Organic sales up 4% while volume declined about 2% during the quarter.
PPG (NYSE:PPG) today reported record net sales of $4.9 billion in the second quarter, an increase of 4% over the prior year. The company reported organic sales growth of 4% year over year (YOY) was led by higher selling prices. Organic sales exclude the impact of currency, acquisitions, divestitures and the wind down of operations in Russia. Overall company sales volumes decreased by about 2% versus the prior-year second quarter, reflecting softer global industrial demand.
The company also reported it made significant progress on margin recovery, with segment margins up 330 basis points YOY. The company reported year-to-date operating cash flow of about $620 million. up about $750 million YOY.
Tim Knavish, PPG president and chief executive officer, commented on the quarter, saying, “The PPG team delivered record sales and earnings in the second quarter driven by our diverse portfolio. While overall global industrial demand was lackluster, several of our technology-advantaged businesses and leading brands once again delivered strong growth. In particular, the aerospace, automotive original equipment manufacturer (OEM), automotive refinish coatings and PPG Comex businesses all achieved record sales during the quarter.”
“We made excellent progress in restoring operating margins toward our prior historical profile, as we sharply improved year-over-year segment margins by 330 basis points. Additionally, we demonstrated one of our long-standing legacies of strong cash generation with record operating cash flow for the first half of the year, and we are targeting further working capital improvements in the second half of the year, specifically in raw materials inventory,” continued Knavish. “Looking ahead, we anticipate that the global macroeconomic environment will remain generally consistent with the second quarter including continued tepid global industrial production, along with some incremental slowing in U.S. architectural residential repaint due to significantly lower existing home sales. Given the strength and momentum we have experienced year to date in several of our businesses, such as aerospace coatings and automotive OEM coatings, we expect our diverse portfolio mix to provide us with continued resiliency. On a regional basis, we anticipate modest sequential demand improvement in China and aggregate European demand to stabilize, albeit at current lower absolute levels. In addition, our supply chain and raw material availability has returned to pre-pandemic levels, and in some instances there is excess supply.”
Automotive Refinish Coatings
According to prepared remarks for its quarterly earnings conference call, organic sales for automotive refinish coatings were higher year over year by a mid-single-digit percentage, led by selling price increases in all regions.
In Europe, sales volumes were negatively impacted by cautious ordering trends by distributors, who in general, are carrying less overall inventory.
In the U.S., sales volumes increased and were similar to pre-pandemic levels despite insurance claim activity being modestly lower than the prior-year second quarter and industry demand remaining about 10% below pre-pandemic levels. Backlogs in the U.S. have normalized closer to historical levels as supply chain conditions improved.
In China, demand for PPG refinish products improved on a sequential basis. In the second quarter the company continued to win new body shops, driven by the company’s ability to provide up to a 15% productivity improvement compared to competitors over the full repair process cycle time. This also includes good progress with new Moonwalk installations, supporting further customer wins. The company expects third quarter global net sales to be lower on a sequential basis driven by normal seasonal patterns in Europe.
Overall, PPG’s Performance Coatings segment, that includes automotive refinish, reported second quarter net sales for the Performance Coatings segment were $3.0 billion, up 4% versus the prior year. Selling prices increased by 6% year over year and were aided by incremental price increases which were implemented in the first quarter 2023. Segment sales volumes were down 3% compared to the second quarter 2022. During the quarter, foreign currency translation favorably impacted sales by nearly 1% driven by the appreciation of the Mexican peso.