PPG has reported financial results for the first quarter 2022 whereby net sales stood at $4.3 billion, 11% higher than prior year. However the adjusted net income fell by 27% YoY and reached $327 million.
Michael H. McGarry, PPG chairman and chief executive officer, commented on the quarter, "We delivered record sales during the quarter despite ongoing supply chain disruptions along with the initial impacts of geopolitical issues in Europe and increasing COVID-19 restrictions in China. Our organic sales growth of 7% was driven by continued selling price realization and above-market sales volume performance in several of our end-use markets, most notably in automotive refinish and PPG-Comex architectural coatings. On a two-year stacked basis, our selling prices are up about 12% over the first quarter 2020 as we continue to manage through persistent and broad inflation. Sales also benefited from our recent acquisitions as Tikkurila and traffic solutions both delivered strong performances.
In addition to further selling price capture, adjusted earnings exceeded our January guidance as we delivered excellent earnings leverage on higher-than-expected sales volumes. The leverage benefits were aided by sequential quarterly improvements in manufacturing performance, including the benefit of more consistent raw material availability. We once again finished the quarter with a much larger than normal order backlog, totaling about $180 million, primarily in automotive refinish and aerospace coatings, and we expect further volume growth in these businesses in the coming quarters.
Looking ahead, aggregate underlying demand for PPG products is expected to remain solid, including continued pandemic-related recovery in certain end-use markets. While supply disruptions are expected to persist, we anticipate further sequential raw material availability improvements driven by increased supplier manufacturing capabilities and labor availability in the U.S., along with lower European demand. Given higher global energy prices, we are implementing further selling price increases in all businesses, and our commercial processes are enabling closer to real-time pricing relative to inflation. We are also developing further cost mitigation actions in the event of broader economic slowdowns. The continuing crisis in Europe and pandemic-related restrictions in China have increased the level of near-term economic uncertainty, as a result our financial guidance for the second quarter considers a wider range of potential earnings outcomes.
I remain optimistic about the number of organic growth opportunities that we are pursuing, increased sales volumes associated with return to normal historical inventory levels in most of our end-use markets and the expected recovery in automotive original equipment manufacturer (OEM) and aerospace coatings, where we have leading global positions. Finally, I want to thank all our global employees who continue to “make it happen” by providing excellent service to our customers and supporting our communities in need during these challenging times."
The company reported the following projections for the second 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:
- Aggregate sales volumes down a low-to-mid-single-digit percentage on a year-over-year basis
- Corporate expenses are expected to be $60 million to $70 million
- Net interest expense is expected to be $26 million to $30 million
- Effective tax rate of 23% to 24%
- Reported EPS of $1.44 to $1.74
- Adjusted EPS $1.60 to $1.90, excluding amortization expense of $0.14 and costs related to previously approved and communicated business restructuring of $0.02.
