PPG reported financial results for the third quarter 2022. During the quarter, the company reported organic sales growth of more than 9% driven by higher selling prices, which are up 18% on a two-year stacked basis.

Commenting on the result, Michael H. McGarry, PPG chairman and Chief Executive Officer, said: “We achieved record sales in the third quarter driven by continued selling price realization, resulting in more than a 12% increase in selling prices versus the third quarter 2021 and an 18% increase on a two-year stacked basis. However, as we previously communicated, sales volumes were impacted by further softening demand in Europe and less sequential quarterly demand recovery in China than was expected due to a resumption of certain pandemic-related restrictions. These factors, along with worsening foreign currency translation impacts, caused our sales growth to be lower than anticipated at the beginning of the quarter.

“The higher year-over-year sales were aided by record sales in our PPG Comex and global automotive refinish businesses. In addition, both the aerospace and automotive original equipment manufacturer (OEM) coatings businesses delivered double-digit percentage sales volume gains, though demand in both industries remains well below pre-pandemic levels. Overall supply chain disruptions continued to broadly ease throughout the quarter; however, a few lingering short-supplied raw materials had impacts across several businesses. At quarter-end, the automotive refinish and aerospace coatings businesses continued to have much larger than traditional order backlogs totaling about $200 million.

“Looking ahead, normal seasonal demand trends are anticipated in the fourth quarter. In addition, economic activity is forecasted to remain soft in Europe and China, and demand for architectural do-it-for-yourself (DIY) paint products is likely to continue to weaken on a global basis. Due to the reduced economic activity, an additional cost restructuring program is now underway focused on fast payback actions targeting $70 million of annualized savings upon full implementation. We continue to expect our business portfolio to prove more resilient in the coming quarters as several of our larger businesses, including automotive OEM and aerospace coatings, are anticipated to deliver growth due to large supply deficits and low inventories in these end-use markets. Finally, we expect that our year-over-year operating margins will improve in the fourth quarter and into 2023 as we work to restore our historical margin profile through our actions to fully offset inflation and manage our costs.

“Lastly, I want to thank our global employees who demonstrate The PPG Way every day by continuing to overcome unexpected challenges to provide our customers across the world with the products and excellent service they rely on.”

At quarter end, the company had cash and short-term investments totaling about $1.1 billion. Net debt was $5.7 billion, about $400 million lower than the end of the second quarter 2022. Inventories declined in comparison to the second quarter and the company remains focused on further reductions in the fourth quarter, including destocking higher-than-normal raw material inventories.

Corporate expenses were about $60 million in the third quarter. Acquisition-related synergies and business restructuring programs delivered about $25 million of cost savings. The company’s reported and adjusted effective tax rates for the third quarter were about 19% and 20%, respectively.

The company today reported the following projections for the fourth quarter 2022 based on current global economic activity and in consideration of the near-term economic uncertainty associated with the impact of geopolitical issues in Europe and the continuing pandemic:

1. Aggregate sales volumes down a mid-single-digit percentage year over year
2. Corporate expenses of between $55 million and $60 million
3. Net interest expense of between $35 million and $40 million
4. Effective tax rate of about 20%
5. Reported EPS of $0.90 to $1.05
6. Adjusted EPS of $1.05 to $1.20, excluding amortization expense of $0.13 and costs related to previously approved and communicated business restructuring of $0.02