PPG posted strong financial results despite a challenging macroeconomic environment, achieving record reported and adjusted EPS and an 11% increase in year-over-year adjusted EPS, marking the sixth consecutive quarter of growth.
While overall organic sales were flat, several sectors saw growth, including aerospace coatings, packaging coatings, architectural coatings in the Americas and Asia Pacific, traffic solutions, and specialty coatings and materials. This positive performance was countered by a decline in global automotive builds and weak global industrial production. Additionally, refinish coatings sales decreased compared to last year due to record prior-year results and inconsistent distributor ordering patterns.
Sales volumes in Europe improved sequentially from the first quarter but remained below expectations. PPG continued to benefit from its established markets in Mexico and China, its second and third largest revenue-generating countries.
Segment margin growth persisted, with aggregate margins increasing by 110 basis points for the seventh consecutive quarter, and gross margins improved by 180 basis points year-over-year. The balance sheet remains robust with reduced inventories, and the company continued to prioritize shareholder value, repurchasing approximately $150 million in shares this quarter and about $300 million year-to-date.
Looking forward, PPG expects strong performance in Mexico and continued organic growth in China, albeit at a slower rate than in the first half of the year. In Europe, demand remains inconsistent, but modest improvements are anticipated. In the U.S., despite subdued economic conditions in some sectors, overall growth is expected to pick up in the latter half of the year.
PPG plans to drive sales growth across its business portfolio, with anticipated improvements in automotive refinish coatings and protective and marine coatings. General industrial demand is projected to see modest sequential quarterly improvement, leading to a forecast of flat-to-low single-digit percentage aggregate organic sales growth for the third quarter.
Strategic reviews of the architectural coatings U.S. and Canada business and the global silicas business are progressing as planned. PPG remains committed to determining the best paths forward from these reviews.
The dedication of PPG’s 50,000 employees has been key to this quarter’s success. Record results were achieved thanks to their efforts in upholding the company’s mission: “We protect and beautify the world®.”
Performance Coatings net sales were flat, with higher selling prices countered by the divestiture of the non-North American traffic solutions business and adverse foreign currency effects.
Aerospace product sales continued to perform well, with double-digit organic growth year-over-year and an increased order backlog of approximately $290 million. Protective and marine coatings saw flat organic sales due to growth in Europe and Asia Pacific being offset by lower volumes in other regions. Architectural coatings in the Americas and Asia Pacific experienced low single-digit growth, driven by U.S. and Canada professional contractor segment sales. Mexico saw record sales and earnings, benefiting from a strong economy and effective distribution. In contrast, architectural coatings in Europe, the Middle East, and Africa saw a slight decrease in organic sales due to lower volumes in Western Europe, despite growth in Central and Eastern Europe. Automotive refinish coatings organic sales declined by a mid-single-digit percentage due to a challenging comparison and uneven distributor orders in the U.S., though growth continued in Asia and Europe.
Segment operating margins reached a second-quarter record of 18.7%, up by 100 basis points year-over-year. Segment income increased by 6% compared to the previous year, driven by improved selling prices despite higher growth-related spending. Industrial Coatings segment net sales fell from the second quarter of 2023 due to lower selling prices from index-based customer contracts and adverse foreign currency effects.
Automotive OEM coatings organic sales dropped by a high single-digit percentage due to lower index-based selling prices and reduced industry volumes in the U.S. and Europe, partially offset by strong growth in Mexico and moderated growth in China. Industrial coatings organic sales declined slightly due to subdued industrial activity in the U.S. and Europe, despite solid growth in China and India. Packaging coatings saw mid-single-digit organic sales growth year-over-year, driven by increased sales volumes from share gains, although this was tempered by lower selling prices. Segment margins improved by 110 basis points from the previous year, with segment income rising by 4% as moderated input costs offset lower selling prices and wage cost inflation.
