PPG reported first quarter 2021 net sales of approximately $3.9 billion, approximately 15% higher than the prior year. Selling prices increased by nearly 2% and sales volumes were higher by approximately 7% year over year. Favorable foreign currency translation impacted net sales by more than 3%, or about $110 million, and acquisition-related sales contributed nearly 3% of the sales growth.

First quarter 2021 reported net income was $378 million, or $1.58 per diluted share, and adjusted net income was $450 million, or $1.88 per diluted share. Adjusted figures exclude after-tax items, including acquisition-related amortization expense of $29 million and other expenses of $43 million, primarily related to environmental remediation charges, expenses related to natural disasters, and other acquisition and integration-related costs. First quarter 2020 reported net income from continuing operations was $243 million, or $1.02 per diluted share, and adjusted net income from continuing operations was $310 million, or $1.31 per diluted share. The first quarter 2021 reported and adjusted effective tax rates were both approximately 23%, compared to the first quarter 2020 reported and adjusted effective tax rates of about 22%. Detailed reconciliations of the reported to adjusted figures are included below.

“We delivered record adjusted EPS in the first quarter which is significantly above 2020 first quarter results, and also 27% higher than first quarter 2019 despite sales volumes not yet having fully recovered to pre-COVID levels,” said Michael H. McGarry, PPG chairman and CEO. “We delivered excellent operating performance in both reportable segments. We achieved these results despite experiencing accelerating raw material and logistics cost inflation during the quarter, and with demand remaining tepid in the global commercial aerospace and U.S. protective coatings end-use markets. The company’s first quarter segment margins were at multi-year seasonal highs as we benefited from strong leverage on higher year-over-year net sales growth.

“In addition to improving sales performance, we delivered about $35 million of structural cost savings from business restructuring programs and continue to target a total of about $125 million of savings for the full-year 2021. We also reduced our working capital as a percent of sales by 200 basis points, driving improved operating cash flow performance compared to the prior year quarter. Finally, we continued to make good progress around our announced acquisitions, closing the VersaFlex transaction and nearing completion of the Tikkurila and Wörwag acquisitions. We are rapidly integrating those acquisitions which have already closed, and we are forecasting total 2021 synergies from all acquisitions to be $25 million to $30 million, assuming that both Tikkurila and Wörwag are completed in May.

“In the near-term, we are proactively managing through both direct supply chain disruptions and production constraints at some of our customers due to their input component shortages. These issues will likely delay some seasonal sales activity into the second half of the year, but overall demand growth across much of our business portfolio remains very strong. The commodity disruptions specifically affecting the coatings supply chain have resulted in raw material cost inflation, which we expect to remain elevated into at least the third quarter. We are prioritizing further selling price increases, which we expect to fully offset raw material cost inflation in the second half of 2021. In addition, we will continue to aggressively manage all aspects of our cost structure,” added McGarry.

“Looking ahead, we expect overall global coatings demand growth to be broad-based across most of the end-use markets that we supply, including an eventual replenishment of many of our customers’ inventories. In addition, I am encouraged to see an increase in domestic flight activity in various parts of the world, which should support the gradual recovery in aftermarket aerospace coatings demand in the second half of 2021. In addition to these organic growth opportunities, we will have further sales growth and earnings accretion from our recent acquisitions. Lastly, I want to thank all of our global employees who continued to manage through the pandemic in the quarter, to serve our customers and support our communities in need,” concluded McGarry.

In addition, the company today reported the following projections for the second quarter 2021 based on current global economic activity, customer production restraints due to global chip shortages, and in consideration of the near-term economic uncertainty associated with the continued impact of the pandemic. The figures below do not include any financial results for acquisitions that have not yet closed:

• Aggregate sequential net sales up a low-teen percentage when compared to the first quarter 2021 and consistent with historical pre-COVID sequential quarterly changes.
• Structural cost savings from restructuring actions of about $30 million year over year.
• Corporate expenses were about $50 million in the first quarter and are expected to be $55 million to $60 million in the second quarter.
• Net interest expense between $27 million and $29 million.
• The company’s global ongoing effective tax rate of 23% to 24%.
• Second quarter adjusted earnings per diluted share between $2.15 and $2.20.