debt, with interest rate swaps converting $375 million of fixed-rate debt to variable-rate[210] - A 10% increase in interest rates would increase annual interest expense on variable rate debt by $3 million[210] Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective - Management concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period[212] - No material changes to the company's internal control over financial reporting occurred during the second quarter of 2025[214] Part II. Other Information Legal Proceedings PPG is managing litigation related to a divested business and asbestos claims, believing its risk is remote - PPG is in a legal dispute with Westlake Corporation regarding the 'Di Gregório litigation', for which liability was transferred to a Westlake predecessor in 2013; a Brazilian court has entered an award against PPG, which could be between $350 million and $700 million[219][220][221] - PPG has filed a lawsuit against Westlake in Delaware to enforce Westlake's obligations to cover the award and all related costs; a decision is expected in Q3 2025 and PPG believes its risk of loss is remote[223][224] - The company continues to be a defendant in lawsuits involving claims of personal injury from asbestos exposure[225] Risk Factors No material changes to the company's risk factors were reported since the 2024 Annual Report - No material changes in the Company's risk factors were reported compared to the 2024 Form 10-K[226] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased over 1.3 million shares of its common stock during the second quarter of 2025 Issuer Purchases of Equity Securities (Q2 2025) | Month | Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | — | $— | | May 2025 | 656,169 | $111.37 | | June 2025 | 689,305 | $111.60 | | Total | 1,345,474 | $111.48 | - The board of directors authorized an additional $2.5 billion for share repurchases in April 2024, with no expiration date[227] Other Information The Chief Financial Officer adopted a Rule 10b5-1 trading plan in May 2025 - On May 2, 2025, CFO Vincent J. Morales adopted a Rule 10b5-1 trading plan for the potential sale of up to 34,872 shares of common stock upon exercise of stock options[228] Exhibits This section lists exhibits filed with the report, including officer certifications and XBRL data - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[233] - The filing includes financial statements and notes formatted in Inline XBRL[235]