PPG Industries(US:PPG)2023-01-20 17:34Financial Data and Key Metrics Changes - The company's Q4 2022 sales reached $4.2 billion, close to record levels from 2021, despite adverse foreign currency translation [9] - Adjusted earnings per diluted share from continuing operations were $1.22, exceeding the midpoint of the guidance provided in October [19] - For the full year 2022, the company achieved record sales of $17.7 billion, although it did not meet its own earnings expectations [24] Business Line Data and Key Metrics Changes - The automotive refinish coatings business gained over 2,000 net new body shop wins, indicating strong demand for its product technology and services [10] - The aerospace business experienced organic sales growth of over 20% year-over-year, driven by a recovering global order book and military-related growth [11] - PPG Comex in Mexico achieved record sales and earnings, surpassing $1 billion in annual sales [18] Market Data and Key Metrics Changes - In Europe, despite soft demand, earnings remained stable due to effective selling price realization and cost management [20] - The company anticipates coatings demand stabilization in Europe beginning in Q2, which is expected to result in higher year-over-year earnings [17] - The U.S. market is expected to benefit from the recovery of aerospace and automotive refinish businesses, supported by strong order books [17] Company Strategy and Development Direction - The company is focused on enhancing its relationship with Home Depot and has launched a new U.S. architectural Pro program [14] - PPG plans to introduce additional sustainable products and unveil new 2030 sustainability goals [16] - The company aims to recover its historical margin profile and achieve mid- to high-teen percentage segment margins [29] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in 2022, including cost inflation, geopolitical issues, and supply chain disruptions, but expressed confidence in future earnings growth catalysts [13][25] - The company expects Q1 demand to remain similar to Q4, with potential improvements in supply chain and raw material costs flowing through to the P&L starting in Q2 [25] - Management remains cautious about the impact of a potential second wave of COVID-19 in China on Q1 performance [36][86] Other Important Information - The company has made progress in reducing SG&A as a percentage of sales, achieving a decrease of about 100 basis points [15] - PPG is actively working on cost savings initiatives, particularly in Europe, to address the challenging macroeconomic environment [21] Q&A Session Summary Question: Can the company achieve the consensus EPS target for the full year? - Management is focused on Q1 due to uncertainties but sees multiple potential earnings growth catalysts for 2023 [35] Question: What is the volume outlook for cyclical and less cyclical markets? - The biggest impact is expected from China, with a significant recovery anticipated starting in Q2 [37][39] Question: How is the pricing environment evolving? - The company has maintained pricing momentum, with an 11% increase in Q4 and expects additional price increases in Q1 [44] Question: How does the company view the U.S. architectural market? - The company sees a bifurcation in the market, with strong performance in commercial and maintenance segments despite a slowdown in DIY and new housing construction [48][50] Question: What are the expectations for raw material costs? - Management expects modest raw material deflation in Q1, with significant impacts on the P&L anticipated in Q2 [63][93] Question: How is the backlog in aerospace and other segments? - Aerospace backlogs are historically strong, and the company sees high backlogs in refinish and commercial segments as well [121]