Q4 2021 PPG Industries Inc Earnings Call

Yes.

Good morning, My name is Rochelle, and I will be your conference operator today.

Speaker 5: Good morning. My name is Rocco and I will be your conference operator today.

Speaker 5: At this time, I would like to welcome everyone to the fourth quarter and four year 2021 conference call.

At this time I would like to welcome everyone to the fourth quarter and full year 2021 conference call.

Speaker 5: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

Speaker 5: If you would like to ask a question during this time, simply press star 1 on your telephone keypad.

If you wanted to ask a question during this time some of the star one on your telephone keypad.

Speaker 5: If you'd like to withdraw your question, please press star then 2.

Would you like to withdraw your question. Please press Star then two.

Speaker 5: To allow everyone an opportunity to ask a question, the company requests that each analyst only ask one question.

To allow everyone an opportunity.

Question, where he'll be requested ease analysts only ask one question.

Thank you.

Speaker 5: And as a reminder, ladies and gentlemen, today's conference call is being recorded.

And as a reminder, ladies and gentlemen, todays conference call is being recorded.

Speaker 5: And now I'd like to turn the conference over to John Bruno. Please go ahead, sir.

Now, let's turn the conference over to John Bruno. Please go ahead Sir.

Speaker 6: Thank you, Rocco, and good morning, everyone. Once again, this is John Bruno. We appreciate your continued interest in PPG and welcome you to our fourth quarter and full year 2021 Financial Results Conference call.

Thank you Rocco and good morning, everyone. Once again this is John Bruno we appreciate your continued interest in PPG and welcome you to our fourth quarter and full year 2021 financial results conference call joining.

Speaker 6: Joining me on the call from PPGR, Michael McGarry, Chairman and Chief Executive Officer, and Vince Morales, Senior Vice President and Chief Financial Officer.

Joining me on the call from PPG are Michael Mcgarry, Chairman and Chief Executive Officer, and Vince for Alice Senior Vice President and Chief Financial Officer, our comments relate to the financial information released after U S. Marc markets closed on Thursday January 20th 2022, we have posted detailed commentary and accompanying.

Speaker 6: Our comments relate to the financial information released after U.S. markets closed on Thursday, January 20.

Speaker 6: 2022. We have posted detailed commentary and accompanying presentation slides on the Investor Center of our website, ppg.com. The slides are also available on the webcast site for this call and provide additional support to the brief opening comments that Michael will make shortly.

Presentation slides on the Investor Center of our website PPG Dot com. The slides are also available on the webcast site for this call and provide additional support to the brief opening comments that Michael will make shortly.

Speaker 6: Following management's perspective on the company's results for the quarter, we will move to a Q&A session. Both the prepared commentary and discussion during this call may contain forward-looking statements reflecting the company's current view of future events.

Following management's perspective on the company's results for the quarter, we will move to a Q&A session. Both the prepared commentary and discussion. During this call may contain forward looking statements, reflecting the company's current view of future events and their potential effect on Ppg's operating and financial performance. These statements involve uncertainties and risk.

Speaker 6: and their potential effect on PPG's operating and financial performance.

Speaker 6: These statements involve uncertainties and risk, which may cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements.

Which may cause actual results to differ the company is under no obligation to provide subsequent updates to these forward looking statements. This presentation also contains certain non-GAAP financial measures. The company has provided in the appendix of the presentation materials, which are available on our website reconciliations of these non-GAAP financial measures to the most direct.

Speaker 6: This presentation also contains certain non-GAAP financial measures the company has provided in the appendix of the presentation materials, which are available on our website, reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

Comparable GAAP financial measures for additional information please refer to ppg's filings with the SEC.

Speaker 6: For additional information, please refer to PPG's filings with the SEC. Now let me introduce PPG Chairman and CEO , Michael McGarry.

Now, let me introduce PPG, chairman and CEO Michael Mcgarry.

Speaker 6: Thank you, John , and good morning, everyone. I would like to welcome everyone to our fourth quarter 2021 earnings call.

Thank you John and good morning, everyone I would like to welcome everyone to our fourth quarter 2021 earnings call.

Speaker 6: I hope you and your loved ones are remaining safe and healthy.

I Hope you and your loved ones are remaining safe and healthy.

Speaker 6: I will provide some comments to supplement the detailed financial results we released last evening.

I will provide some comments to supplement the detailed financial results, we released last evening.

Speaker 6: For the fourth quarter, we achieved record net sales of about $4.2 billion and our adjusted earnings per diluted share from continuing operations were $1.26.

For the fourth quarter, we achieved record net sales of about $4.2 billion and our adjusted earnings per diluted share from continuing operations for $1.26.

Speaker 6: Quickly summarize the quarter, we had favorable sales versus our forecast, but encouraged significant manufacturing challenges due to COVID-related staffing shortages, intermittent customer order patterns, and raw material supply challenges.

Quickly summarize the quarter, we had favorable sales versus our forecast, but incurred significant manufacturing challenges due to COVID-19 related staffing shortages.

And customer order patterns and raw material supply challenges.

Speaker 6: Adjusted earnings were aided by a lower than expected tax rate in the fourth quarter as we recognize more favorable discrete items

Our adjusted earnings were aided by a lower than expected tax rate in the fourth quarter as we recognize more favorable discrete items.

Speaker 6: Excluding the favorable impact from the tax rate, our adjusted EPS was about 10% below the financial guidance we provided in October .

Excluding the favorable impact from the tax rate, our adjusted EPS was about 10% below the financial guidance, we provided in October .

Speaker 6: Our sales performance for the fourth quarter was solid as we achieved higher sales than our guidance, primarily due to better-than-expected automotive OEM global production, higher selling price realization, and strong above-market sales volumes in several of our in-use markets.

Our sales performance for the fourth quarter was solid as we achieved higher than sales than our guidance, primarily due to better than expected automotive OEM global production higher styling price realization and strong above market sales volumes in several of our end use markets.

Overall demand remains robust.

Speaker 6: Our PPG COMEX business delivered yet again another excellent quarter and finished with 10% organic sales growth for the full year of 2021.

Our PPG Comex business delivered yet again, another excellent quarter and finished with 10% organic sales growth for the full year of 2021.

Speaker 6: This business had record sales and earnings growth for 2021 and continues to expand its concessionaire network. And in January , we will have 5,000 concessionaire locations in our network. And we recently added our traffic solutions products to its portfolio.

This business had record sales and earnings growth for 2021 and continues to expand its concessionaire network and in January we will have 5000 concessionaire locations in our network and we recently added our traffic solutions products to its portfolio.

Speaker 6: The protective and marine business continued its trend of strong top-line results, this time led by improvements in the marine coatings where industry builds are expected to grow for the next several years.

The protective and marine business continued its trend of strong topline results. This time led by improvements in the marine coatings, where industry builds are expected to grow for the next several years.

Speaker 6: We also continue to grow our share in automotive refinish for a full suite of advanced products and services, different PPG from our competition and in automotive OEM.

We also continue to grow our share in automotive refinish, where a full suite of advantaged products and services difference PPG from our competition and in automotive OEM.

Speaker 6: We are award a new 2022 business based upon our expanded mobility product offering.

We were awarded new 2022 business based upon our expanded mobility product offering.

Speaker 6: And finally, we realize higher increased selling prices globally.

And finally, we realized higher increased selling prices globally.

Speaker 6: Lastly, the recently acquired Ticarilla Business delivered record sales and earnings for any fourth quarter despite the difficult operating environment.

Lastly, the recently acquired Tequila business delivered record sales and earnings for any fourth quarter, despite the difficult operating environment.

Speaker 6: As I mentioned, overall sales would have been better, but we experienced continuing supply chain disruptions and a significant increase in COVID cases that hampered our ability to fully and consistently operate and prevented us from fully meeting our strong customer order book.

As I mentioned overall sales would have been better, but we experienced continuing supply chain disruptions and a significant increase in COVID-19 cases that hampered our ability to fully and consistently operate and prevented us from fully meeting our strong customer order books.

Speaker 6: Recently, some of our manufacturing facilities had had up to 40% of their workforce out.

Recently, some of our manufacturing facilities have had up to 40% of their workforce out.

Speaker 6: In several businesses, we continue to face certain raw material shortages with the biggest impacts in U.S. architectural coatings and traffic solutions.

In several businesses, we continue to face certain raw material shortages with the biggest impacts in U S architectural coatings and traffic solutions.

Speaker 6: Overall, our sales backlog grew, and in total was about $150 million exiting the quarter, most notably in our aerospace and automotive refinish and general industrial businesses. Our segment earnings

Overall, our sales backlog grew and in total was about $150 million exiting the quarter, most notably in our aerospace and automotive refinish and general industrial businesses.

Our segment earnings did not meet our expectations.

Speaker 6: While we benefited from higher sales and increased selling prices, it was not sufficient to offset significant inflation, supply disruptions, and operational inefficiencies caused by the rapid increase in COVID cases within our employee base and those at our customers and suppliers.

While we benefited from higher sales and increased selling prices. It was not sufficient to offset significant inflation supply disruptions and operational inefficiencies caused by the rapid increase in Covid cases within our employee base and those that our customers and suppliers.

Speaker 6: Raw material cost inflation was up approximately 30% compared to prior year. And transportation costs spiked due to shortages of available trucks and drivers. In addition, operating costs were progressively higher during the quarter due to manufacturing interruptions at both our facilities and our customers' operations stemming from COVID.

Raw material cost inflation was up approximately 30% compared to prior year and transportation costs Spike due to shortages of available trucks and drivers. In addition to operating costs, we're progressively higher during the quarter due to manufacturing interruptions at both our facilities and our customers' operations stemming from Covid.

Speaker 6: These increased operating costs impacted the quarter by about $0.20 per share, and COVID-related absenteeism has continued in January .

These increased operating costs impacted the quarter by about 20 cents per share and Covid related absentee them has continued in January .

Speaker 6: Once we see some normalization, we are confident that we'll quickly be able to return our legacy of strong manufacturing performance.

Once we see some normalization we are confident that we will quickly be able to return our legacy of strong manufacturing performance.

Speaker 6: We've been taking actions to further diversify our supplier base and increase our internal resin manufacturing capability.

We've been taking actions to further diversify our supplier base and increase our internal resin manufacturing capability.

Speaker 6: PPG has in-house, large-scale resin manufacturing in each major region, and we are expanding our capability in 2022 to mitigate future risks. As one example, PPG COMEX sources a high percentage of its resins internally, which has resulted in minimal disruption.

PPG has in house large scale resin manufacturer in each major region and we are expanding our capability in 2022 to mitigate future risk as one example, PPG comex sources, a high percentage of its residents internally, which has resulted in minimal disruptions.

Speaker 6: in addition to the historically high level of commodity raw material price.

In addition to the historically high level of commodity raw material prices were also experiencing rising costs in other areas such as labor and utilities.

Speaker 6: We're also experiencing rising costs in other areas such as labor and utilities.

Speaker 6: We expect to continue to proactively work with our customers to implement additional selling pricing.

We expect to continue to proactively work with our customers to implement.

Additional selling price increases in the first quarter.

Speaker 6: In aggregate, our selling price realization in the fourth quarter was about 8 percent, with a higher price realization in our industrial reporting segment. Our price capture remains broad, with good traction in all businesses in all regions, and the pace of price capture is much faster than the pace of prior inflationary cycles.

In aggregate, our selling price realization in the fourth quarter was about 8% with a higher price realization and our industrial reporting segment, our price capture remains broad with good traction in all businesses and all regions and the pace of price price excuse me the pace of price capture as much faster than the pace of prior in.

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Speaker 6: Reflecting back to 2021, we achieved all-time record sales of $16.8 billion, led by strategic acquisitions and strong organic growth of 10%, despite the various ongoing supply chain challenges we encouraged.

Reflecting back to 2021, we achieved all time record sales of $16 $8 billion led by strategic acquisitions and strong organic growth of 10%. Despite the various ongoing supply chain challenges we incurred in.

Speaker 6: In addition, we delivered record EPS growth of more than 10 percent, even with raw material cost inflation of about 20 percent for the full year. The highest level of coatings industry inflation

In addition, we delivered record EPS growth of more than 10%, even with raw material cost inflation of about 20% for the full year.

The highest level of coatings industry inflation in recent memory.

Speaker 6: We once again lowered our S&GA as a percentage of sales, decreasing by about 200 basis points, aided by delivering 135 million in restructuring savings in 2021.

We once again lowered our S N G E as a percentage of sales decreasing by about 200 basis point aided by delivering 135 million in restructuring savings in 2021.

Speaker 6: We also advance our digital capabilities in many businesses, most notably the architectural coding business where sales transaction on a digital platform increased by 20% compared to 2020 as we see our customers digital patterns become more ingrained.

We also advanced our digital capabilities and many businesses, most notably the architectural coatings business, where sales transaction on a digital platform increased by 20% compared to 2020, as we see our customers digital patterns become more ingrained.

Speaker 6: In 2021, we had strong accreted cash deployment, including the funding of our acquisitions.

In 2021, we had strong accretive cash deployment, including the funding of our acquisitions.

Speaker 6: Share repurchases made in the fourth quarter and increase in our quarterly dividend for the 50th consecutive year.

Share repurchases made in the fourth quarter and increasing our quarterly dividend for the 15th consecutive year.

Speaker 6: We're among a small number of companies that have achieved this milestone, along with even fewer companies paying a dividend for more than 120 consecutive years.

Were among a small number of companies that have achieved this milestone along with even fewer companies paying a dividend for more than 120 consecutive years.

Speaker 6: Our working capital as a percent of sales remain at historically low levels and comparable to last year, even though we purchased more raw material than typical in the fourth quarter.

Our working capital as a percent of sales remained at historically low levels and comparable to last year, even though we purchase more raw material than typical in the fourth quarter.

Speaker 6: Finally, we have lowered our net debt by about $350 million since funding Ticarilla in June and exited 2021 with a strong balance sheet and optionality for future accretive cash deployment.

Finally, we have lowered our net debt by about $350 million since funding Tequila in June and exited 2021, with a strong balance sheet and optionality for future accretive cash deployment.

Speaker 6: Throughout 2021, we took actions to bolster our ESG program. As an example, in the fourth quarter, we further strengthened our overall ESG corporate governance structure.

Throughout 2021, we took actions to bolster our ESG program and as an example in the fourth quarter. We further strengthen our overall ESG corporate governance structure.

Speaker 6: We define accountability and oversight for all major elements of our ESG efforts under respective board committees.

We define accountability and oversight for all major elements of our ESG efforts under respective board committees.

Speaker 6: We also redefined and renamed our Technology and Environmental Committee to the Sustainability and Innovation Committee, with a key focus on tracking our sustainability progress and defining climate-related risks and opportunities. A slide reflecting the changes is included in our presentation material.

We also redefined and renamed our technology and Environmental Committee to the sustainability and innovation Committee with a key focus on track in our sustainability progress and defining climate related risks and opportunities.

Slide reflecting the changes is included in our presentation materials.

Speaker 6: Looking ahead, demand continues to be robust in most of our in-use markets. The heightened supply and COVID-related disruptions evidenced in the fourth quarter are expected to continue into the first quarter of 2022, impacting our ability to manufacture and deliver products.

Looking ahead demand continues to be robust in most of our end use markets tightened supply and COVID-19 related disruptions evidence.

In the fourth quarter are expected to continue into the first quarter of 2022 impact and our ability to manufacture and delivered product.

Speaker 6: We expect economic activity to be soft in China during the first quarter, as more severe operating restrictions have recently been imposed due to COVID and during the Winter Olympics.

We expect economic activity to be soft in China. During the first quarter as more severe operating restrictions have recently been imposed due to COVID-19 and during the Winter Olympics.

Speaker 6: We anticipate more favorable economic conditions in the second quarter.

We anticipate more favorable economic conditions in the second quarter.

Speaker 6: We plan to implement further selling price increases in all our businesses as raw materials and other cost inflation remain at elevated levels and are increasing further in certain areas.

We plan to implement further selling price increases in all our businesses as raw materials and other cost inflation remain at elevated levels and our increasing further in certain areas. We will continue to aggressively manage all aspects of our cost structure and are managing to minimize the cost impacts of the current supply challenge.

Speaker 6: We will continue to aggressively manage all aspects of our cost structure and are managing to minimize the cost impacts of the current supply challenge.

Speaker 6: The first quarter EPS guidance that we provided has a wider range than normal.

The first quarter EPS guidance that we provided has a wider range than normal.

Speaker 6: As is typical, the month of March will be the largest component to our quarterly sales.

As is typical the month of March will be the largest component to our quarterly sales our current visibility to the second half of the quarter is limited due to uncertainties around the supply chain disruptions and the various impacts of omicron globally.

Speaker 6: Current visibility to the second half of the quarter is limited due to uncertainties around the supply chain disruptions and the various impacts of Omicron globally.

Speaker 6: While the current environment remains difficult to predict, I expect that as 2020 progresses, we will start to experience more economic reopenings and an easing of supply chain problems, general inventory rebuilding across many in-use markets, and a healthy consumer willing to spend.

While the current environment remains difficult to predict I expect that as 2020 progresses, we will start to experience more economic reopening and an easing of supply chain problems general inventory rebuilding across many end use markets and a healthy consumer willing to spend.

Speaker 6: I remain very optimistic about future earnings capability of our company and see many catalysts return to prior peak operating margins with opportunities to exceed them. This includes, first, continued recovery in the automotive refinish, OEM, and aerospace coatings businesses, which collectively account for about 40% of our pre-pandemic sales, and where we have broad global businesses supported by advanced technology.

I remain very optimistic about future earnings capability of our company and see many catalyst returned to prior peak operating margins with opportunities to exceed them.

It includes first continued recovery in the automotive refinished, OEM and aerospace coatings businesses, which collectively account for about 40% of our pre pandemic sales and where we have broad global businesses supported by advantaged technologies.

Speaker 6: The volume for these businesses remain about 15% below pre-pandemic levels. And we are already experiencing improving order flow that is being crimped by supply availability.

The volume for these businesses remain about 15% below pre pandemic levels, and we were already experiencing improving order flow that it's being crimped by supply availability.

Speaker 6: Second, normalization of commodity raw material costs, which should moderate over time as supply dislocations improve.

Second normalization of commodity raw material cost, which should moderate over time as supply disrupt dislocations improve.

Speaker 6: Third, higher operating leverage on sales volume supported by our lower cost structure.

Third higher operating leverage on sales volume supported by our lower cost structure.

Speaker 6: Fourth, year-over-year earnings growth in 2022 and 2023 due to further Synergy capture from our recent acquisitions, including a 15% increase to our original Synergy target. And finally, above-market organic growth driven by our advantage in leading brands, technology, and services.

Fourth year over year earnings growth in 2022, and 2023 due to further synergy capture from our recent acquisitions, including a 15% increase to our original synergy target and finally above market organic growth driven by our advantaged and leading brands technology and services.

Speaker 6: An example of the key organic growth opportunities is a recent announcement on our expanded relationship with e-Home Depot and HD Supply with the launch of propane assortment at all U.S. locations.

An example of the key organic growth opportunities. The recent announcement of our expanded relationship with the home depot and HD supply with the launch of pro paint assortment at all U S locations.

Speaker 6: This initiative strongly supports our Asset Light strategy by adding more than 2,000 distribution locations. Together with the Home Depot, we are positioned to outgrow the pro market in the U.S.

This initially strongly supports our asset light strategy by adding more than 2000 distribution locations together with the home depot, we're positioned to outgrow the pro market in the U S.

Speaker 6: Considering all of these catalysts, I believe we have a path to at least $9 of EPS in 2023.

Considering all of these catalysts I believe I believe we have a path to at least $9 of EPS in 2023.

Speaker 6: In closing, I want to express my thanks and appreciation to our more than 50,000 employees around the world for their dedication to serving our customers and supporting the many communities where we operate. Every day, their hard work and commitment to delivering our company's purpose to protect and beautify the world are reasons why we are well positioned today and in the future. Thank you for your continued confidence in PPG. This concludes our prepared remarks. And now, Rocco, would you please open the line for questions?

In closing I want to express my thanks, and appreciation to our more than 50000 employees around the world for their dedication to serving our customers and supporting the many communities, where we operate every day their hard work and commitment to delivering our company's purpose to protect and beautify. The world are reasons, why we are well positioned today and in the future.

Thank you for your continued confidence that PPG. This concludes our prepared remarks and now Rocco would you. Please open the line for questions.

Speaker 5: At this time, I'd like to remind everyone in order to ask a question, please press star and the number one on your telephone keypad. And as a reminder, please limit yourself to one question. We'll pause for just a moment to compile the Q&A roster.

Yes.

Tom I'd like to remind everyone in order to ask a question. Please press Star then the number one on the telephone keypad.

As a reminder, please limit yourself to one question well pause for just a moment to compile the Q&A roster.

Speaker 5: And today's first question comes from David Begleiter with Deutsche Bank. Please go ahead.

And today's first question comes from David Begleiter with Deutsche Bank. Please go ahead.

Speaker 6: Thank you. Good morning. Michael, just on the Q1 guidance, can you parse out a little bit more of the details around the U.S. manufacturing disruptions and what's happening in China and how it's impacting the U.S. economy?

Hi, Thank you good morning, Michael.

Michael just on the Q1 guidance can you parse out a little bit more of the details around the U S manufacturing disruptions and what's happening in China, and how it's impacting the Q1 Q1 earnings guidance.

Speaker 6: Well, I think David right now, we're not seeing a whole lot of difference between what we experienced in the fourth quarter. So, you know, we had about 20 cents of manufacturing negative deviation. You know, if you think about October , November .

Well I think David right now, we're not seeing a whole lot of difference between what we experienced in the fourth quarter. So we had about 20 cents of manufacturing negative deviation.

You know if you think about October and November .

Speaker 6: You know, we have had, in December and January , four times the amount of people out.

We have had in December and January four times, the amount of people out.

Speaker 6: with Omicron, and that includes not just people who are sick with Omicron, but also people that we have to quarantine because they had a close exposure.

Oh my crime.

And that includes not just people who are.

Sick with Omar Crown, but also people that we have to corn team because they had to close exposure.

Speaker 6: And what we're really worried about is, you know, if Omicron gets to China. So if you think about China, they have this zero COVID policy. And our largest plant in PPG is in Tianjin. And just recently they had a small outbreak there. And in two days, they tested 14 million people.

And what we're really worried about is if I'm a crime gets to China. So if you think about China. They had this zero COVID-19 policy.

And our largest plant and PPG is in Tianjin and just recently they had a small outbreak there.

And in two days, they tested 14 million people.

Speaker 6: So if Omicron were to get to China and they continue with their zero COVID policy, that could have a pretty disruptive effect. So we're being very careful in how we look at this. And right now I just, you know, I think Omicron has peaked in the U.S., but it hasn't started to come down.

So if O mccraw, and where to get to China and they continue with their zero Covid policy that could have a pretty disruptive effect. So we're being very careful in how we look at this and right now I just.

You know I think go Micron has peaked in the U S.

But it hasnt started to come down yet.

Speaker 7: Yeah, David, if you think about our Q1 guide, in addition to the production concerns or limitations we've had, we do know that China will be limited somewhat due to the Olympics.

Yeah, David if you think about our Q1 guide.

<unk> to the production concerns or limitations. We've had we do know that China will be a limited somewhat due to the Olympics.

Speaker 7: We are also experiencing significant logistics.

We are also experiencing significant logistics.

Speaker 7: issues in the U.S. and in other parts of the world. We expect those logistics issues to continue into Q1, especially in March.

Issues in the U S and in other parts of the World.

We expect those logistics issues to continue into Q1, especially in March.

Speaker 7: when the overall economy starts to improve seasonally.

The overall economy starts to improve seasonally.

Speaker 7: And for us the month of March is our biggest month by far in the first quarter as is traditional and We have more muted visibility on March than we typically would you know given the given the issues We've seen over the past six to eight weeks

And for Us.

March is our biggest month by far in the first quarter as is traditional.

And we have more muted visibility on March than we typically would given the given the issues we've seen over the past six to eight weeks.

Speaker 5: Thank you. And our next question today comes from Bob Cort with Goldman Sachs. Please go ahead.

Our next question today comes from Bob <unk> with Goldman Sachs. Please go ahead.

Speaker 8: Thank you very much. Good morning, Michael. The. The guy you gave in the 1st quarter.

Thank you very much good morning, Michael.

The guide you gave in the first quarter.

Speaker 8: seems to suggest maybe the raw material inflation aspect is starting to hit a crest, obviously availability and production issues.

It seems to suggest maybe the raw material inflation aspect is starting to hit a crest, obviously availability and production issues.

Speaker 8: compounding problems. Do you see any stability in those ROAs? Have you seen any come down? Are the ones that caused you such trouble in the past the same ones? Is availability improved? Can you give us any inspiration outside of Omicron that maybe the inflation bubble is hitting a ceiling?

You know a compounding problems.

Yeah.

Stability in those raws have you seen any come down are the ones that caused you said trouble in the past the same ones as availability improved can you give us any inspiration outside of OMA crown that maybe the inflation bubble is is hitting a ceiling.

Speaker 6: Yeah, actually, Bob, I think our guide for the first quarter looks at two factors. One, raw materials have leveled off. Obviously, we're watching the recent pop in oil, you know, up to.

Yeah actually Bob I think our guide for the first quarter. It looks at two factors one raw materials have leveled off.

Obviously, we're watching the recent pop and oil.

Uh huh.

Speaker 6: Mid to high 80s so that could have an impact on solvents, but right now. We've we've modeled 20 to 25 percent raw material inflation For the first quarter. We are also modeling that our price is going to be at the same level as raw material inflation so I So I think that's going to be a good number for us We are seeing logistics, and I think I misspoke. I think it's 25 to 30 percent for q1

The mid to high Eighty's, so that could have an impact on solvents, but right now we've we've modeled $20 to 25% raw material inflation for the first quarter. We were also modeling that our price is going to be at the same level as a raw material inflation.

So.

So I think that's going to be a good number for us we are seeing logistics and I think I misspoke, I think it's 25% to 30% for Q1.

Speaker 6: But anyway, so price will equal raw material inflation in Q1, and obviously we're watching logistics costs, but we are feeling pretty good. We're projecting price to be up between 9 and 10 percent.

But anyway, so price will equal raw material inflation in Q1, and you know.

Obviously, we're watching logistics costs, but we are feeling pretty good we're projecting prices to be up between nine and 10%.

Yeah.

Speaker 5: Thank you. And our next question today comes from Chris Parkinson in Mississippi. Please go ahead.

Our next question today comes from.

Chris Parkinson at Mizuho. Please go ahead.

Speaker 9: Thank you. Good morning. You know, Michael, it seems that the goalposts keep on moving on the both the costs and the procurement front, but it really appears that it's really the raw material shortages freight, as you highlighted, you know, electricity rates in varying capacities, depending on geography and to, I guess, to a slightly lesser extent labor, you know, I know you've already.

Thank you and good morning.

You know Michael it seems that the goalposts to keep on moving on the both the costs and the procurement fronts, but it really appears that the it's really the raw material shortages freight as you highlighted you know electricity rates in various capacities to pay on geography, and two I guess to a slightly lesser extent labor.

I know you've already yes it.

Speaker 9: have been talking about, you know, getting an achieving price, but can you quickly comment on those other cost variables, you know, once you just hit it on a little bit, how we should be thinking about those heading through the balance of the first half of 2022? So, it's a short-term question. The second thing is just, you know, are there any other strategic actions that you and your team can take to potentially alleviate these challenges in the future? Thank you very much.

It had been talking about it she getting.

Getting in achieving price, but can you quickly comment on there's other cost variables. You know once you just hit it on the little bit how we should be thinking about those heading through the balance of the first half of 2022.

So as a short term question and the second thing is just are there any other strategic actions that you and your team can take to potentially alleviate these challenges are in the future. Thank you very much.

Speaker 6: Well, what I would tell you is, you know, freight is the single biggest challenge we have right now, truck drivers not showing up. So you don't get the contract price that you have negotiated, then you end up having to buy spot loads.

Well, what I would tell you is you know freight is the single biggest challenge we have right now truck drivers not showing up so you don't get the contract price that you have negotiated and then you end up having to buy spot loads.

Speaker 6: That's one. We are seeing labor inflation. That's another one. I would tell you that we anticipate warehousing inflation, although we always try to do those as a long-term contract, but any of that roll off this year, we'll be looking for an increase in that space.

That's one we are seeing labor inflation. That's another one I would tell you that we anticipate warehousing inflation, although we always try to do those as a long term contract, but any of that roll off this year will be a you know looking for an increase in that space.

Speaker 6: Overall, I would tell you, though, those have all been anticipated, so there's nothing that we haven't anticipated in regards to that inflation. Our team is well-versed that we're not looking to get just raw material inflation, but raw material and total inflation from our customers. And we've been very explicit in those discussions with our customers as well.

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Overall I would tell you, though those are all been anticipated. So theres nothing that we haven't anticipated in in regards to that inflation. Our team is well versed that we're not looking to get just raw material inflation, but raw material and total inflation from our customers and we've had been very explicit in those discussions with our customer.

For us as well.

Speaker 7: So I think that would be the first part. I don't know, Vince, if there's anything you want to add. Yeah, Chris. Just to stratify the total cost pools here, again, raw materials remain significant. 60%, 70% of our cost of goods sold. If you look at labor, it's a mid-single-digit percent of our sales, a little higher, obviously, in architectural, given the stores and the feet on the street, a little lower in some of our OEM businesses. And logistics costs is probably mid- to high-single digits.

So I think that would be the first part I don't know Vince if there's anything you want to add yes, Chris just to stratify. The total cost pools here again raw materials remained significant 60, 70% of our cost of goods sold if you look at labor. It's a mid single digit percent of our sales a little higher obviously an architect.

Given the stores and the feet on the street, a little lower than some of our OEM businesses and logistics cost is probably mid to high single digits as a percent of sales again, the distribution businesses like architectural refinish a little higher.

Speaker 7: percent of sales, again, the distribution businesses like architectural refinished a little higher, the OEM businesses a little lower. So these labor and logistics costs, while they're going up and we're covering them with price, they're much smaller cost components for the company.

<unk> business was a little lower so these are labor and logistics cost, while they are going up and we're covering them with price theyre much smaller cost components.

For the company.

Yeah.

Speaker 5: Thank you. And our next question today comes from Ghansom Khanjabi with Baird. Please go ahead.

Thank you and our next question today comes from Ghansham Panjabi with Baird. Please go ahead.

Speaker 10: Thank you. Good morning, everybody. You know, just high-level, given all the disruptions of the customer side and the incremental impact from Omicron, will first half 2022, the way you see it at this point, be more pressure than the back half of last year, or do you think there'll be an easing of the bottlenecks as the first half unfolds? I guess I'm asking because you have massive labor issues at the homebuilder level, you know, rolling shutdowns and auto EM, and various degrees of logistical constraints. How should we think about that?

Thank you and good morning, everybody.

Just high level, given all the disruptions at the customer side and the incremental impact from omicron, well first half 'twenty two the way you see it at this point be more pressured in the back half of last year or do you think there'll be an easing of the bottlenecks as the first half unfolds I guess I'm asking because you have massive labor issues at the homebuilder level rolling shutdowns in auto OEM.

In various degrees of logistical constraints, how should we think about that.

Speaker 6: Gunshim, I think the single biggest thing about Omicron, let me just give you an example about how difficult it is to be a plant manager. The toughest job in PPG right now is a plant manager.

Ghansham I think that the single biggest thing about omicron, Let me just give you. An example about how difficult it is to be a plant manager the toughest job in PPG right now as a plant manager.

Speaker 6: They wake up in the morning, check their phone to see how many people call off sick, you know, and then they get to work, they go through the.

They wake up in the morning check their phone to see how many people called off sick you know and then they get to work they go through the.

Speaker 6: You know, dock area to see how many trucks didn't get picked up and then they go to the receiving areas and find out what didn't come in that was supposed to.

You know dock area to see how many trucks didn't get picked up and then they go to the receiving areas and find out what didn't come in that was supposed to.

And then they move it into the plant and the supply chain people are telling you that they're going to have to make smaller batches because of lack of raw materials and then the same.

Speaker 6: Sales team is telling them, oh my God, if we don't get paint out the door, here's how many customers we're going to impact. So by the time they get to their desk before they even have a morning meeting, they've had to overcome a number of issues, but.

Sales team is tell them Oh My God you know, we if we don't get paid out the door. He was how many customers. We're gonna impact. So you know by the time they get to their desk before they even have a morning meeting.

<unk> had to overcome a number of issues but.

Speaker 6: The contrary to that is when I think about your first quarter to second quarter question, you know, what do I see improving? I see automotive OEM definitely improving. You know, the chip shortage is going to continue to get marginally better. They're getting better at handling it. So that is going to get better.

Contrary to that is when I think about your first quarter to second quarter question, you know what do I see it improving I see automotive OEM definitely improving the chip shortage is going to continue to get margin even better they are getting better at handling it so that is going to get better.

Speaker 6: Refinish you know clearly this winner that we're having right now is a positive and so Refinish is going to get better first quarter to second quarter

Refinish you know clearly this winter that we're having right now is a positive and so refinish is going to get better first quarter to second quarter.

Speaker 6: At some point, China is going to approve the 737 MAX. And when they fully approve that, that is going to be a positive for our aerospace business because Boeing, we anticipate, will increase build rates.

At some point, China is going to approve the 737 Max.

And when they fully approved that that is going to be a positive for our aerospace business because Boeing we anticipate will increase build rates.

Speaker 6: You know, also, we are seeing and you've heard the CEOs of the airlines talk about how people are already booking post-Omicron, so we expect the MRO of our aerospace business to continue to improve first quarter to second quarter. Our packaging business...

Also we are seeing and you've heard the Ceos of the airlines talk about how people are already booking post omicron, So where we expect the MRO of our aerospace business to continue to improve first quarter to second quarter.

Our packaging business you know, we could continue to see a strong push for sustainability. There are a number of new packaging plants that will be opening up in 2022.

Speaker 6: You know, we could continue to see a strong push for sustainability. There are a number of new packaging plants that will be opening up in 2022.

Speaker 6: And so to transition from plastic to metal packaging, away from single-use plastic, is continuing. And that is going to be a positive. So those are the positives that I see coming up. Now, clearly, you know the

And so to transition from plastic to metal packaging away from single use plastic is continuing and that is going to be a positive. So that those are the positives that I see coming up now clearly you know the marine new builds in China are going to be significant but we don't anticipate that to be a first quarter to second quarter event.

Speaker 6: Marine new builds in China are going to be significant, but we don't anticipate that to be a first quarter, second quarter event. I think that's more of a back half of the.

I think that's more of a back half of the year.

Speaker 5: Thank you. And our next question today comes from John Roberts at UBS. Please go ahead.

Next question today comes from John Roberts of UBS. Please go ahead.

Speaker 7: Thanks. Michael, I think Comex, when you bought it, had 80% of their own resin in plastic pail production.

Thanks, Michael I think comex when you bought it had 80% of their own resin in plastic pail production.

Speaker 6: You were obviously a lot lower in the other regions. What's the right level of back integration for PPG?

You were obviously a lot lower than the other regions, what's the right level of back integration for PPG.

Speaker 6: Well, I would tell you that that's not a precise answer because you have to balance the capital that you put in to build additional resin capacity into the cost of buying.

Well I would tell you that that's not a precise answer because you have to balance the capital that you put in to build additional resin capacity into the cost of buying it.

Speaker 6: And so for us, we're actually getting more capacity in Mexico. We're adding a little bit more capacity in the US. We don't see the need to do that in Europe because the supply availability is pretty good in Europe . And from Asia, it is certainly not a priority for us. So it is a balance. So I would tell you that we'll be higher in internally sourced resins in 22 and 23 than we are today.

And so for US, we're actually getting more capacity in Mexico.

We're adding a little bit more capacity in the U S. We don't see the need to do that in Europe because of supply availability is pretty good in Europe .

And from Asia. It is certainly not a priority for us so it is a balance.

So I would tell you that our will be higher and internally sourced resins.

And 'twenty, two and 'twenty three than we are today.

Yeah.

Speaker 5: Thank you. And our next question today comes from Michael Sisson with Wells Fargo. Please go ahead.

Thank you and our next question today comes from Michael Sison of Hulu.

Wells Fargo. Please go ahead.

Hey, guys good morning.

Speaker 11: Michael, just curious if you could help us sort of bridge the gap to the $9. I suspect a good portion of that will be closing that pricing raw material gap, but any help in sort of, you know, how much of the walk gets us there on that, and then, you know, volume, cost.

Mike I was just curious if you could help us sort of bridge the gap to the $9 at I suspect a good portion of that will be closing that pricing raw material gap, but any help in sort of how much of the work gets.

Sorry, [laughter] gets us there on that and then volume.

Our cost savings and such thanks.

Speaker 7: Yeah, Mike, this is Vince. I'll start and Michael can add some color. The biggest issue that we've talked about for the last couple quarters is just a return on normalcy on some of our biggest businesses.

Yeah, Mike This is Vince I'll start and Michael can add some color.

The biggest issue that we've talked about for the last couple of quarters is just a return of normalcy on some of our biggest businesses.

Speaker 7: Auto OEM, Refinish, Aerospace. Michael gave you some color a few minutes ago around how we see that just from 1Q to 2Q. But those businesses are down 10% to 15% or more in the case of Aerospace, first 2019 levels. We do see strong.

Auto OEM Refinish Aerospace Michael gave you some color a few minutes ago around how we see that just from <unk>, but those businesses are down 10% to 15% or more in the case of aerospace for 2019 levels, we do see strong.

Speaker 7: strong demand patterns in those businesses. And to get to the $9, we need those businesses to get closer to 2019.

Strong demand patterns in those businesses and to get to the $9, we need those businesses to get closer to 2019.

Speaker 7: You know, one of the other benefits we expect is we had negative price raw exposure all of 2021. As Michael said, we're cresting on raws, prices are getting close to raws or exceeding them depending on the business. So we expect some year-over-year recovery there. And then if you look over the past couple of years, Mike, we've taken about $250 million of structural cost out via restructuring.

And one of the other benefits, we expect as we had negative price raw exposure all of the whole of 2021.

As Michael said, we're cresting on raws prices are getting close to raws are exceeding them depending on the business. So we expect some year over year recovery there.

Then if you look over the past couple of years, Mike we've taken about $250 million of structural cost out.

We are restructuring we've taken out about another $100 million to $125 million of overhead cost out. So as volume returns, we expect a higher incremental margin than we've had historically. So those are three of those are three of the bigger pillars that will get us to the $9.

Speaker 7: We've taken out about another $100 million to $125 million of overhead costs out. So as volume returns, we expect a higher incremental margin than we've had historically.

Speaker 7: So those are three of the bigger pillars that will get us to the $9. Again, a return on normalcy is the biggest one of those.

Then I'll return to normalcy is the biggest one of those.

And Mike I would just add that when you think about the volume.

Speaker 6: You know, you can use some external sources like OrinBoss, and then you could think about how a bigger return in our impacted businesses will be a positive for us. And finally, productivity. Productivity is one item that we're very good at, and this obviously wasn't there in the 2021.

You know you can use some external sources like or in boss and then you could take about how a bigger return and are impacted.

Impacted businesses will be a positive for us and finally productivity our.

Productivity is one item that we're very good at and this obviously wasn't there in the 2021 time period.

Speaker 11: time period. Yeah, and Michael, I'll add one more, our synergies that we've taken up in this quarter, we're now targeting $150 million in total, so that'll also provide some assistance in getting to that $9.

And Michael I'll add one more our synergies that we've taken up in this quarter. We're now targeting $150 million in total so that will also provide some assistance in getting to that $9.

Thank you and our next question today comes from John Mcnulty with BMO. Please go ahead.

Speaker 12: Thank you. And our next question today comes from John McNulty with BMO. Please go ahead. Yeah, thanks for taking my question. Michael, maybe you can help us to think about the big Home Depot win that you had. Can you help us to maybe scale the opportunity there? Also, maybe give us a little bit of color in terms of how big the initial fill is and how much incremental help you might get from that. Thanks very much.

Thanks for taking my question, Michael maybe you can help us to think about the big home depot win that you had can you help us to maybe scale. The opportunity. There also maybe give us a little bit of color in terms of how big the initial fill isn't how much incremental help you might get from that thanks very much.

Speaker 6: So, John , the way I would think about it is, first of all, we had a very extensive test. So we started out in Tampa, Denver, Albany, so we had about 80 plus in that market.

So John the way I would think about it is first of all we had a very extensive tests. So we started out in Tampa Denver Albany. So we had about 80 plus stores in that market.

Speaker 6: That went exceptionally well. And then we expanded that to Indy, New Orleans, and Detroit. We added about another 80 stores. So that's, let's call it 160 stores. And they were very pleased. We were able to share internal data between the companies about who comes into Home Depot, who buys a number of paint sundry items, but do not buy paint.

That went exceptionally well and then we expanded that to indeed in New Orleans in Detroit, We added about another 80 stores. So that's let's call it 160 stores.

And are they were they were very pleased we were able to share internal data between the companies about who comes into home depot, who buys a number of paint sundry items, but do not buy paint.

Speaker 6: uh... we're also able to to uh... pinpoint who comes in the store and buys what type of paint products that if they optimize their purchase they'd be able to uh... do a better job in productivity and as a result of that we are able to target uh... not winning in home depot but winning externally and that is the number one thing that home depot and ppg want to do is win externally

We were also able to pinpoint who comes in the store and buys what type of paint product set if they optimize their purchase they'd be able to do a better job in productivity and as a result of that we are able to target are.

Not winning in home depot, but winning externally and that is the number one thing that home depot and PPG and want to do is win externally.

Speaker 6: And so this is going to be a significant win for us. We will be outpacing the pro growth for many years to come with the support of Home Depot. So we've basically taken our 800 stores, their 2,000 plus stores, and formed a network. And this will allow them to significantly grow their share in the pro paint market.

And so this is gonna be a significant win for US we will be outpacing the pro growth for many years to come with the support of home depot. So we basically taken.

Our 800 stores, there 2000, plus stores and formed a network and this will allow them to significantly grow their share in the pro paint market.

Speaker 7: And if I could add, this is Vince, a couple of things for us strategically.

If I could add.

Vince a couple of things for us strategically.

Speaker 7: You know, this is consistent with our heavy distribution model.

This is consistent with our heavy distribute distribution model and an asset light format, using our existing brick and mortar.

Speaker 7: an asset light format using existing brick and mortar. This is also consistent with our digital.

This was also consistent with our digital strategy.

Speaker 7: We're able to use digital platforms for both us and our big customers. Probably one of the more exciting things that Michael alluded to is, as we compared CRMs or customer data, we do know that painters of all size go into the Home Depot. As Michael alluded to, they're not always buying paint today, but painters of all size, all pro painters of all size are going into Home Depot for something.

We were able to use digital platforms for both us and our big customers.

And probably one of the more exciting things that Michael alluded to is as we compared.

CRM or customer data and we do know that painters of all size go into the home depot as Michael alluded to they are not always buying paint today, but.

Painters are all size all pro painters of all size are going into home depot for something so this will we hope alleviate their need to.

Speaker 7: So this will, we hope, alleviate their need to visit.

To visit.

Speaker 7: two different or three different retail outlets to get their full need.

Two different or three different retail outlets to get their full needs.

Speaker 6: which will drive productivity for the pro painter. That's what this is all about. So they can spend more time painting and less time driving the story.

Which will drive productivity for the pro painter. That's what this is all about so they can spend more time painting and less time driving the stores.

Thanks.

Speaker 5: Thank you. And our next question today comes from Stephen Byrne at Bank of America Securities. Please go ahead.

Question today comes from Stephen.

I used to American Securities. Please go ahead.

Speaker 1: Yeah, I'd like to continue this discussion on this, this Home Depot relationship. Some of these really large pink contractors.

Yes.

We knew this discussion on this this home depot relationships some of these really large screen contractors.

It's from.

Speaker 1: you know, free delivery to the job site and, you know, five gallon containers.

Free delivery to the job site.

Five gallon containers.

Speaker 8: uh you know features that you may provide from your stores but home depot doesn't is is that going to change and and if so

The features that you may provide from your stores, but home depot dozens.

<unk> going to change.

Change and if so.

Speaker 13: Will that service be provided from your stores or will Home Depot provide that? Does it depend on who's digital app is?

Well that service can be provided from your stores or will.

Home depot provided that does it depend on who is digital.

Yep.

<unk> is involved in this.

Speaker 6: Yeah, actually, we will have fives in the store. So if you go into Home Depot right now, you'll see PPG five-gallon containers already in the store. We will be coordinating with Home Depot on delivery as appropriate. And we also have service level agreements with our own stores to provide a fast turnaround to our people that are ordering digitally. And of course, Home Depot already has this on their digital apps as well.

Yeah actually we will have fives in the store. So if you go in a home depot right now you'll see P. P. G. Five gallon container is already in the store, we will be coordinating with the home depot on delivery as appropriate and we also have service level agreements with our owned stores to provide a fad.

<unk> turnaround to our people that are ordering digitally and of course home depot already has this on their digital apps as well. So this will continue to be a.

Speaker 6: So this will continue to be a new dynamic in how paint is delivered to our major propainters.

New dynamics and how paint is delivered to our major pro painters.

Speaker 5: Thank you. And our next question today comes from Laurence Favre with BNP Exane. Please go ahead.

Thank you and our next question today comes from Laurence for whether it be actually please go ahead.

Speaker 14: Yes, good morning. Michael, in the slides, you highlighted two businesses where Q1 is expected to be better than Q4, Otozo Yen and Architectural EMEA. You've talked quite a bit about Otozo Yen. Could you say a little bit more about the Architectural EMEA line?

Yes, good morning.

Michael in the slides you highlighted Q.

Businesses, where Q1 is expected to be better than Q4 with total yeah, and an architectural EMEA, you've talked quite a bit the bounce.

Could you say a little bit more bounce to the architectural EMEA line.

Speaker 6: Sure, Laurent. And what you are starting to see in Europe is a continued growth in the Pro Painter in Europe . And DIY is kind of normalized, but Pro is picking up.

Sure Laura and what you are starting to see in Europe is of continued growth in the pro painter in Europe .

And it's a DIY is kind of normalize but pro is picking up and you know even though there have been a small amount of lockdowns in Europe that.

Speaker 6: And even though there have been a small amount of lockdowns in Europe , that has not really impacted the order pattern so far in the European market, plus we have the growth that we are expecting to see in Ticarilla. So we have a pretty good line of sight.

That is not really impacted the order patterns so far in the in the European market plus we have the growth that we are expecting to see an up tick of realized so we have a pretty good line of sight to their what they call their pre selling season and that has worked out pretty well and.

Speaker 6: to their, what they call their pre-selling season. And that has worked out pretty well. And so we're expecting to have a pretty good first quarter, second quarter in European architecture.

So we're we're expecting to have a pretty good.

First quarter second quarter and European architectural.

Speaker 5: Thank you. Our next question today comes from Frank Mitch with Permium Research. Please go ahead.

Thank you and our next question today comes from Frank Mitsch Fermium Research. Please go ahead.

Speaker 12: Good morning, gentlemen, and let me give a quick shout-out to Mr. Knavish. Congrats, if you're listening. Michael, you outlined why, you know, the last couple of quarters, we've seen margin compression. And in a release, you mentioned that you see a path to returning to prior peak operating margins and also exceeding them. I was wondering if you could offer a kind of a glide path or a timeline that you see the margin improvement, you know, over the next couple of years.

Good morning, gentlemen, and let me give a quick shout out to Mr. Knievel, Congrats if youre listening Michael you you outlined why you know the last couple of quarters, we've seen margin compression and in the release you mentioned that are that you are you see a path to returning to prior peak operating margins and also exceeding them.

I was wondering if you could offer a kind of a glide path or a timeline that you that you see the margin improvement over the next couple of years.

Speaker 6: Well, I think what you should think about, Frank, is that every quarter from this point out, we should start to see improvement in the margin.

Well I think what you should think about Frank is that every quarter from this point out we should start to see improvement in the margins.

Speaker 6: So we're anticipating raw materials are flattening out right now. Our price increases will continue. So we've had 19 quarters in a row of positive price.

So we're anticipating raw materials are flattening out right now.

Our price increases will continue so we've had a 19 quarters in a row of positive price.

Speaker 6: You know, so we'll be stacking 2021 out there as well. And so that's gonna be the start of it. We'll be getting the manufacturing behind us.

So we will be stacking 2021 out there.

As well and so that that's going to be the start of it we'll be getting the manufacturing behind us.

Speaker 6: Those issues will be behind us as well. So that'll be a positive

Those issues will be behind us as well so that'll be a positive and then we have a number of productivity programs. The capital that we're wanting to put into the business to drive more productivity. So you take a less need less labor to get paying out the door.

Speaker 6: And then we have a number of productivity programs, capital that we're wanting to put into the business to drive more productivity so you need less labor to get the paint out the door. So that will also be a positive. So we've talked about being over $9. I don't know why we wouldn't be there in 2023.

So that will also be a positive. So we've we've talked about being over $9 I don't know why we wouldn't be there in 2023.

Speaker 7: But I think, Frank, just to, you know, again, the challenges we faced the past three or four quarters, you know, we've been playing significant catch up on pricing, again, that's

But I think Frank just.

Again, the challenges we faced over the past three or four quarters, we've been playing significant catch up on pricing.

Again, that's we think we're normalizing there to closer to parity.

Speaker 7: We think we're normalizing there to closer to parity this quarter and in successive quarters we hope to get some recapture. So that headwind should turn into at least a neutral.

This quarter successive quarters, we hope to get some recapture.

So that headwind should turn into at least a neutral.

Speaker 7: It's not a catch-up tailwind. The manufacturing, again, we expect to normalize at some point, we hope.

Ketchup tailwind the.

The manufacturing again, we expect to normalize at some point we hope.

Speaker 7: in late Q1, early Q2, but the real driver for us is that volume.

In late Q1 early Q2, but the real the real driver for us is that volume.

Speaker 7: And again, we're down significantly. We're down probably 5%, 6% versus 2019 still with several of our big businesses, as I alluded to earlier. And those are gonna come back at nice incrementals. And then as John Bruno mentioned, we'll have the synergy capture latter part of this year heading into next year. So these will be stacked sequentially in that manner.

And again, we're down significantly we're down probably 656% versus 2019 still with several of our big businesses as I alluded to earlier and those are going to come back at nice Incrementals and then as John Bruno mentioned, we will have the synergy capture latter part of this year heading into next year. So these will these will be stacked sequentially in that in that manner.

Speaker 5: Thank you. And our next question today comes from Kevin McCarthy and Vertical Research Partners. Please go ahead.

Thank you and our next question today comes from Kevin Mccarthy Vertical Research partners. Please go ahead.

Speaker 15: Yes, good morning. Michael, just to follow up on pricing, you're making some good progress there. I think you mentioned 9 to 10 percent as an outlook for the first quarter.

Yes, good morning, Michael just to follow up on pricing, you're making some good progress. There I think you mentioned, a 9% to 10% as an outlook for the first quarter.

Speaker 15: on pricing. So, two parts. Where are you most happy with the realizations and where do you think you might have more work to do? And then, as we think about that 9% to 10% level for the first quarter,

On pricing so to two parts.

Where are you most happy with the realizations and then where do you think you might have more work to do and then as we think about that 9% to 10% level for the first quarter. How do you think that might trend as 2022 progresses.

Speaker 15: How do you think that might trend as 2022 progresses?

Speaker 15: you know, would you expect that level to be sustained, move higher, or regress in a scenario where the raw pressure might cool off?

Would you expect that level to be sustained move higher or or regress in a scenario, where the raw pressure might cool off.

Speaker 7: Kevin, this is Vince. Let me start. The 9 to 10% in the Q1, if you look at it on a two-year stack, it's closer to 11 to 12%.

Kevin This is Vince let me start the 9% to 10% in Q1, if you look at it on a two year stack.

Looser to 11% to 12%. So I think when you when we talk about pricing from here going forward, we're going to have to look at it on two year stack because we did get pricing traction early in 2021, So we'll be lapping that as we go throughout the year. So again that two year stack is probably a better marker.

Speaker 7: So I think when we talk about pricing from here going forward, we're going to have to look at it on a two-year stack because we did get pricing traction early in 2021. So we'll be lapping that as we go throughout the year. So again, that two-year stack's probably a better marker on a go-forward basis. And that, again, 11% to 12% is what we're expecting on a two-year stack beginning in Q1. I'll let Michael talk about the different businesses.

On a go forward basis, and that again, 11%, 12% is what we're expecting on a two year stack beginning in Q1 and I'll, let Michael talk about the different businesses.

Speaker 6: Yeah, I would say, Kevin, the businesses are probably pretty much what you would expect, right? So, you know, we've been working proactively in our refinished business and we're able to consistently get price and refinish PMC. We've done a really good job in PMC, except in China. China has been a challenge for us with people chasing volume. So that would be the one area I'd say we need to do a better job in.

Yeah, I would say Kevin the businesses are probably pretty much what you would expect right. So we've been working proactively in our refinish business and we're able to consistently get price in refinish M. P. M. C. We've done a really good job in PMC, except in in China, China has been a channel.

For us with the.

People chasing volume so that would be the one area I would say, we need to do a better job in.

Speaker 6: And then when you think about architectural, we've consistently done a good job on that around the world. I have no concerns in that regard. I would tell you that, you know, we've gotten traction in automotive OEM, and so automotive OEM

And then when you think about architecture, what we've consistently done a good job on that around the world I have no concerns in that regard.

I would tell you that you know we've gotten traction in automotive OEM.

And so automotive OEM was very close to the company average in the fourth quarter and they expect to be at the company average in the second quarter. So that's been a an improvement I would say on the packaging side, we need to do a little bit better we have more inflation in packaging because it has higher epocrates component.

Speaker 6: was uh... very close to the company average in the fourth quarter and they expect to be at the company average in the second quarter so that's been a an improvement uh... i would say on the packaging side we we need to do a little bit better we have more inflation in packaging because it uh... has a higher epoxy component

Speaker 6: uh... and i've been pleased with the uh... industrial side but you know that the around the world way of thinking about this is china has always been the most challenging you know on the other automotive oem side uh... you know we have a number of competitors that are still chasing by instead of uh... you know pushing price so we see that and uh... so we're conscious of what's going on over there

And I've been pleased with the industrial side, but.

The around the world way of thinking about this as China has always been the most challenging.

On the automotive OEM side.

We have a number of competitors that are still chasing volume instead.

You know pushing price so we see that and so we're conscious of what's going on over there.

Speaker 7: Yeah, if I could just add on on some of the auto businesses, you know, for us, our mission is to ensure we're getting good value for our products.

If I could just add on on some of the auto businesses for US our mission is to ensure we're getting good value for our products.

Speaker 7: If we don't see value, we're going to shed some of the customer businesses. We know some of the competition, especially in China, is not doing that. Our marker is to remain a good, solid, profitable automotive business.

We don't see value, we're going to ship some of the customer businesses. We know some of the competition, especially in China is not doing that.

Our markers to remain.

Good solid profitable automotive business.

Speaker 5: Thank you. Our next question today comes from Vincent Andrews and Morgan Stanley . Please go ahead.

Thank you. Our next question today comes from Vincent Andrews with Morgan Stanley . Please go ahead.

Speaker 7: Thank you and good morning. A couple of things on your acquisitions. One, the businesses you've already brought into the fold, how are you doing there in terms of getting the price-cost relationship to the company level? And then just on capital allocation, I think the last time or last quarter, it seemed like M&A was less likely this year versus last year, just given maybe where the bid-ask spread was, but any update there as well?

Thank you and good morning, a couple of things on your acquisitions, one the businesses you've already brought into the fold.

How are you doing there in terms of getting the price cost relationship to the company level and then just on capital allocation I think the last time or last quarter. It seemed like M&A was less likely this year versus last year, just given maybe you know where the bid ask spread was but any update there as well please.

Speaker 6: Okay, let's do these by the acquisitions. So we'll start with the little ones. So Versaflex, well ahead, been exceptionally pleased with that team.

Okay, let's do these by the acquisitions. So we'll start with the little ones. So versus a flex are well ahead been exceptionally pleased with that team.

Speaker 6: The two in Germany, Ceylon and Borbog, unfortunately the prior management before our time had made commitments for 2021. So the good news is 2021 is behind us, 2022 price increases will be significant and is already in place. So I'm pleased with where we are starting, not pleased obviously that we had to wait a number of months to make that happen.

Two in Germany settle on and Boardwalk. Unfortunately, the prior management to before our time had made commitments for 2021.

So the good news is our 2021 is behind US 2022 price increases will be significant and is already in place. So so I'm pleased with where we are starting not pleased obviously that we had to wait to a number of months to make that happen.

Speaker 6: Traffic Solutions, that's the old Innisfint, they've done a really good job on that. They've really have changed the way the industry thinks about getting value for paint, and I think that has really helped out a lot. And then finally, Tickerilla, we're doing very well there as well. I've been pleased with the team.

Traffic solutions, that's the old and it's Flint that they've got a really good job on that day, but really have changed the way the industry thinks about getting value for paint and I think that has really helped out a lot and then finally pickerill Oh, we're doing very well there as well I've been pleased with the team.

Speaker 6: And, you know, we had a good pricing realization in the fourth quarter, and we're starting out Q1 in good shape as well. So net-net, you know, slow on a couple businesses due to prior management commitments, but overall for 2022, I feel very good about it.

And we had a good pricing realization in the fourth quarter and we're starting out Q1 and in good shape as well. So net net you know a slow on a couple of businesses due to prior management commitments, but overall for 2022 I feel very good about it.

Speaker 7: Yeah, and just on cash deployment, first of all, we're still reviewing what I would call an active acquisition pipeline that remains, if available, and at the proper price priority for us, we'll continue to vet those and use.

Yeah, and then just on the on cash deployment.

First of all we're still.

Reviewing.

What I would call an active acquisition pipeline that.

That remains available and at the proper price a priority for US we will continue to vet those and use.

Speaker 7: remainder as a flywheel. We'll certainly look to mop up dilution this year, as we've tried to do in prior years, at least on a cumulative basis.

The remainder is a flywheel.

We will certainly look to mop up dilution this year.

We've tried to do in prior years at least on accumulative basis.

Speaker 7: We have some debt to service, so we'll do that as well.

We have some debt to service so we will do that as well.

Speaker 7: But right now we have a strong balance sheet and we'll use that for shareholder accretion as we go throughout the year.

But right now we have a strong balance sheet and we'll use that for shareholder accretion as we go throughout the year.

Speaker 5: Thank you. Our next question today comes from Arun Vizwanathan with RBC Capital Markets. Please go ahead.

Thank you. Our next question today comes from a room or room, there's loosen.

Leasing capital markets. Please go ahead.

Hey, guys. Thanks for taking my question.

Speaker 16: Hey guys. Thanks for taking my question. I'm just curious, I guess on refinish, have you guys seen a noticeable drop off in the last couple of months because of Omicron and similarly for aerospace? Has that happened as well? And if so, I guess, could you offer any thoughts on when would that reverse, I guess?

Curious I guess on refinish have you guys seen a noticeable drop off in the last couple of months because of omicron and similarly for our aerospace that happened as well and if so I guess could you offer any any thoughts on when would that reverse I guess.

Speaker 6: No, actually, Arun, on both those businesses, we have substantial backlogs. We finish the year and refinish, especially in Europe and the US.

No actually a ruin on both those businesses we have substantial backlogs.

We finished the year in refinish, especially in Europe , and the U S with substantial backlogs inventories are low winter has been helpful to us, especially here in the U S. So we're anticipating a good start to our refinish business in 2022.

Speaker 6: with substantial backlogs. Inventories are low. Winter has been helpful to us, especially here in the U.S., so we're anticipating a good start to our refinished business in 2022.

Speaker 6: And we finish with a very substantial backlog in aerospace. The challenge in aerospace has been the airlines have been ordering MROs, especially transparencies and coatings.

And we finished with a very substantial backlog in aerospace the challenge in aerospace has been the airlines have been ordering MRO is especially transparencies and coatings.

Speaker 6: and Codings were able to mostly keep up but on transparencies, you know We're having a challenge hiring enough people. It takes a lot longer to train people to build transparencies and so I would tell you that pretty substantial backlog and that's only going to get bigger in the first half of The year and we anticipate both of those businesses doing better in 2022 than they did in 2021

And coatings were able to mostly keep up but on transparencies, we're having a challenge hiring enough people and it takes a lot longer to train people to build transparencies and so I would tell you that a pretty substantial backlog and that's only going to get bigger in the first half of the year.

And we anticipate both of those businesses doing better in 2022 than they did in 2021.

Speaker 7: Yeah, Arun, and this is Vince again, if you think about one of the things Michael alluded to in the opening comments.

Yeah. Arun this is Vince again, if you think about one of the things Michael alluded to in the opening comments the inventory channels in almost every one of our end markets is very depleted.

Speaker 7: the inventory channels in almost every one of our end markets.

Speaker 7: very depleted the most visible

The most visible.

Speaker 7: economically is in the automotive business where dealer lots are void of cars.

<unk> is in the automotive business, where new dealer lots are void of cars.

Speaker 7: We know refinish is extremely light in terms of inventory, not only to complete the current mix of cars that are in need of repair, but also to replenish with a very low distribution inventory level. Michael talked about aerospace MRO, very light inventory that needs to be replenished with safety stock.

We know refinish is extremely.

Light in terms of inventory not only to complete the current.

Mix of cars that are in need of repair, but also to replenish what's a very low distribution inventory level, Michael talked about aerospace MRO very light inventory that needs to be replenished with safety stock.

Speaker 7: The architectural businesses, no matter where you are in the world, the inventory at market is very light.

The architectural businesses no matter, where you are in the world the inventory at market is very light.

Speaker 7: And so in general industrial markets some of those have very very low safety stock if any at all So we're very comfortable If we could make product we could sell product

And so in general industrial markets. Some of those have very very low safety stock if any at all so we're very comfortable if we can make product we can sell product.

Speaker 7: And we do feel hopefully some of the supply chain issues will resolve.

And we do feel hopefully some of the supply chain issues will resolve in the back half of Q1 early Q2 and allow us to to begin shipping.

Speaker 6: in the back half of Q1, early Q2, and allow us to begin shipping. We certainly need to get the labor availability back, but inventory replenishment is a big story for 2022. Yeah, the other thing I would tell you, Arun, that maybe people don't recognize is with used car prices so high.

We just needed to get the labor availability back, but inventory replenishment is a big story for 2022, yeah. The other thing I would tell you ruin that maybe people don't recognize it with used car prices so high.

Speaker 6: You know, people are repainting cars that get in accidents that might have previously been totaled. And so we're seeing a number of used cars get painted and, you know, historically where that might have been what I call a value paint, a lot of people are now coming in and demanding premium paint. So, you know, the refinished business is in really good shape.

People are repainting cars that get in accidents that might have previously been totaled.

And so we're seeing a number of used cars get painted and you know historically, where that might've been a what I'd call a value paint a lot of people coming in and demanding.

Premium paint so the refinished businesses and is in really good shape.

Okay.

Speaker 5: Thank you. And our next question today comes from Duffy Fisher at Barclays. Please go ahead.

Thank you and our next question today comes from Duffy Fischer of Barclays. Please go ahead.

Yes, good morning.

Speaker 17: Yes, good morning. Question around the foregone volume. So your volumes were negative four. I think everybody would argue if you didn't have or the industry didn't have issues, that number would have been positive. So maybe there was, you know, five, six, seven percent foregone volume.

Question around the foregone volumes. So your volumes were negative for I think everybody would argue if you didn't have or the industry didn't have the issues that number would've been positive. So maybe there was 567% forgone volume, but my question is what's the mix in that volume were you able to push those scarce.

Speaker 17: But my question is, what's the mix in that volume? Were you able to push those scarce resources into higher margin products, so maybe that foregone volume carries a lower margin? Or maybe just help us understand the margin that that volume would have carried versus the corporate average and how the mix is different in that than what you're actually selling.

Resources into higher margin products, so maybe that forgone volume carries a lower margin or maybe just help us understand that the margin that that volume would have carried versus the corporate average and how the mix is different than that then what you are actually selling.

Speaker 6: Jeff, the first thing is, I'd probably take a little bit of...

Duffy the first thing is I'd, probably take a little bit of.

Speaker 6: exception to that, minus four going to a plus. I don't think that's likely. I think a minus four would have probably been, you know, minus one or at best because there's a number of other issues going on in the market right now.

Exception to that minus four go onto a plus I don't think that's likely I think a minus four would've probably been minus one or.

At best because there's a number of other issues going on in the market right now.

Hum.

Speaker 6: you know to the extent that we can get raw materials we're shipping product and uh... from that standpoint most of our businesses have had challenge getting product out the door uh... we have significant demand out there and i don't think it would have been any different mix to be honest uh... clearly if we'd have been able to get more transparencies and more uh... refinish out the door that would have been a a better mix for us

You know to the extent that we can get raw materials, we're shipping product and from that standpoint.

Most of our businesses have had challenge getting product out the door.

We have significant demand out there.

And I don't think it would have been any different mix to be honest clearly if we'd have been able to get more transparencies and more refinish out the door that would've been a better mix for us.

Speaker 7: But I'm not sure that we have really substantially diluted ourselves or accreted ourselves by what we shipped in the fourth quarter. Yeah, Duffy, and I'll add here that the minus four is a very strong comp in the prior year. We saw in the fourth quarter of 2020, you know, the partial recovery from COVID in our automotive businesses, in our industrial businesses.

But I'm not sure that we have really substantially diluted ourselves or accreted ourselves by what we shipped in the fourth quarter.

Duffy I'll add here the minus four is versus a very strong comp in the prior year, we saw in the fourth quarter.

2020.

The partial recovery from Covid in our automotive businesses in our industrial businesses.

Speaker 7: So we had very strong performance in Q4 of 2020 that we were competing against in 2021. If you compare to 2019, we're still down more than 4%. And again, it's in the heavy technology-laced businesses, refinish, OEM, aerospace, that typically would favor the mix that you're referring to.

So we had very strong.

Performance in Q4 of 2020 that we're comping against in 2021, if you compare to 2019 were still down more than 4% and again, it's in the heavy technology lays businesses refinished OEM aerospace typically.

Would would favor the mix that you're referring to.

Speaker 18: And the next question today comes from PJ Joubacar with Citi. Please go ahead. Yes, good morning.

And the next question today comes from Peter <unk> with Citi. Please go ahead.

Yes, good morning, a couple of questions Michael.

Speaker 18: Emerging markets seem to have slowed down.

Emerging markets seem to have slowed down.

Speaker 18: You know, it seems like Chinese industrial activity is down, but that could be due to dual control and the Olympics.

It seems like China, Chinese industrial activity is down but that could be due to dual control and and the Olympics.

Speaker 18: Latin America seems to be down as well, maybe because of COVID. Can you just parse out and tell us what you think is happening underlying in emerging markets? And then secondly, you were talking about OEM just recently, just now. I'm not sure why your OEM sales were down or underperformed the industry, because I think you have good EV exposure, so that should have helped you.

Latin America seems to be down as well.

Maybe because of Covid can you just parse out and tell us what you think is happening underlying and in emerging markets and then secondly, you were talking about the OEM just recently just now.

Oh It was I'm not sure why you would OEM sales were down.

Uh huh.

From the industry, because I think you have good EV exposure so that should have helped you.

Thank you.

Speaker 6: We'll start with the OEM. I would tell you that we were slightly below because when you look at some of our business in China, we decided that we wanted price and we were willing to walk away. That business will come back to us.

We'll start with the OEM.

I would tell you that we were slightly below because when you look at some of our business and in China. We decided that we wanted price and we were willing to walk away and you know that business will come back to us.

Speaker 6: So, I'm not worried at all about that. We are definitely gaining share in the mobility.

So I'm not worried at all about that we are definitely gaining share in the mobility section.

Speaker 6: In fact, we started up a brand new battery fire protection plant in China.

Fact.

We started up our brand new battery fire protection plant in China, and that that's 100% for batteries and that is going exceptionally well and we will be doing similar expansions in Europe to support that European growth as well, so I feel very confident about that but we are.

Speaker 6: And that's 100% for batteries. And that is going exceptionally well. And we will be doing similar expansions.

Speaker 6: in Europe to support the European growth as well. So I feel very confident about that, but we are committed to getting price up in OEM if that means that some of these smaller customers

We're getting price up and OEM.

That means that some of the smaller customers.

Speaker 6: you know, move their business elsewhere, that's fine.

No move their business elsewhere, that's fine.

Speaker 6: from a emerging market standpoint. Let's talk about this in several different factors. Okay, China is right now a little bit soft.

For my emerging market standpoint, let's talk about this in several different factors. Okay. China is right now a little bit soft, but you know that just means they're not growing as fast as they used to grow there's still growing right and you know we.

Speaker 6: But, you know, that just means they're not growing as fast as they used to grow. They're still growing. Right. And, you know, we're expecting global production in China to be up four or five percent in 2022.

Expecting them.

Global production in China to be up four 5% in 2022.

Speaker 6: Second, I would tell you that India is doing exceptionally well, you know, we're expecting them to be up eight or nine percent this year.

Second I would tell you that India is doing exceptionally well, we're expecting them to be up eight or 9% this year.

Speaker 6: And actually, when you look at our Eastern European business in the past six months, it was up high single digits.

And actually when you look at our eastern European business in the past six months. It was up high single digits. So we're pretty pleased with that as well and what I'm. Most excited about our long term it won't be a major win in 2022, but with our tic a real acquisition.

Speaker 6: So we're pretty pleased with that as well. And what I'm most excited about long-term, it won't be a major win in 2022, but with our Tikarila acquisition, we are now the largest coatings company in Russia.

We're now the largest coatings company in Russia.

Speaker 6: And our architectural business is substantially bigger than the number two guy. And I think this is going to be an opportunity for us to grow share in Russia through advantaged products. And that's going to be a win for us.

And our architectural business.

Is substantially bigger than the number two guy and I think this is going to be an opportunity for us to grow share in Russia through advantaged products.

And that's going to be a win for us.

Speaker 7: long-term in in Russia And Michael mentioned earlier PJ, you know, Mexico for us We've big businesses. They're obviously an architectural which has done exceptionally well once again The automotive and industrial businesses we have there were somewhat tempered by the the lower Automotive builds on on a year-of-year basis. We do expect those To return as the chip shortages alleviate as we pass through the year here

Long term and in Russia.

And Michael mentioned earlier P J, Mexico for US we have big businesses, they're obviously in architectural which has done exceptionally well once again.

The automotive and industrial businesses, we have there were somewhat tempered by the lower automotive builds on a year over year basis, we do expect those to return as the chip shortages alleviate as we pass through the year here.

Speaker 5: And our next question today comes from Mike Harrison at Seaport Research Partners. Please go ahead.

And our next question today comes from.

Service and support research partners. Please go ahead.

Speaker 19: Hi, good morning. I had a question on the auto OEM business. You noted that production was a little bit better than you were anticipating coming into the quarter, but that it was intermittent. Can you help explain why this intermittent production led to operational challenges and higher operating costs for PPG?

Hi, good morning.

I had a question on the auto OEM business. You noted that production was a little bit better than you were anticipating coming into the quarter. But then it was intermittent can you help explain why this intermittent production led to operational challenges and higher operating costs for PPG.

Speaker 6: Sure, Mike, I mean the issue that you have is the suppliers don't have great visibility on when they do or don't get chipped.

Sure Mike I mean, the issue that you have as the suppliers don't have great visibility on when they do or don't get chips.

Speaker 6: So they provide us an order schedule. And in the old days, a 90-day advance order schedule would give us, let's call it 85% to 90% confidence.

So they provide us a order schedule and in the old days.

Our 90 day advance order schedule would give US you know, let's call it 85% to 90% confidence.

Speaker 6: And then at 30 days, it was 100% confidence. Well, nowadays, even at a week out, we only have 80% confidence. And so we're having to make smaller batches. And we're having to shift basis what they get in. And from a chip standpoint, what we might have to make. And those lead to inefficiencies in our operation.

And then at 30 days, it was 100% confidence well nowadays.

Even at a week out we only have 80% confidence and so we're having to make smaller batches and we're having a shipped.

<unk> what.

What they get in and from a chip standpoint, what we might have to make and those lead to inefficiencies in our operations, but what I would tell you you know looking forward you know the the industry produce about 75 million cars. This year and we're looking at that being closer to 82 to 84 million cars next year. So.

Speaker 6: But what I would tell you, looking forward, the industry produced about 75 million cars this year. And we're looking at that being closer to 82 to 84 million cars next year. So this is still down from its peak. And that is a substantial opportunity for us long term. Because at the peak, it was 95 million cars.

This is still down from its peak and that is a substantial opportunity for us long term because at the peak. It was 95 million cars. So there is still more runway in the automotive OEM space.

Speaker 7: So there is still more runway in the automotive OEM space. Yeah, and then at the peak, the 95 million cars Michael mentioned, it doesn't include the fact that we have to replenish the dealer lots.

And then at the peak the 95 million cars. Michael mentioned it doesn't include the fact that we have to replenish the dealer lots we.

Speaker 7: We think that's up to 2 to 3 million vehicles in 2022 alone, if they can make them, as well as the rental car fleet.

We think that's up to two to 3 million vehicles in 2022 alone.

They can make them.

As well as the rental car fleets in.

In the U S are fairly.

Fairly depleted and those need replenished and then in Europe . There's a lot of company owned cars that have been not replenished over the past couple of years. So in addition to the normal demand.

Normal consumption from consumers, there's other elements in the automotive market that we believe will allow us to remain in elevated production capability willing element elevated production for multiple years.

Speaker 6: And Mike, I assume you've also put in the OEM model the growth in the mobility space. So when we do get back at higher levels, there will be more content per vehicle for PPE.

And Mike I assume you've also put in the OEM model the growth in the mobility space. So when we do get back at higher levels, there will be more content per vehicle for PPG.

Speaker 20: Thank you. And our next question today comes from Edwin Rodriguez with Jeffries. Please go ahead. Thank you. Good morning, guys. Michael, and again, apologies if you already addressed that. In terms of capital allocation, you have more than a billion left on the current share buyback program. What should we be thinking in terms of pace and time? Is this a 2022 event or will it take longer?

Thank you and our next question today comes from Edlin Rodriguez with Jefferies. Please go ahead.

Thank you good morning, guys, Michael and again apologies if you already addressed that in terms of capital allocation you have more than 1 billion left under the current share buyback program, what should we be thinking in terms of pace and time is this was too.

2022 event or will it take longer.

Speaker 7: Yeah, this is Vince. We did just a few questions ago, you know, answer that. Again, we're going to look at acquisitions, primarily, still active pipeline, likely smaller transactions than the past 12 to 15 months. We'll mop up dilution for sure this year at a minimum. We'll do some debt servicing, and then we'll continue to assess as we go through the year where to deploy any excess cash.

Yes.

As Vince we did just a few questions ago answer that again, we're going to look at acquisitions, primarily still active pipeline likely smaller.

Transactions in the past 12 months to 15 months and we will mop-up dilution for sure. This year at a minimum we will do some debt servicing and then we'll continue to assess as we go through the year where to deploy any excess cash.

Speaker 5: Thank you. And ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to the management team for any final remarks.

Ladies and gentlemen, this concludes our question and answer session.

The conference back over to the management team for any final remarks.

Speaker 11: Great. Thank you, Rocco. We'd like to thank everyone for your time and interest in PPG. This concludes our fourth quarter earnings call. Have a good day.

Great. Thank you Rocco, we'd like to thank everyone for your time and interest in PPG. This concludes our fourth quarter earnings call have a good day.

Speaker 5: Thank you sir. Today's conference has now concluded. You may all disconnect your lines and have a wonderful day.

Thank you Sir.

You may all disconnect your lines have a wonderful day.