Q4 2023 PPG Industries Inc Earnings Call

January 19, 2024

Okay.

[music].

Good morning. My name is Elliot. I'll be your conference operator.

Good morning, My name is and I'll be your conference operator today.

Elliot: At this time I would like to welcome everyone to the fourth quarter PPG Earnings Conference.

Elliot: At this time, I would like to welcome everyone to the fourth quarter PPG Earnings Conference. All lines are being placed on mute to prevent any background noise. Speaker's remarks. There will be a question and answer. We'll be right back. If you would like to ask a question during this time, simply press star and follow button number one on your telephone. If you would like to withdraw your question, please press the button. To allow everyone an opportunity to ask a question, a company request. Each analyst may ask one question. And I'd like to turn the conference over to Jonathan Edwards, Director of Investor Relations.

At this time I would like to welcome everyone to the fourth quarter <unk> earnings Conference call.

Elliot: All lines being placed on mute to prevent any background noise.

Speaker Change: <unk> has been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If.

Elliot: Speaker's remarks, there'll be a question and answer. We'll be right back.

Elliot: If you would like to ask a question during this time, simply press star, follow button number one on your telephone.

Speaker Change: If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Elliot: If you would like to withdraw your question, please press the button.

Speaker Change: If you would like to withdraw your question. Please press the pound key.

Speaker Change: To allow everyone an opportunity to ask a question the company requests.

Elliot: To allow everyone an opportunity to ask a question, a company request,

Elliot: Each analyst may ask one question.

Speaker Change: Unless I ask one question. Thank you.

Elliot: And I'd like to turn the conference over to Jonathan Edwards, Director of Investor Relations.

Speaker Change: Now I'd like to turn the conference over to Jonathan Edwards Director of Investor Relations. Please go ahead.

Speaker Change: Yeah.

Jonathan Edwards: Thank you, Elliot, and good morning, everyone.

Jonathan Edwards: Thank you, Elliot, and good morning, everyone. This is Jonathan Edwards.

Jonathan Edwards: Thank you Elliot and good morning, everyone.

Jonathan Edwards: This is Jonathan Edwards.

Jonathan Edwards: This is Jonathan Edwards, we appreciate your continued interest in PPG and welcome you to our fourth quarter 2023 financial results Conference call. Joining me on the call from PPG are Tim Davis, Chairman and Chief Executive Officer, Vince Byrd.

Speaker Change: We appreciate your continued interest in PPG and welcome you to our fourth quarter 2023 financial results conference.

Speaker Change: We appreciate your continued interest in PPG and welcome you to our fourth quarter 2023 financial results conference call. Joining me on the call from PPG are Tim Kanavish, Chairman and Chief Executive Officer, Vince Morales, Senior Vice President and Chief Financial Officer, and John Bruno, Vice President of Finance. Our comments relate to the financial information released after U.S. equity markets closed on Thursday, January 18, 2024. We have posted detailed commentary and accompanying presentation slides on the investor center of our website, pbg.com. The slides are also available on the webcast site for this call and provide additional support for the opening comments Tim will make shortly.

Speaker Change: Joining me on the call from PPG are Tim Kanavish, Chairman and Chief Executive Officer, Vince Morales, Senior Vice President and Chief Financial Officer, and John Bruno, Vice President of Finance.

Speaker Change: Senior Vice President and Chief Financial Officer, and John Brennan, Vice President of Finance.

Speaker Change: Our comments relate to the financial information released after U.S. equity markets closed on Thursday, January 18, 2024.

Speaker Change: Our comments related to the financial information released after U S equity markets closed on Thursday January 18 2024.

Speaker Change: We have posted detailed commentary and accompanying presentation slides on the investor center of our website, pbg.com.

Speaker Change: We have posted detailed commentary and accompanying presentation slides on the Investor Center of our website PPG Dot com.

Speaker Change: The slides are also available on the webcast site for this call and provide additional support to the opening comments Tim will make shortly.

Speaker Change: Slides are also available on the webcast site for this call and provide additional support to the opening comments Tim will make shortly.

Speaker Change: Following management's perspective on the company's results, 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 risks, which may cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements. The 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.

Speaker Change: Following management's perspective of the company's results, we will move to a Q&A session.

Speaker Change: Following management's perspective on the Companys results, we will move to a Q&A session.

Speaker Change: 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.

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 risks, which may cause actual results to differ the company is under no obligation to provide subs.

Speaker Change: These statements involve uncertainties and risks, which may cause actual results to differ.

Speaker Change: The company is under no obligation to provide subsequent updates to these forward-looking statements.

Sequencers updates to these forward looking statements. The presentation also contains certain non-GAAP financial measures.

Speaker Change: The presentation also contains certain non-GAAP financial measures.

Speaker Change: 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.

Speaker Change: As 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.

Speaker Change: For additional information, please refer to PPG's filings with the SEC.

Speaker Change: For additional information please refer to Ppg's filings with the SEC and now let me introduce PPG, Chairman and CEO Tim Davies.

Speaker Change: And now let me introduce PPG Chairman and CEO, Tim Knabich.

Speaker Change: And now, let me introduce PPG Chairman and CEO, Tim Knabich.

Tim Knabich: Thank you, Jonathan, and congratulations on your new role, and good morning, everyone. Welcome to our fourth quarter and full year 2023 earnings call.

Tim Knabich: Thank you, Jonathan, and congratulations on your new role, and good morning, everyone. Welcome to our fourth quarter and full year 2023 earnings call. I'd like to start by providing a few highlights on our fourth quarter and full year 2023 financial performance, and then I will move to our outlook. In the fourth quarter, the PPG team delivered strong financial results, including record fourth quarter sales of $4.4 billion and adjusted earnings per diluted share of $1.53. This is our fourth consecutive quarter of delivering record sales as we continue to benefit from organic sales growth. Our fourth quarter adjusted EPS was 25% higher year over year, driven by aggregated segment margin improvement of 260 basis points compared to the fourth quarter of 2022 as we continue to be laser focused on driving margin improvement. Our results reflect our continuing growth trends and strong execution in several of our leading and technology-advantaged businesses, which culminated in record fourth-quarter sales in the aerospace, automotive OEM, and automotive refinish businesses, with strong performance in protective and marine and PBG Mexico architectural coatings businesses.

Thank you Jonathan and congratulations on your new role and good morning, everyone welcome to our fourth quarter and full year 2023 earnings call.

Tim Knabich: I'd like to start by providing a few highlights on our fourth quarter and full year 2023 financial performance, and then I will move to our outlook.

Speaker Change: I'd like to start by providing a few highlights on our fourth quarter and full year 2023 financial performance and then I'll move to our outlook.

The fourth quarter, the PPG team delivered strong financial results, including record fourth quarter sales of $4 4 billion.

Tim Knabich: In the fourth quarter, the PPG team delivered strong financial results, including record fourth quarter sales of $4.4 billion and adjusted earnings per diluted share of $1.53. This is our fourth consecutive quarter of delivering record sales as we continue to benefit from organic sales growth.

Speaker Change: And adjusted earnings per diluted share of $1 53.

This is our fourth consecutive quarter of delivering record sales as we continue to benefit from organic sales growth.

Tim Knabich: Our fourth quarter adjusted EPS was 25% higher year over year, driven by aggregated segment margin improvement of 260 basis points compared to the fourth quarter of 2022 as we continue to be laser focused on driving margin improvement.

Speaker Change: Our fourth quarter, adjusted EPS was <unk>, 25% higher year over year, driven by aggregated segment margin improvement of 260 basis points compared to the fourth quarter of 2022, as we continue to be laser focused on driving margin improvement.

Good morning. My name is Elliot.

Tim Knabich: Our results reflect our continuing growth trends and strong execution in several of our leading and technology-advantaged businesses, which culminated in record fourth-quarter sales in the aerospace, automotive OEM, and automotive refinish businesses, with strong performance in a protective and marine and PBG Mexico architectural coatings business.

I'll be your conference operator. At this time, I would like to welcome everyone to the fourth quarter PPG Earnings Conference. All lines are being placed on mute to prevent any background noise.

Our results reflect our continuing growth trends and strong execution in several of our leading technology advantaged businesses, which culminated in record fourth quarter sales in the aerospace automotive OEM and automotive refinished businesses with strong performance in our protective and marine and PPG Mexico.

Speaker's remarks, there'll be a question and answer. We'll be right back. If you would like to ask a question during this time, simply press star, followed by button number one on your telephone.

If you would like to withdraw your question, please press the button. To allow everyone an opportunity to ask a question on the company record, please call 1-800-544-3316 or call 1-800-544-3316. Each analyst may ask one question. And I'd like to turn the conference over to Jonathan Edwards, Director of Investor Relations. Thank you, Elliot, and good morning, everyone. This is Jonathan Edwards.

Tim Knabich: Our year-over-year sales volume trend improved compared to recent quarters, decreasing less than 1% year-over-year. However, we continue to experience lower global industrial production along with soft U.S. and European architectural demand, especially for DIY-related products.

Actual coatings businesses are.

Tim Knabich: Our year-over-year sales volume trend improved compared to recent quarters, decreasing less than 1% year-over-year.

Our year over year sales volume trends improved compared to recent quarters decreasing less than 1% year over year.

Tim Knabich: We continue to experience lower global industrial production along with soft U.S. and European architectural demand, especially for DIY-related products.

Speaker Change: We continued to experience lower global industrial production, along with soft U S and European architectural demand, especially for DIY related products.

Tim Knabich: Notable for us during the quarter was China, where despite a lethargic general economy, we achieved high single-digit percentage volume growth, reflecting our strong mix of businesses in the country. In addition, we delivered flat year-over-year volumes in Europe as we see economic stabilization in the region, albeit at lower absolute demand levels. Our selling prices were about 2% higher, with both segments delivering positive prices led by the performance coding segment. We expect total company selling prices to remain modestly positive in the first quarter of 2024 as new selling price increases have been implemented in several of our businesses. We also benefited from further normalization of our operations as we experienced stabilization of both upstream and downstream supply chains and order patterns. From a supply perspective, the vast majority of our suppliers have more than sufficient capacity heading into 2024.

Jonathan Edwards: We appreciate your continued interest in PPG and welcome you to our fourth quarter 2023 financial results conference call. Joining me on the call from PPG are Tim Kanavish, Chairman and Chief Executive Officer, Vince Morales, Senior Vice President and Chief Financial Officer, and John Bruno, Vice President of Finance. Our comments relate to the financial information released after U.S. equity markets closed on Thursday, January 18, 2024. We have posted detailed commentary and accompanying presentation slides on the investor center of our website, pbg.com. The slides are also available on the webcast site for this call and provide additional support for the opening comments Tim will make shortly.

Speaker Change: Notable for us during the quarter was China, where despite a lethargic general economy, we achieved high single digit percentage volume growth, reflecting our strong mix of businesses in the country. In addition, we delivered flat year over year volumes in Europe, as we see economic stabilization in the region, albeit at lower absolute <unk>.

Speaker Change: <unk> levels.

Speaker Change: Our selling prices were about 2% higher with both segments delivering positive price led by the performance coatings segment.

Tim Knabich: Our selling prices were about 2% higher with both segments delivering positive price led by the performance coding segment.

Tim Knabich: We expect total company selling prices to remain modestly positive in the first quarter of 2024 as new selling price increases have been implemented in several of our businesses.

Speaker Change: We expect total company selling prices to remain modestly positive in the first quarter of 2024 as new selling price increases have been implemented in several of our businesses.

Jonathan Edwards: Following management's perspective on the company's results, 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 risks, which may cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements.

Tim Knabich: We also benefited from further normalization of our operations as we experienced stabilization of both upstream and downstream supply chains and order patterns.

Speaker Change: We also benefited from further normalization of our operations as we experienced stabilization of both upstream and downstream supply chain and order patterns from a supply perspective, the vast majority of our suppliers have more than sufficient capacity heading into 2024.

Tim Knabich: From a supply perspective, the vast majority of our suppliers have more than sufficient capacity heading into 2024.

Tim Knabich: We started the year laser focused on margin recovery, and the fourth quarter marked our fifth consecutive quarter of year-over-year operating segment margin improvement, and, as I mentioned, fourth quarter aggregate segment operating margins increased 260 basis points year-over-year and full year increased 310 basis points. We also achieved our second key priority for the year by delivering excellent cash generation of nearly $900 million during the fourth quarter, which was up over $300 million on a year-over-year basis, leading to record full-year cash generation of over $2.4 billion.

Tim Knabich: We started the year laser focused on margin recovery and the fourth quarter marked our fifth consecutive quarter of year-over-year operating segment margin improvement and as I mentioned fourth quarter aggregate segment operating margins increased 260 basis points year-over-year and full year increased 310 basis points.

Speaker Change: We started the year laser focused on margin recovery in the fourth quarter marked our fifth consecutive quarter of year over year operating segment margin improvement and as I mentioned fourth quarter aggregate segment operating margins increased 260 basis points year over year and full year.

Tim Kanavish: The presentation also contains certain non-GAAP financial measures. PPG 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. For additional information, please refer to PPG's filings with the SEC. Now, Jonathan, and congratulations on your new role, and good morning, everyone.

Speaker Change: <unk> increased 310 basis points.

Tim Knabich: We also achieved our second key priority for the year by delivering excellent cash generation of nearly $900 million during the fourth quarter, which was up over $300 million on a year-over-year basis, leading to record full-year cash generation of over $2.4 billion.

Speaker Change: We also achieved our second key priority for the year by delivering excellent cash generation of nearly $900 million during the fourth quarter, which was up over $300 million on a year over year basis, leading to record full year cash generation of over $2 4 billion.

Tim Kanavish: Welcome to our fourth quarter and full year 2023 earnings call. I'd like to start by providing a few highlights on our fourth quarter and full year 2023 financial performance, and then I will move to our outlook. In the fourth quarter, the PPG team delivered strong financial results, including record fourth quarter sales of $4.4 billion and adjusted earnings per diluted share of $1.53.

Tim Knabich: We significantly reduced working capital by a total of about $600 million on a sequential quarterly basis, and this includes the benefit from a partial reduction of our inventory level.

Tim Knabich: We significantly reduced working capital by a total of about $600 million on a sequential quarterly basis, and this included the benefit from a partial reduction of our inventory level. However, we still ended the year with higher inventory levels from a historical perspective, primarily in raw materials, and will continue to reduce inventory in the first half of 2024. The strong cash generated drove a reduction in net interest expense by about $20 million compared to the fourth quarter of 2022 as we repaid some high variable cost debt during the quarter. Additionally, we repurchased $100 million of stock in the fourth quarter, which essentially offset dilution.

Speaker Change: We significantly reduced working capital by a total of about $600 million on a sequential quarterly basis and this includes the benefit from a partial reduction of our inventory levels. However, we still ended the year with higher inventory levels from a historical perspective, primarily in raw materials and will continue to reduce.

Tim Knabich: However, we still ended the year with higher inventory levels from a historical perspective, primarily in raw materials, and will continue to reduce inventory in the first half of 2024.

Inventory in the first half of 2024.

Tim Knabich: This is our fourth consecutive quarter of delivering record sales as we continue to benefit from organic sales growth. Our fourth quarter adjusted EPS was 25% higher year over year, driven by aggregated segment margin improvement of 260 basis points compared to the fourth quarter of 2022 as we continue to be laser focused on driving margin improvement. Our results reflect our continuing growth trends and strong execution in several of our leading and technology-advantaged businesses, which culminated in record fourth-quarter sales in the aerospace, automotive OEM, and automotive refinished businesses, with strong performance in protective and marine and PPG Mexico architectural coatings businesses. Our year-over-year sales volume trend improved compared to recent quarters, decreasing less than 1% year-over-year. We continue to experience lower global industrial production along with soft U.S. and European architectural demand, especially for DIY-related products.

Tim Knabich: The strong cash generated drove a reduction in net interest expense by about $20 million compared to the fourth quarter of 2022 as we repaid some high variable cost debt during the quarter. Additionally, we repurchased $100 million of stock in the fourth quarter, which essentially offset dilution.

Speaker Change: The strong cash generated drove a reduction in net interest expense by about $20 million compared to the fourth quarter of 2022, as we repaid some high variable cost debt during the quarter.

Speaker Change: Additionally, we repurchased $100 million of stock in the fourth quarter, which essentially offset dilution.

Tim Knabich: Now, a few comments on the full year 2023. As I communicated at the beginning of 2023, my priorities included margin recovery, strong cash generation, and further strengthening of our capabilities to support our customers' productivity and sustainability needs, which will result in higher PPG organic growth. And coming into 2023, we had a high degree of conviction that our global business portfolio would prove resilient, while anticipating a challenging economic environment, and this clearly played out during the year.

Tim Knabich: Now, a few comments on the full year, 2023. As we communicated at the beginning of 2023, my priorities included margin recovery, strong cash generation, and further strengthening of our capabilities to support our customers' productivity and sustainability needs, which will result in higher PPG organic growth. And coming into 2023, we had a high degree of conviction that our global business portfolio would prove resilient, while anticipating a challenging economic environment, and these clearly played out during the year.

Speaker Change: Now a few comments on our full year 2023.

Speaker Change: As we communicated at the beginning of 2023 my priorities included margin recovery strong cash generation and further strengthening of our capabilities to support our customer's productivity and sustainability needs, which will result in higher PPG organic growth.

Speaker Change: <unk> into 2023, we had a high degree of conviction that our global business portfolio would prove resilient, while anticipating a challenging economic environment and these clearly played out during the year.

Tim Knabich: For the full year, I'm proud of our team's execution against our strategic objectives as it resulted in delivery of record sales, record-adjusted EPS, and record operating cash.

Tim Knabich: For the full year, I'm proud of our team's execution against our strategic objectives as it resulted in delivery of record sales, record-adjusted EPS, and record operating cash, and our sales performance was led by continued selling price execution to offset significant multi-year cost inflation. Thank you for watching. Our year-over-year earnings growth was driven by these improved selling prices coupled with moderating input costs and cost structure reductions stemming from our cost management and restructuring initiatives. This resulted in improved margins in both segments. Our businesses delivered innovative and value-added products and solutions to our customers, and this enabled several of our businesses to set all-time annual sales records, including our aerospace, auto OEM, automotive refinish, architectural Mexico, and protective and marine coatings business.

For the full year I'm proud of our team's execution against our strategic objectives as it resulted in delivery of record sales record adjusted EPS and record operating cash flow and our sales performance was led by continued selling price execution to offset significant multi year cost inflation.

Tim Knabich: and our sales performance was led by continued selling price execution to offset significant multi-year cost inflation. Thank you for watching.

Tim Knabich: Our year-over-year earnings growth was driven by these improved selling prices coupled with moderating input costs and cost structure reductions stemming from our cost management and restructuring initiatives.

Speaker Change: Our year over year earnings growth was driven by these improved selling prices, coupled with moderating input costs and cost structure reductions stemming from our cost management and restructuring initiatives. This resulted in improved margins in both segments.

Tim Knabich: This resulted in improved margins in both segments.

Tim Knabich: Our businesses delivered innovative and value-added products and solutions to our customers, and this enabled several of our businesses to set all-time annual sales records, including our aerospace, auto OEM, automotive refinish, architectural Mexico, and the protective and marine coatings business.

Speaker Change: Our businesses delivered innovative and value added products and solutions to our customers and this enabled several of our businesses to set all time annual sales records, including our aerospace auto OEM automotive refinish, and architectural Mexico, and the protective and marine coatings businesses.

Tim Knabich: We expect total company selling prices to remain modestly positive in the first quarter of 2024 as new selling price increases have been implemented in several of our businesses. We also benefited from further normalization of our operations as we experienced stabilization of both upstream and downstream supply chains and order patterns. From a supply perspective, the vast majority of our suppliers have more than sufficient capacity heading into 2024. We started the year laser focused on margin recovery, and the fourth quarter marked our fifth consecutive quarter of year-over-year operating segment margin improvement, and, as I mentioned, fourth quarter aggregate segment operating margins increased 260 basis points year-over-year and full year increased 310 basis points. We also achieved our second key priority for the year by delivering excellent cash generation of nearly $900 million during the fourth quarter, which was up over $300 million on a year-over-year basis, leading to record full-year cash generation of over $2.4 billion.

Tim Knabich: Our enterprise growth initiatives delivered about $150 million of incremental sales in the first year, including strong growth from selling our innovative products for electric vehicles, as well as our share gains in powder coating and Automotive Refinish. Customer adoption of our industry-leading digital tools accelerated, yielding nearly 2,000 net body shop wins. These digital tools include our Link services and Moonwalk mixing machines, both of which are best in class and are focused on improving body shop productivity.

Speaker Change: Our enterprise growth initiatives delivered about $150 million of incremental sales in the first year, including strong growth from selling our innovative products for electric vehicles, as well as our share gains and powder coatings.

Tim Knabich: and Automotive Refinish, customer adoption of our industry-leading digital tools accelerated, yielding nearly 2,000 net body shop wins.

Speaker Change: And automotive refinish customer adoption of our industry, leading digital tools accelerated.

Speaker Change: <unk>, yielding nearly 2000 net body shop wins.

Tim Knabich: These digital tools include our Link services and Moonwalk mixing machines, both of which are best in class and are focused on improving body shop productivity.

Speaker Change: These digital tools include our linked services and moonwalk mixing machines, both of which are best in class and are focused on improving body shop productivity.

Tim Knabich: In Mexico, we further advance cross-selling of our valued products, including protective coatings and certain light industrial coatings, through the best-in-class distribution network of nearly 5,200 concessionaire locations.

Tim Knabich: In Mexico, we further advanced cross-selling of our valued products, including protective coatings and certain light industrial coatings, through the best-in-class distribution network of nearly 5,200 concessionaire locations. Finally, our strong focus on the customer drove share gains across several businesses, including the expansion of our architectural coatings products at Walmart. Strategically, we conducted an ongoing review of both our product and business portfolios, leading to the divestiture of several non-core assets, including our European and Australian traffic solution businesses, along with the recently announced strategic alternatives review of Silica's product business. In a variety of cases, we also simplified and improved our product offering, allowing us to reduce complexity and drive down working capital. Finally, these actions, plus strong balance sheet management, resulted in a record full year 2023 cash generation of $2.4 billion.

Speaker Change: In Mexico, we further advanced cross selling of our valued products, including protective coatings and certain light industrial coatings through the best in class distribution network of nearly 5200 concessionaire locations.

Tim Knabich: Finally, our strong focus on the customer drove share gains across several businesses, including the expansion of our architectural coatings products at Walmart.

Speaker Change: Finally, our strong focus on the customer drove share gains across several businesses, including the expansion of our architectural coatings products at Walmart.

Tim Knabich: Strategically, we conducted an ongoing review of both our product and business portfolios leading to the divestiture of several non-core assets, including our European and Australian traffic solution businesses, along with the recently announced strategic alternatives review of the Silica's product business.

Speaker Change: Strategically we conducted an ongoing review of both our product and business portfolio, leading to the divestiture of several noncore assets, including our European and Australian traffic solutions businesses, along with our recently announced strategic alternatives review of the silicone product business.

Jonathan Edwards: We significantly reduced working capital by a total of about $600 million on a sequential quarterly basis, and this included the benefit from a partial reduction of our inventory level. However, we still ended the year with higher inventory levels from a historical perspective, primarily in raw materials, and will continue to reduce inventory in the first half of 2024. The strong cash generated drove a reduction in net interest expense by about $20 million compared to the fourth quarter of 2022, as we repaid some high variable cost debt during the quarter.

Speaker Change: <unk>.

Tim Knabich: In a variety of cases, we also simplified and improved our product offering, allowing us to reduce complexity and drive down working capital.

And a variety of cases, we also simplified and improved our product offering, allowing us to reduce complexity and drive down working capital.

Tim Knabich: Finally, these actions plus strong balance sheet management resulted in record full year 2023 cash generation of $2.4 billion.

Speaker Change: Finally, these actions plus strong balance sheet management resulted in record full year 2023 cash generation of $2 4 billion.

Speaker: Our results reflect our continuing growth trends and strong execution in several of our leading and technology-advantaged businesses, which culminated in record fourth-quarter sales in the aerospace, automotive OEM, and automotive refinish businesses, with strong performance in protective and marine and PBG Mexico architectural coatings businesses. Our year-over-year sales volume trend improved compared to recent quarters, decreasing less than 1% year-over-year. We continue to experience lower global industrial production along with soft U.S. and European architectural demand, especially for DIY-related products. Notable for us during the quarter was China, where, despite a lethargic general economy, we achieved high single-digit percentage volume growth, reflecting our strong mix of businesses in the country. In addition, we delivered flat year-over-year volumes in Europe as we see economic stabilization in the region, albeit at lower absolute demand levels. Our selling prices were about 2% higher, with both segments delivering positive prices, led by the performance coding segment.

Tim Knabich: So overall, we achieved excellent financial results in 2023 and are anticipating improving from this higher base in 2024.

Speaker Change: So overall, we achieved excellent financial results in 2023 and are anticipating improving from this higher base in 2024.

Tim Knabich: We remain confident that we will deliver positive sales volume in 2024, including benefits from China, India, and Mexico.

Speaker Change: We remain confident that we will deliver positive sales volume in 2024, including benefits from China, India and Mexico.

Tim Knabich: We've delivered share gains in several businesses including auto refinish, packaging, and the protective and marine coating business.

Speaker Change: We've delivered share gains in several businesses, including auto refinish packaging and protective and marine coatings businesses. We will also execute on our more than $250 million order backlog in aerospace drive further growth and are well positioned businesses in Mexico.

Jonathan Edwards: Additionally, we repurchased $100 million of stock in the fourth quarter, which essentially offset dilution. Now, a few comments on the full year 2023. As we communicated at the beginning of 2023, my priorities included margin recovery, strong cash generation, and further strengthening of our capabilities to support our customers' productivity and sustainability needs, which would result in higher PPG organic growth. And coming into 2023, we had a high degree of conviction that our global business portfolio would prove resilient, while anticipating a challenging economic environment, and that clearly played out during the year. For the full year, I'm proud of our team's execution against our strategic objectives as it resulted in delivery of record sales, record-adjusted EPS, and record operating cash. And our sales performance was led by continued selling price execution to offset significant multi-year cost inflation. Our year-over-year earnings growth was driven by these improved selling prices coupled with moderating input costs and cost structure reductions stemming from our cost management and restructuring initiatives. This resulted in improved margins in both segments.

Tim Knabich: We will also execute on our more than $250 million order backlog in aerospace, drive further growth in our well-positioned businesses in Mexico, California, and the United States. For more information, visit www.fema.gov.

Tim Knabich: and further expand the benefits of our key growth initiatives including powder coatings, electric vehicle products, and digital solutions.

Speaker Change: And further expand the benefits of our key growth initiatives, including powder coatings.

Speaker Change: Electric vehicle products and digital solutions.

Tim Knabich: We will drive further improvement of our operating margins aided by the sales volume growth leverage and our initiatives that drive manufacturing productivity following several years of supply chain and other disruptions.

Tim Knabich: We will drive further improvement of our operating margins, aided by the sales volume growth leverage and our initiatives that drive manufacturing productivity following several years of supply chain and other disruptions. Lastly, we entered 2024 with a strong balance sheet, which provides us with the flexibility for further shareholder value creation going forward, including funding organic growth initiatives. Appropriate Acquisitions, Debt Repayment, and Share Repurchase.

We will drive further improvement of our operating margins aided by the sales volume growth leverage.

Speaker Change: And our initiatives to drive manufacturing productivity following several years of supply chain and other disruptions.

Speaker Change: Lastly, we entered 2024 with a strong balance sheet, which provides us with the flexibility for further shareholder value creation going forward, including funding organic growth initiatives appropriate acquisitions debt repayment and share repurchases.

Tim Knabich: Lastly, we entered 2024 with a strong balance sheet, which provides us with the flexibility for further shareholder value creation going forward, including funding organic growth initiatives.

Speaker: We expect total company selling prices to remain modestly positive in the first quarter of 2024, as new selling price increases have been implemented in several of our businesses. We also benefited from further normalization of our operations as we experienced stabilization of both upstream and downstream supply chains and order patterns. From a supply perspective, the vast majority of our suppliers have more than sufficient capacity heading into 2024. We started the year laser focused on margin recovery, and the fourth quarter marked our fifth consecutive quarter of year-over-year operating segment margin improvement, and, as I mentioned, fourth quarter aggregate segment operating margins increased 260 basis points year-over-year and full year increased 310 basis points. We also achieved our second key priority for the year by delivering excellent cash generation of nearly $900 million during the fourth quarter, which was up over $300 million on a year-over-year basis, leading to record full-year cash generation of over $2.4 billion.

Tim Knabich: Appropriate Acquisitions, Debt Repayment, and Share Repurchase.

Tim Knabich: Now I'll comment on our first quarter outlook.

Tim Knabich: Now I'll comment on our first quarter outlook. We expect to deliver sequential adjusted EPS growth of $1.53 per share in Q4 2023 to a range of $1.80 to $1.87 per share in Q1 2024, an increase of 20% at the midpoint of the range. We anticipate global industrial production to remain soft, and our year-over-year sales volume performance will be unfavorably impacted by the approximately $40 million non-recurring Walmart customer load-in that occurred in the first quarter of 2023. Also, the timing of the Easter holiday will shift some sales into the second quarter. Despite these difficult year-over-year comparison items, we expect our first quarter sales volume to be flat overall, aided by positive sales volume growth in our aerospace, protective, and marine, and packaging coatings businesses.

Speaker Change: Now I'll comment on our first quarter outlook.

Tim Knabich: We expect to deliver sequential adjusted EPS growth from $1.53 per share in Q4 2023 to a range of $1.80 to $1.87 per share in Q1 of 2024, an increase of 20% at the midpoint of the range.

Speaker Change: We expect to deliver sequential adjusted EPS growth from $1 53 per share in Q4 2023 to a range of $1 80 to $1 87 per share in Q1 of 2024, an increase of 20% at the midpoint of the range.

Speaker Change: We anticipate global index industrial production to remain soft and our year over year sales volume performance will be unfavorably impacted by the approximate $40 million nonrecurring Walmart customer load in that occurred in the first quarter of 2023 also the timing of the Easter.

Tim Knabich: We anticipate global industrial production to remain soft, and our year-over-year sales volume performance will be unfavorably impacted by the approximate $40 million non-recurring Walmart customer load-in that occurred in the first quarter of 2023. Also, the timing of the Easter holiday will shift some sales into the second quarter.

Jonathan Edwards: Our businesses delivered innovative and value-added products and solutions to our customers, and this enabled several of our businesses to set all-time annual sales records, including our aerospace, auto OEM, automotive refinish, architectural Mexico, and protective and marine coatings business. Our enterprise growth initiatives delivered about $150 million of incremental sales in the first year, including strong growth from selling our innovative products for electric vehicles, as well as our share gains in powder coating and Automotive Refinish. Additionally, customer adoption of our industry-leading digital tools accelerated, yielding nearly 2,000 net body shop wins. These digital tools include our Link services and Moonwalk mixing machines, both of which are best in class and are focused on improving body shop productivity.

Speaker Change: Holiday will shift some sales into the second quarter.

Tim Knabich: Despite these difficult year-over-year comparison items, we expect our first quarter sales volume will be flat overall, aided by positive sales volume growth in our aerospace, protective and marine, and packaging coatings businesses.

Speaker Change: Despite these difficult year over year comparison items, we expect our first quarter sales volume will be flat overall aided by positive sales volume growth in our aerospace protective and marine in packaging coatings businesses.

Tim Knabich: We project solid growth in our auto OEM business in Asia Pacific, where we expect to drive solid volume growth in China, led by our strong positioning with the electric vehicle OEM producers. Additionally, we expect to deliver organic sales growth through our best-in-class Mexico distribution platform. We anticipate overall company selling prices to remain positive as some modest declines in our industrial reporting segment related to a small portion of customer-based index contracts will be more than offset by targeted selling price increases in our performance coding segment.

Projects solid growth in our auto OEM business in Asia Pacific, where we expect to drive solid volume growth in China led by our strong positioning with the electric vehicle OEM producers.

Speaker: We significantly reduced working capital by a total of about $600 million on a sequential quarterly basis, and this included the benefit from a partial reduction of our inventory level. However, we still ended the year with higher inventory levels from a historical perspective, primarily in raw materials, and will continue to reduce inventory in the first half of 2024. The strong cash generated drove a reduction in net interest expense by about $20 million compared to the fourth quarter of 2022 as we repaid some high variable cost debt during the quarter.

Tim Knabich: Additionally, we expect to deliver organic sales growth through our best-in-class Mexico distribution platform.

Speaker Change: Additionally, we expect to deliver organic sales growth through our best in class Mexico distribution platform.

Tim Knabich: We anticipate overall company selling prices to remain positive as some modest declines in our industrial reporting segment related to a small portion of customer-based index contracts will be more than offset by targeted selling price increases in our performance coding segment.

Speaker Change: We anticipate overall company selling prices to remain positive as some modest declines in our industrial reporting segment related to a small portion of customer based index contracts will be more than offset by targeted selling price increases in our performance coatings.

Jonathan Edwards: In Mexico, we further advanced cross-selling of our valued products, including protective coatings and certain light industrial coatings, through the best-in-class distribution network of nearly 5,200 concessionaire locations. Finally, our strong focus on the customer drove share gains across several businesses, including the expansion of our architectural coatings products at Walmart. Strategically, we conducted an ongoing review of both our product and business portfolios, leading to the divestiture of several non-core assets, including our European and Australian traffic solution businesses, along with the recently announced strategic alternatives review of Silica's product business. In a variety of cases, we also simplified and improved our product offering, allowing us to reduce complexity and drive down working capital. Finally, these actions, plus strong balance sheet management, resulted in a record full year 2023 cash generation of $2.4 billion.

Tim Knabich: The first quarter comparisons also include declines in certain transitory European energy-related pricing indices that were put in place during a period of extremely high energy prices in the region. However, these particular price declines are offset by lower purchased energy costs for our facilities. The net selling price increases, along with various productivity initiatives, will serve to offset somewhat higher expected wage inflation in 2024, especially in emerging regions. With regard to commodity raw materials, supply remains ample, and we will continue to realize benefits from moderating input costs, including further recognition of savings stemming from working down our higher inventories as we progress through 2024. We will diligently manage our costs and expect to deliver manufacturing and productivity gains supported by a more stable supply chain and customer order pattern.

Speaker: Additionally, we repurchased $100 million of stock in the fourth quarter, which essentially offset dilution. Now, a few comments on the full year 2023. As we communicated at the beginning of 2023, my priorities included margin recovery, strong cash generation, and further strengthening of our capabilities to support our customers' productivity and sustainability needs, which would result in higher PPG organic growth. And coming into 2023, we had a high degree of conviction that our global business portfolio would prove resilient, while anticipating a challenging economic environment, and that clearly played out during the year. For the full year, I'm proud of our team's execution against our strategic objectives as it resulted in delivery of record sales, record-adjusted EPS, and record operating cash, and our sales performance was led by continued selling price execution to offset significant multi-year cost inflation. Thank you for watching.

Speaker Change: Segment.

Speaker Change: First quarter comparisons also include declines in certain transitory European energy related pricing indices that were put in place during the period of extremely high energy prices in the region.

Tim Knabich: First quarter comparisons also include declines in certain transitory European energy-related pricing indices that were put in place during a period of extremely high energy prices in the region.

Tim Knabich: These particular price declines are offset by lower purchased energy costs for our facilities.

Speaker Change: These particular price declines are offset by lower purchased energy costs for our facility.

Speaker Change: The net selling price increases along with various productivity initiatives will serve to offset somewhat higher expected wage inflation in 2024, especially in emerging regions.

Tim Knabich: The net selling price increases along with various productivity initiatives will serve to offset somewhat higher expected wage inflation in 2024, especially in emerging regions.

Tim Knabich: With regard to commodity raw materials, supply remains ample, and we will continue to realize benefits from moderating input costs, including further recognition of savings stemming from working down our higher inventories as we progress through 2024.

Speaker Change: With regard to commodity raw materials supply remains ample and we will continue to realize benefits from moderating input costs, including further recognition of savings stemming from working down our higher inventories as we progress through 2024.

Tim Knabich: We will diligently manage our costs and expect to deliver manufacturing and productivity gains supported by a more stable supply chain and customer order pattern.

Speaker Change: We will diligently manage our costs and expect to deliver manufacturing and productivity gains supported by a more stable supply chain and customer order patterns. We.

Tim Knabich: So overall, we achieved excellent financial results in 2023 and are anticipating improving from this higher base in 2024. We remain confident that we will deliver positive sales volume in 2024, including benefits from China, India, and Mexico. We've delivered share gains in several businesses, including auto refinish, packaging, and the protective and marine coating business. We will also execute on our more than $250 million order backlog in aerospace and drive further growth in our well-positioned businesses in Mexico, California, and the United States. For more information, visit www.fema.gov.

Speaker: Our year-over-year earnings growth was driven by these improved selling prices coupled with moderating input costs and cost structure reductions stemming from our cost management and restructuring initiatives. This resulted in improved margins in both segments. Our businesses delivered innovative and value-added products and solutions to our customers, and this enabled several of our businesses to set all-time annual sales records, including our aerospace, auto OEM, automotive refinish, architectural Mexico, and the protective and marine coatings business. Our enterprise growth initiatives delivered about $150 million of incremental sales in the first year, including strong growth from selling our innovative products for electric vehicles, as well as our share gains in powder coating, and Automotive Refinish. Customer These digital tools include our Link services and Moonwalk mixing machines, both of which are best in class and are focused on improving body shop productivity.

Tim Knabich: We anticipate more moderate year-over-year earnings growth in the first quarter associated with some of the transitory items I mentioned earlier. However, we are confident that we will deliver our commitment for full-year earnings growth of around 10% at our forecast guidance midpoint.

We anticipate more moderate year over year earnings growth in the first quarter associated with some of the transitory items I mentioned earlier. However, we are confident that we will deliver our commitment for full year earnings growth of around 10% at our forecast guidance midpoint.

Tim Knabich: Finally, I want to thank our more than 50,000 employees for making it happen by delivering excellent 2023 financial results and positioning the company for growth and value creation in 2024 and beyond for the benefit of all stakeholders. Thank you for your continued confidence in PPG. This concludes our prepared remarks, and now would you please open the line for questions.

Speaker Change: Finally, I want to thank our more than 50000 employees for making it happen by delivering excellent 2023 financial results and positioning the company for growth and value creation in 2024 and beyond for the benefit of all stakeholders.

Tim Knabich: Thank you for your continued confidence in PPG and this concludes our prepared marks and now would you please open the line for questions.

Speaker Change: Thank you for your continued confidence and PPG and this concludes our prepared remarks and now would you. Please open the line for questions.

Speaker Change: Thank you at this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.

Speaker Change: Thank you. At this time, I would like to remind everyone in order to ask a question, please press star then a number one on your telephone.

Speaker Change: Thank you. At this time, I would like to remind everyone that in order to ask a question, please press star then number one on your telephone. We'll pause for just a moment to compile the Q&A.

Jonathan Edwards: We will drive further improvement of our operating margins aided by the sales volume growth leverage and our initiatives that drive manufacturing productivity following several years of supply chain and other disruptions. Lastly, we entered 2024 with a strong balance sheet, which provides us with the flexibility for further shareholder value creation going forward, including funding organic growth initiatives such as Appropriate Acquisitions, Debt Repayment, and Share Repurchase.

Speaker Change: We'll pause for just a moment to compile the Q&A.

Of course for just a moment to compile the Q&A roster.

Speaker Change: Okay.

Speaker Change: First question comes from David Begleiter with Deutsche Bank. Your line is open, please.

Speaker Change: The first question comes from David Begleiter with Deutsche Bank. Your line is open, please.

Last question comes from David Begleiter with Deutsche Bank. Your line is open. Please go ahead.

David I. Begleiter: Good morning.

David I. Begleiter: Hey, good morning.

David I. Begleiter: Tim and Vince, do you expect total company pricing to be up?

David I. Begleiter: Tim and Vince, do you expect total company pricing to be up? For Performance, are you seeing pressure from big box retailers?

David I. Begleiter: Tim events do you expect total company pricing to be up in 'twenty four I presume that is it.

Speaker: In Mexico, we further advanced cross-selling of our valued products, including protective coatings and certain light industrial coatings, through the best-in-class distribution network of nearly 5,200 concessionaire locations. Finally, our strong focus on the customer drove share gains across several businesses, including the expansion of our architectural coatings products at Walmart. Strategically, we conducted an ongoing review of both our product and business portfolios, leading to the divestiture of several non-core assets, including our European and Australian traffic solution businesses, along with the recently announced strategic alternatives review of Silica's product business. In a variety of cases, we also simplified and improved our product offering, allowing us to reduce complexity and drive down working capital. Finally, these actions, plus strong balance sheet management, resulted in a record full year 2023 cash generation of $2.4 billion.

David I. Begleiter: for

David I. Begleiter: Positive performance down in industrial.

David I. Begleiter: Within performance are you seeing pressure from big box retailers.

David I. Begleiter: Performance, are you seeing pressure from big box retailers?

David I. Begleiter: The lower your paint prices.

Jonathan Edwards: Now I'll comment on our first quarter outlook. We expect to deliver sequential adjusted EPS growth of $1.53 per share in Q4 2023 to a range of $1.80 to $1.87 per share in Q1 2024, an increase of 20% at the midpoint of the range. We anticipate global industrial production to remain soft, and our year-over-year sales volume performance will be unfavorably impacted by the approximately $40 million non-recurring Walmart customer load-in that occurred in the first quarter of 2023. Also, the timing of the Easter holiday will shift some sales into the second quarter.

Hey, good morning, Dave Thanks for the question.

Speaker Change: Hey, good morning, Dave. Thanks for the question. We will have positive company price for full year 2024. Again, to your point, largely from performance codings and more targeted beyond that. As far as big box pricing, most of the big box pricing is contractual. And so I wouldn't say that you'll see significant movement in that pricing throughout the year.

Speaker Change: Hey, good morning, Dave. Thanks for the question. We will have a positive company price for the full year 2024. Again, to your point, largely from performance coding and more targeted beyond that. As far as big box pricing is concerned, most of the big box pricing is contractual. And so I wouldn't say that you'll see significant movement in that pricing throughout the year.

Speaker Change: We will have positive company price for full year 2024.

Speaker Change: Again to your point largely from from performance coatings, and a more targeted beyond that.

Speaker Change: Far as big box pricing most of the big box pricing is contractual and so I wouldn't I wouldn't say that youll see significant movement in that pricing throughout the year.

Speaker Change: Okay.

Speaker Change: Our next question comes from John Mcnulty with BMO. Your line is open. Please go ahead.

Speaker Change: Our next question comes from John McNulty with BMO. Your line is open please.

Speaker Change: Our next question comes from John McNulty with BMO. Your line is open, please.

John P. McNulty: Yeah. Thanks for taking my question so.

John P. McNulty: Yeah, thanks for taking my question.

John P. McNulty: Yeah, thanks for taking my question. Maybe a little bit more color on the raw material front. Can you speak relative to what you reported in the fourth quarter? How much lower are the raw materials that you're buying right now? Because it does look like, you know, things are held up a little bit because of FIFO and also some of your destocking. Or is it just the mid single-digit dip that you've guided to for one cue? Or is there more to it than that? And what should we be thinking about?

John P. McNulty: Maybe a little bit more color on the raw material front. Can you speak to relative to what you reported in the fourth quarter?

John P. McNulty: Maybe a little bit more color on the raw material front can you speak to kind of relative to what you reported in the fourth quarter.

Speaker: So overall, we achieved excellent financial results in 2023 and are anticipating improving from this higher base in 2024. We remain confident that we will deliver positive sales volume in 2024, including benefits from China, India, and Mexico. We've delivered share gains in several businesses, including auto refinish, packaging, and the protective and marine coating business. We will also execute on our more than $250 million order backlog in aerospace and drive further growth in our well-positioned businesses in Mexico, California, and the United States. For more information, visit www.fema.gov.

Jonathan Edwards: Despite these difficult year-over-year comparison items, we expect our first quarter sales volume to be flat overall, aided by positive sales volume growth in our aerospace, protective, and marine, and packaging coatings businesses. We project solid growth in our auto OEM business in Asia Pacific, where we expect to drive solid volume growth in China, led by our strong positioning with the electric vehicle OEM producers. Additionally, we expect to deliver organic sales growth through our best-in-class Mexico distribution platform. Additionally, we anticipate overall company selling prices to remain positive as some modest declines in our industrial reporting segment related to a small portion of customer-based index contracts will be more than offset by targeted selling price increases in our performance coding segment. The first quarter comparisons also include declines in certain transitory European energy-related pricing indices that were put in place during a period of extremely high energy prices in the region.

John P. McNulty: How much lower are raw materials that you're buying right now? Because it does look like, you know, things are held up a little bit because of FIFO and also some of your destocking. Is it just the mid single digit dip that you've guided to for one cue? Or is there more to it than that? And how should we be thinking about?

John P. McNulty: How much lower our raw materials that you are buying right now because it does look like things are held up a little bit because of FIFO and also some of your Destocking is it just the mid single digit dip that you guided to for one Q or is there is there more to it than that and how should we be thinking about that.

John P. McNulty: Yeah, John, this is Vince. If you look throughout all of last year, we continued to accrue larger benefits.

Yes, John this is Vince if you look.

Vincent Andrew: Throughout all of last year, we continued to accrue larger benefits from the moderation of raw materials, we will remind everybody raw material costs are still higher on a multiyear basis by a significant amount and as we can.

Vince Morales: From the moderation of raw materials, we will remind everybody, raw material costs are still higher on a multi-year basis by a significant amount. As Tim mentioned, most of our suppliers have more than ample capacity, and it's certainly a focus for them to pick up more volume. We expect some incrementally better invoicing.

Vince Morales: From the moderation of raw materials, we will remind everybody that raw material costs are still higher on a multi-year basis by a significant amount. As Tim mentioned, most of our suppliers have more than ample capacity, and it's certainly a focus for them to pick up more volume. We expect some incrementally better invoicing benefits from raw materials, and then that will eventually flow through our P&L as we go through the year. But year over year, we expect some incrementally beneficial invoice prices. Yeah, I would just add, this is Tim. John, thanks for the question. I would just add that fundamentally, you know, upstream of us, it's still a pretty long environment. No issues, no issues on our end from the availability perspective. And I think that's a good indicator for us as we move through the year as well.

Vincent Andrew: Jim mentioned most of our suppliers have more than ample.

Speaker: We will drive further improvement of our operating margins aided by the sales volume growth leverage and our initiatives that drive manufacturing productivity following several years of supply chain and other disruptions. Lastly, we entered 2024 with a strong balance sheet, which provides us with the flexibility for further shareholder value creation going forward, including funding organic growth initiatives such as Appropriate Acquisitions, Debt Repayment, and Share Repurchase.

Vincent Andrew: Our capacity and it's certainly.

Vincent Andrew: The focus for them to pick up more volume, we expect some incrementally better invoice invoice benefits from raw materials, and then that will eventually flow through our P&L as we go through the year, but year over year, we expect some incremental benefit and official invoice pricing.

Vince Morales: Invoice benefits from raw materials, and then that will eventually flow through our P&L as we go through the year. But year over year, we expect some incrementally beneficial invoice prices.

Vince Morales: Yeah, I would just add, this is Tim, John, thanks for the question. I would just add that fundamentally, you know, upstream of us, it's still a pretty long environment. No issues, no issues on our end from availability. And I think that's a good indicator for us as we move through the year as well.

Speaker Change: Yes, I would just add this is Tim John Thanks for the question I would just add that fundamentally upstream of us it's still a pretty long environment no issues no issues on our end from availability and I think thats a good indicator for us as we move through the year as well.

Jonathan Edwards: These particular price declines are offset by lower purchased energy costs for our facilities. The net selling price increases, along with various productivity initiatives, will serve to offset somewhat higher expected wage inflation in 2024, especially in emerging regions. With regard to commodity raw materials, supply remains ample, and we will continue to realize benefits from moderating input costs, including further recognition of savings stemming from working down our higher inventories as we progress through 2024. We will diligently manage our costs and expect to deliver manufacturing and productivity gains supported by a more stable supply chain and customer order pattern. We anticipate more moderate year-over-year earnings growth in the first quarter associated with some of the transitory items I mentioned earlier. However, we are confident that we will deliver our commitment for full-year earnings growth of around 10% at our forecast guidance midpoint.

Speaker: Now I'll comment on our first quarter outlook. We expect to deliver sequential adjusted EPS growth of $1.53 per share in Q4 2023 to a range of $1.80 to $1.87 per share in Q1 2024, an increase of 20% at the midpoint of the range. We anticipate global industrial production to remain soft, and our year-over-year sales volume performance will be unfavorably impacted by the approximately $40 million non-recurring Walmart customer load-in that occurred in the first quarter of 2023. Also, the timing of the Easter holiday will shift some sales into the second quarter.

Speaker Change: Our next question comes from Ghansham Panjabi with Baird. Your line is open, please go ahead.

Speaker Change: Our next question comes from Ghansham Panjabi with Baird. Your line is open. Please go ahead.

Ghansham Panjabi: Thanks, operator, good morning, everybody.

Ghansham Panjabi: Tim I want to go back to the question that was asked earlier about pricing.

Ghansham Panjabi: Go back to the...

Ghansham Panjabi: You kind of zoom out a bit.

Ghansham Panjabi: Price for PPG as a whole has been up over 20% since 2021 and a lot of that is just the enormity of the raw material cycle, and so on and so forth, which seems to have changed significantly.

Ghansham Panjabi: Video of the raw material cycle.

Ghansham Panjabi: Your confidence on price Your confidence on price

Ghansham Panjabi: Your confidence in price Your confidence in price and partly

Ghansham Panjabi: Youre confidence on pricing holding.

Ghansham Panjabi: Being up in 2024.

Ghansham Panjabi: Maybe even beyond that is that based partly on the mix change in the portfolio with aerospace and so on and so forth.

Ghansham Panjabi: and partly

Ghansham Panjabi: Or is there something unique about the industry structure now thats going to allow you to hold onto the enormity of these price increases with raw materials doing what they're doing.

Ghansham Panjabi: You know, or is there something You know, or is there something

Speaker: Despite these difficult year-over-year comparison items, we expect our first quarter sales volume to be flat overall, aided by positive sales volume growth in our aerospace, protective, and marine, and packaging coatings businesses. We project solid growth in our auto OEM business in Asia Pacific, where we expect to drive solid volume growth in China, led by our strong positioning with the electric vehicle OEM producers. Additionally, we expect to deliver organic sales growth through our best-in-class Mexico distribution platform. Additionally, we anticipate overall company selling prices to remain positive as some modest declines in our industrial reporting segment related to a small portion of customer-based index contracts will be more than offset by targeted selling price increases in our performance coding segment. The first quarter comparisons also include declines in certain transitory European energy-related pricing indices that were put in place during a period of extremely high energy prices in the region.

Speaker Change: Hey, good morning, Ghansham. It's not a mixed issue for us, Ghansham. It's more, first of all, I'm very pleased with how we've continued to hold price, even just closing out fourth quarter with another 2% increment. Again, we'll be positive in Q1. The confidence level is more because of a couple of things. One, to Vince's point earlier, RAS are still quite elevated. We're talking about coming off of extremely high peaks, but they're still quite elevated from, say, 2019. So we don't see what I would characterize as massive deflation by any means.

Speaker Change: Hey, good morning, Ghansham. It's not a mixed issue for us. It's more, first of all, I'm very pleased with how we've continued to hold prices, even just closing out the fourth quarter with another 2% increment. Again, we'll be positive in Q1. The confidence level is higher because of a couple of things. One, to Vince's point earlier, RAS is still quite elevated. We're talking about coming off of extremely high peaks, but they're still quite elevated from, say, 2019. So we don't see what I would characterize as massive deflation by any means.

Speaker Change: Yeah, Hey, good morning Ghansham.

Speaker Change: It's not a mix issue for us Ghansham, it's more first of all I'm very pleased with how we've continued to hold price even just closing out.

Speaker Change: Fourth quarter with another another 2% increment again will be positive in Q1, the confidence level is more because of a couple of things. One convinced this point earlier raws are still quite elevated we're talking about coming off of extremely high peaks.

Jonathan Edwards: Finally, I want to thank our more than 50,000 employees for making it happen by delivering excellent 2023 financial results and positioning the company for growth and value creation in 2024 and beyond for the benefit of all stakeholders. Thank you for your continued confidence in PPG. This concludes our prepared remarks, and now would you please open the line for questions. Thank you.

Speaker Change: So, but there is still quite elevated from say 2019.

Speaker Change: So we don't see what I would characterize as massive deflation by any means and the confidence level as we move through the year I'll talk performance coatings.

Speaker Change: And the confidence level as we move through the year, you know, I'll talk performance coding.

Speaker Change: And the confidence level as we move through the year, you know, I'll talk about performance coding. You know, we, as you know well, get price almost irrespective of the raw material environment because of the unique value proposition that we deliver in performance, where we're such a small part of the cost structure of our customers from a pure paint standpoint, but the value add outside of the can that we deliver is such a big, significant impact on their cost So that's a very different model there. And on the industrial side, where maybe it is more, you know, proportionate to raw material increases or decreases, we just don't see the long supply dynamic upstream of us changing dramatically as we move through the year.

Speaker Change: You know, we, as you know well, we get price almost irrespective there of the raw material environment because of the unique value proposition that we deliver in performance where we're such a small part of the cost structure of our customers from a pure paint standpoint, but the value add outside of the can that we deliver is such a big significant impact on their cost structure. So that's a very different model there. And on industrial side, where maybe it is more, you know, proportionate to raw material increases or decreases, we just don't see the long supply dynamic upstream of us changing dramatically as we move through the year. When you think about, for example, you know, China, you know, just not having a V-shaped rebound. And China is a big consumer of raws. So we expect a more moderate environment as we move through 2022.

Speaker Change: As you know well, we get we get price almost.

Jonathan Edwards: At this time, I would like to remind everyone that in order to ask a question, please press star then number one on your telephone. We'll pause for just a moment to compile the Q&A. The first question comes from David Begleiter with Deutsche Bank. Your line is open, please. Good morning.

Irrespective there of the raw material environment because of the unique value proposition that we deliver and performance where we're such a small part.

Speaker Change: Of the cost structure of our customers from a pure paint standpoint, but the value add outside of the can that we deliver is such a big significant impact on their cost structure. So that's a very different model there and on industrial side, where maybe it is more.

Tim Knabich: Tim and Vince, do you expect total company pricing to be up? For performance, are you seeing pressure from big box retailers? Hey, good morning, Dave.

Speaker Change: Proportionate to raw material increases or decreases.

Speaker: These particular price declines are offset by lower purchased energy costs for our facilities. The net selling price increases, along with various productivity initiatives, will serve to offset somewhat higher expected wage inflation in 2024, especially in emerging regions. With regard to commodity raw materials, supply remains ample, and we will continue to realize benefits from moderating input costs, including further recognition of savings stemming from working down our higher inventories as we progress through 2024. We will diligently manage our costs and expect to deliver manufacturing and productivity gains supported by a more stable supply chain and customer order pattern. We anticipate more moderate year-over-year earnings growth in the first quarter associated with some of the transitory items I mentioned earlier. However, we are confident that we will deliver our commitment for full-year earnings growth of around 10% at our forecast guidance midpoint.

Speaker Change: We just don't see the long supply.

Tim Knabich: Thanks for the question. We will have a positive company price for the full year 2024. Again, to your point, largely from performance coding and more targeted beyond that. As far as big box pricing, most of the big box pricing is contractual.

Speaker Change: Dynamic upstream of us changing dramatically as we move through the year. When you think about is for example, China.

Speaker Change: When you think about, for example, China, you know, just not having a V-shaped rebound. And China is a big consumer of raw materials. So we expect a more moderate climate as we move through 2022.

Speaker Change: Just not not having a V shaped rebound in China is a big consumer of raws. So we expect a more moderate environment as we move through 2024.

Speaker Change: Yes.

Tim Knabich: And so I wouldn't say that you'll see significant movement in that pricing throughout the year. Our next question comes from John McNulty with BMO. Your line is open, please.

Speaker Change: Our next question comes from Duffy Fischer with Goldman Sachs. Your line is open.

Speaker Change: Our next question comes from Duffy Fischer with Goldman Sachs. Your line is open. Please go ahead.

Duffy Fischer: Good morning, guys. Two questions. First is, cash flow is a percent of EBITDA. If you hit the midpoint of your guide this year, EBITDA should be up about $250 million. Should we expect a commensurate move in cash flow?

Duffy Fischer: Hey, good morning, guys.

Duffy Fischer: Two questions.

First is cash flow as a percent of EBITDA. If you hit the midpoint of your guide this year EBITDA should be up about 250 million should we expect a commensurate move in cash flow would be one.

John P. McNulty: Yeah, thanks for taking my question. Maybe a little bit more color on the raw material front. Can you speak to kind of relative to what you reported in the fourth quarter? How much lower are the raw materials that you're buying right now? Because it does look like, you know, things are held up a little bit because of FIFO and also some of your destocking. Or is it just the mid single-digit dip that you've guided to for one cue? Or is there more to it than that?

Duffy Fischer: And then two, in the auto OE biz,

Duffy Fischer: And then two, in the auto OE biz, you guided it down to low single digits coming into Q4. You did mid-single digits up. Again, guiding down in Q1. Is that just conservatism? Because when you look at the auto numbers, it seems like auto OE should be better than that unless there's some pricing in there. So can you just talk about what you're seeing in auto OE for the Q1 price versus Yeah, hey Duffy, this is Tim. I'll do the auto one. I'll let Vince do the cash versus EBITDA one.

Duffy Fischer: And then two in the auto OE business, you guided to down low single digits coming into Q4, you did mid single digits.

Duffy Fischer: You guided to down low single digits coming into Q4. You did mid-single digits up. Again, guiding down in Q1. Is that just conservatism? Because when you look at the auto numbers, it seems like auto OE should be better than that unless there's some pricing in there. So can you just talk about what you're seeing in auto OE for Q1 price versus...

Speaker Change: Again guiding down in Q1 is that just conservatism because when you look at the auto numbers. It seems like auto OE should be better than that unless there is some pricing in there. So can you just talk about what youre seeing in Ottawa, we for Q1 price versus volume.

Speaker: Finally, I want to thank our more than 50,000 employees for making it happen by delivering excellent 2023 financial results and positioning the company for growth and value creation in 2024 and beyond for the benefit of all stakeholders. Thank you for your continued confidence in PPG. This concludes our prepared remarks, and now would you please open the line for questions. Thank you.

John P. McNulty: And what should we be thinking about? Yeah, John, this is Vince. If you look throughout all of last year, we continued to accrue larger benefits. From the moderation of raw materials, we will remind everybody, raw material costs are still higher on a multi-year basis by a significant amount. As Tim mentioned, most of our suppliers have more than ample capacity, and it's certainly a focus for them to pick up more volume. We expect some incrementally better invoicing. Invoice benefits from raw materials, and then that will eventually flow through our P&L as we go through the year. But year over year, we expect some incrementally beneficial invoice prices. Yeah, I would just add, this is Tim. John, thanks for the question.

Speaker Change: Yeah.

Duffy Fischer: Yeah, hey Duffy, this is Tim. I'll do the auto one. I'll let Vince do the cash versus EBITDA one.

Speaker Change: Yes, Duffy this is Tim uptake.

Tim: I'll do the auto one I'll let.

Speaker Change: I'll, let Vince do the cash versus EBITDA one.

Vincent Andrew: Auto auto had a really good year for us last year, and we are well positioned for what we view as a multi year recovery.

Tim: Otto had a really good year for us last year, and we are well-positioned for what we view as a multi-year recovery. So I personally continue to be bullish on Otto as we look into the full year, 2024. When you look at our Q1, and we went from up mid-single digits in Q4, and we're projecting low single digits down in Q1. A lot of that, if you go back to last year, we were a strong double-digit up in Q1 of 2023. And also, yeah, there is some, as I mentioned in my opening remarks, we do have some of our index pricing. We're rolling back, and that has some impact. But I would not, personally, I'm not over-concerned about Otto volumes as we move through the year. I think total builds were, you know, 89-point-something last year. I believe there's some incremental upside to that as we move through 2024. Our share position's good. Our China Otto position is really good. And as you know, out of the 90 million new builds, about 30 million. The end of them come out of China. So, overall, feeling good about Otto. There's a little bit of a year-over-year comp soft point and a little bit of index pricing rolling off in Q1.

Vincent Andrew: So I am personally continue to be bullish on auto as we look into the full year 2024, when you look at.

Vincent Andrew: Our Q1, and we went from up mid single digits in Q4 and were projecting.

Operator: At this time, I would like to remind everyone that in order to ask a question, please press star then number one on your telephone. We'll pause for just a moment to compile the Q&A. The first question comes from David Begleiter with Deutsche Bank. Your line is open, please. Good morning.

Vincent Andrew: Low single digits down in Q in Q1, a lot of that if you go back to last year, we were a strong double digit up in Q1 of 2023 and also yes. There is some as I mentioned in my opening remarks, we do have some of our index pricing.

Tim: I would just add that fundamentally, you know, upstream of us, it's still a pretty long environment. No issues, no issues on our end from availability. And I think that's a good indicator for us as we move through the year as well. Our next question comes from Ghansham Panjabi with Baird. Your line is open, please go ahead.

Tim: We're rolling back, and that has some impact. But personally, I'm not over-concerned about Otto volumes as we move through the year. I think total builds were, you know, 89-point-something last year. I believe there's some incremental upside to that as we move through 2024. Our share position's good. Our China Otto position is really good. And as you know, out of the 90 million new builds, about 30 million, or the end of them come out of China. So, overall, I'm feeling good about Otto. There's a little bit of a year-over-year comp soft point and a little bit of index pricing rolling off in Q1.

Speaker: Tim and Vince, do you expect total company pricing to be up? For performance, are you seeing pressure from big box retailers? Hey, good morning, Dave.

Vincent Andrew: Rolling back and that has some impact, but I would not personally I'm not over concerned about auto volumes as we move through the year I think total builds were.

Tim Knabich: Go back to the... Raw Materials Psych. Your confidence in price, your confidence in price, and partly, you know, or is there something? You know, or is there something? Hey, good morning, Ghansham. It's not a mixed issue for us.

89 point something last year I believe there is some incremental upside to that as we move through 2024, our share position is good our China auto position is really good and as you know.

Speaker: Thanks for the question. We will have a positive company price for the full year 2024. Again, to your point, largely from performance coding and more targeted beyond that. As far as big box pricing, most of the big box pricing is contractual.

Tim Knabich: It's more, first of all, I'm very pleased with how we've continued to hold prices, even just closing out the fourth quarter with another 2% increment. Again, we'll be positive in Q1. The confidence level is higher because of a couple of things.

Vincent Andrew: About 90 million, new builds about $30 million of them come out of China. So overall feeling good about auto theres, a little bit of a year over year comp soft point in a little bit of index pricing rolling off in Q1.

John P. McNulty: And so I wouldn't say that you'll see significant movement in that pricing throughout the year. Our next question comes from John McNulty with BMO. Your line is open, please.

Tim Knabich: One, to Vince's point earlier, RAS are still quite elevated. We're talking about coming off of extremely high peaks, but they're still quite elevated from, say, 2019. So we don't see what I would characterize as massive deflation by any means.

Speaker Change: Just to add, as we talked several times, Duffy, on auto, acceleration in China helps us from an EV perspective as well. So we have more content on a traditional EV than we do on an ICE.

Speaker Change: Just to add, as we talked several times, Duffy, on the auto front, acceleration in China helps us from an EV perspective as well. So we have more content on a traditional EV than we do on an ICE.

Speaker Change: Just add.

Speaker Change: We've talked several times Duffy on auto.

Speaker Change: The acceleration in China helps us from <unk> perspective, as well so we have more content on any traditional EV than we do on an ice so that thats a buffer for us PPG in particular to your cash flow question. Yeah. I think the short answer is typically EBITDA would certainly serve as a proxy for cash flow plus.

Vince: Yeah, thanks for taking my question. Maybe a little bit more color on the raw material front. Can you speak to kind of relative to what you reported in the fourth quarter? How much lower are the raw materials that you're buying right now? Because it does look like, you know, things are held up a little bit because of FIFO and also some of your destocking. Or is it just the mid single-digit dip that you've guided to for one cue? Or is there more to it than that?

Speaker Change: So that's a buffer for us, PPG in particular. To your cash flow question, yeah, I think the short answer is typically EBITDA would certainly serve as a proxy for cash flow, plus or minus. We have the last couple years, the expanded answer is we have the last couple years had working capital movement that has either helped or hurt the cash flow on a transitory basis. We do have, as Tim alluded to in his opening comments, probably a couple hundred million dollars of excess raw materials in inventory. We're going to work that down in 2024, so that'll have a cash flow implication for us in a positive manner. But I think generally what you're saying, EBITDA and cash flow should be the movement should be consistent. EBITDA and cash flow should be consistent.

Speaker Change: So that's a buffer for us, PPG in particular. To your cash flow question, yeah, I think the short answer is typically EBITDA would certainly serve as a proxy for cash flow, plus or minus. The expanded answer is we have had working capital movement that has either helped or hurt the cash flow on a transitory basis. We do have, as Tim alluded to in his opening comments, probably a couple hundred million dollars of excess raw materials in inventory. We're going to work that down in 2024, so that'll have a cash flow impact for us in a positive manner.

Ghansham Panjabi: And the confidence level as we move through the year. I'll talk about performance coding later. You know, we, as you know well, we get price almost irrespective of the raw material environment because of the unique value proposition that we deliver in performance where we're such a small part of the cost structure of our customers from a pure paint standpoint, but the value add outside of the can that we deliver is such a big, significant impact on their cost structure. So that's a very different model there.

Speaker Change: Plus or minus.

Speaker Change: We have the last couple of years expanding expanded answer is we have the last couple of years had working capital movement that have either helped or hurt.

Speaker Change: The cash flow on a transitory basis we.

Speaker Change: Do have as Tim alluded to in his opening comments.

Tim: And what should we be thinking about? Yeah, John, this is Vince. If you look throughout all of last year, we continued to accrue larger benefits. From the moderation of raw materials, we will remind everybody, raw material costs are still higher on a multi-year basis by a significant amount. As Tim mentioned, most of our suppliers have more than ample capacity, and it's certainly a focus for them to pick up more volume. We expect some incrementally better invoicing. Invoice benefits from raw materials, and then that will eventually flow through our P&L as we go through the year. But year over year, we expect some incrementally beneficial invoice prices. Yeah, I would just add, this is Tim. John, thanks for the question.

Speaker Change: A couple of hundred million dollars of excess raw materials and inventory.

Speaker Change: We're going to work that down.

Ghansham Panjabi: And on the industrial side, where maybe it is more, you know, proportionate to raw material increases or decreases, we just don't see the long supply dynamic upstream of us changing dramatically as we move through the year. When you think about, for example, China, you know, just not having a V-shaped rebound. And China is a big consumer of raw materials. So we expect a more moderate environment as we move through 2022. Our next question comes from Duffy Fischer with Goldman Sachs. Your line is open.

In 2024, so that will have a cash flow implication for us in a positive manner, but I think generally what you are saying EBITDA and cash flow should be the the.

Speaker Change: But I think generally what you're saying, EBITDA and cash flow should be the movement should be consistent. Yeah, and Duffy, this is Tim. I'm going to come back with one more. Vince mentioned the EV situation, and we all see the headlines on EVs, but that's largely the U.S. and Europe right now, and as you know, two-thirds of the world's EVs are made in China. And that content number, if you look at the average PPG content across the EV space for 2023, was up by 20%. So our content per EV built was up by 20% in 2023, so that bodes well for us as well.

Speaker Change: The movement should be consistent.

Speaker Change: Yeah, and Duffy, this is Tim. I'm going to come back with one additional. Vince mentioned the EV situation, and we all see the headlines on EVs, but that's largely U.S. and Europe right now, and as you know, two-thirds of the world's EVs are made in China. And that content number, if you look at the average PPG content across the EV space for 2023, was up by 20%. So our content per EV built was up by 20% in 2023, so that bodes well for us as well.

Speaker Change: Yes, Duffy, it's Tim I'm going to come back with one additional Vince mentioned, the EV situation in that yes.

Tim: We all see the headlines on on Evs, but that's largely U S and Europe right now and as you know two thirds of the world's Evs are made in China.

Tim: And that content number if you look at the average the average PPG content.

Vince: I would just add that fundamentally, you know, upstream of us, it's still a pretty long environment. No issues, no issues on our end from availability. And I think that's a good indicator for us as we move through the year as well. Our next question comes from Ghansham Panjabi with Baird. Your line is open, please go ahead.

Tim: Across the EV space for 2023 was up by 20%. So our content per EV built was up by 20% in 2023, so that bodes well for us as well.

Ghansham Panjabi: Good morning, guys. I have two questions. The first point is cash flow is a percent of EBITDA. If you hit the midpoint of your guide this year, EBITDA should be up about $250 million. Should we expect a commensurate move in cash flow? And then two, in the auto OE biz, you guided to down low single digits coming into Q4. You did mid-single digits up. Again, guiding down in Q1. Is that just conservatism?

Tim: Sure.

Tim: Okay.

Ghansham Panjabi: Go back to the... Raw Materials Psych. Your confidence in price, your confidence in price, and partly, you know, or is there something? You know, or is there something? Hey, good morning, Ghansham. It's not a mixed issue for us.

Speaker Change: Our next question comes from Steven Byrne with Bank of America, Merrill Lynch. Your line is open, please go ahead.

Speaker Change: Our next question comes from Stephen Byrne with Bank of America Merrill Lynch. Your line is open. Please go ahead.

Steve Byrne: Yes, thank you. And you've been involved in this partnership with Home Depot for a long time. I'm curious to hear your view whether

Steve Byrne: Yes, thank you. And you've been involved in this partnership with Home Depot for a long time. I'm curious to hear your view on whether Going is better or worse.

Stephen Byrne: Yes. Thank you.

And he's been involved in this partnership with home depot for a long time I'm curious to hear your view whether it's.

Steve Byrne: Going better or worse?

Stephen Byrne: It's going better or worse than.

Speaker: It's more, first of all, I'm very pleased with how we've continued to hold prices, even just closing out the fourth quarter with another 2% increment. Again, we'll be positive in Q1. The confidence level is higher because of a couple of things.

Steve Byrne: What you had expected and any potential for an inflection in that relationship in 2024? And if you don't mind, can you just comment on SG&A?

Steve Byrne: What you had expected and any potential for an inflection in that relationship in 2024? And, if you don't mind, can you just comment on SG&A?

Stephen Byrne: What you had expected.

Tim: Because when you look at the auto numbers, it seems like auto OE should be better than that unless there's some pricing in there. So can you just talk about what you're seeing in auto OE for Q1 prices versus... Yeah, hey Duffy, this is Tim. I'll do the auto one.

Stephen Byrne: The potential for an inflection.

Stephen Byrne: And that relationship in 2024, and if you don't mind can you just comment on SG&A.

Steve Byrne: 2020-2024

Stephen Byrne: For 2024.

Steve Byrne: It seemed to really jump in the fourth quarter.

Steve Byrne: It seemed to really jump in the fourth quarter. Were there some unusuals in there, like with your strategic actions? Any comments on that? How should we forecast that going forward?

Stephen Byrne: It seemed to really jump in the fourth quarter, where there were some unusuals in there like with your.

Speaker: One, to Vince's point earlier, RAS are still quite elevated. We're talking about coming off of extremely high peaks, but they're still quite elevated from, say, 2019. So we don't see what I would characterize as massive deflation by any means.

Steve Byrne: Were there some unusuals in there, like with your...

Tim: I'll let Vince do the cash versus EBITDA one. Otto had a really good year for us last year, and we are well-positioned for what we view as a multi-year recovery. So I personally continue to be bullish on Otto as we look into the full year, 2024.

Steve Byrne: Your strategic actions, any comments on that? How should we forecast that going forward?

Stephen Byrne: I know your strategic actions.

Stephen Byrne: On that how should we how should we forecast that going forward.

Yeah, Hey, good morning, Steve Yeah, and there were the quick answer on your second question is there were some unusuals and Vince will take that but your first one.

Speaker Change: Yeah. Hey, good morning, Steve. Yeah. And there were the quick answer on your second question is there were some unusuals and Vince will take that. But your first one.

Speaker Change: Yeah. Hey, good morning, Steve. Yeah. And the quick answer to your second question is that there were some unusual ones, and Vince will take that. But your first one. The Home Depot relationship and progress on the PRO program are going as expected. Quite frankly, the challenge that we have is that as it's growing off a relatively small denominator, as you know, it's still being offset by the challenges on the DIY side. We're, you know, it's DIY is still a Home Depot and the Glidden brand and Olympic brands are still a critical part of our DIY omni-channel strategy going forward.

Speaker Change: When you look at our Q1, we went from up mid-single digits in Q4, and we're projecting low single digits down in Q1. A lot of that, if you go back to last year, we were a strong double-digit increase in Q1. And also, yeah, there is some, as I mentioned in my opening remarks, we do have some of our index pricing. We're rolling it back, and that has some impact. But I would not, personally; I'm not over-concerned about Otto volumes as we move through the year. I think total builds were, you know, 89-point-something last year.

Speaker: And the confidence level as we move through the year. I'll talk about performance coding later. You know, we, as you know well, we get price almost irrespective of the raw material environment because of the unique value proposition that we deliver in performance where we're such a small part of the cost structure of our customers from a pure paint standpoint, but the value add outside of the can that we deliver is such a big, significant impact on their cost structure. So that's a very different model there.

Stephen Byrne: The home depot relationship and progress.

Speaker Change: The Home Depot relationship and progress on the PRO program is going as expected.

Vincent Andrew: On the pro program as.

Vincent Andrew: Is going as expected.

Speaker Change: Quite frankly, the challenge that we have is that as it's growing off, you know, relatively small denominator, as you know, it's still being offset by the challenges on the DIY side. We're, you know, it's DIY is still a, you know, the Home Depot and the Glidden brand and Olympic brands are still a critical part of our DIY omni-channel strategy going forward. And unfortunately, the negatives there from a volume standpoint are offsetting the good progress that we have on our pro omni-channel between the Home Depot and our own network. If I look at, just to give some perspective, so Q4, despite the challenges out there, we were up low single digits on our pro omni-channel and our...

Quite frankly, the challenge that we have is that as its growing off.

Vincent Andrew: Relatively small denominator as you know, it's still being offset by the challenges on the DIY side.

DIY is still.

One depot in the Glidden brand in Olympic brands are still a critical part of our DIY Omnichannel strategy going forward and unfortunately, the negatives there from a volume standpoint are offsetting the good progress that we have on our pro omnichannel between the home depot and our own.

Speaker: And on the industrial side, where maybe it is more, you know, proportionate to raw material increases or decreases, we just don't see the long supply dynamic upstream of us changing dramatically as we move through the year. When you think about, for example, China, you know, just not having a V-shaped rebound. And China is a big consumer of raw materials. So we expect a more moderate environment as we move through 2022. Our next question comes from Duffy Fischer with Goldman Sachs. Your line is open.

Speaker Change: And unfortunately, the negatives there from a volume standpoint are offsetting the good progress that we have made on our pro omni-channel between the Home Depot and our own network. If I look at, just to give some perspective, so in Q4, despite the challenges out there, we were up low single digits on our pro omni-channel, and our Sellout with the Home Depot was one of our better quarters yet. So we're making progress there, but our DIY omnichannel, which includes not only what we do with the Home Depot but also, you know, our big partner in the Midwest, our DIY has remained down.

Tim: I believe there's some incremental upside to that as we move through 2024. Our share position's good. Our China Otto position is really good. And as you know, out of the 90 million new builds, about 30 million. The end of them come out of China.

Vincent Andrew: Our own network, if I look at just.

Vincent Andrew: Just to give some perspective, so Q4, despite the challenges out there.

Vincent Andrew: We were up low single digits on a pro omnichannel.

Vincent Andrew: And.

Vince Morales: So, overall, I'm feeling good about Otto. There's a little bit of a year-over-year comp soft point and a little bit of index pricing rolling off in Q1. Just to add, as we talked several times, Duffy, on the auto front, acceleration in China helps us from an EV perspective as well. So we have more content on a traditional EV than we do on an ICE. So that's a buffer for us, PPG in particular. To your cash flow question, yeah, I think the short answer is typically EBITDA would certainly serve as a proxy for cash flow, plus or minus.

Vincent Andrew: Our.

Speaker Change: Sellout with the Home Depot was one of our better quarters yet.

Sell out with.

Vincent Andrew: With the home depot was one of our better quarters, yet so we're making progress there, but our DIY omnichannel, which includes not only what we do with the home depot, but also.

Speaker Change: So we're making progress there, but our DIY omnichannel, which includes not only what we do with the Home Depot, but also, you know, our big partner in the Midwest, our DIY remained down. So that's the issue there, but the momentum continues to grow. It's, as I've said many times, we are building a business model for the future that's brick and mortar light, and it's a marathon, not a sprint, and we continue to tick off miles on the marathon. So good progress.

Speaker Change: So that's the issue there, but the momentum continues to grow. It's, as I've said many times, we are building a business model for the future that's bricks and mortar light, and it's a marathon, not a sprint, and we continue to tick off miles on the marathon. So, good progress.

Duffy Fischer: Good morning, guys. I have two questions. The first point is cash flow is a percent of EBITDA. If you hit the midpoint of your guide this year, EBITDA should be up about $250 million. Should we expect a commensurate move in cash flow? And then two, in the auto OE biz, you guided to down low single digits coming into Q4. You did mid-single digits up. Again, guiding down in Q1. Is that just conservatism?

Vincent Andrew: Our big partner and in the Midwest.

Vincent Andrew: Our DIY remain down so that's the issue there, but the momentum continues to grow it's as I've said many times, we are building a business model for the future that's brick and mortar light.

Vincent Andrew: And it's a marathon not a sprint and we continue to tick off miles on the marathon so good progress.

Tim Knabich: The expanded answer is we have had working capital movement that has either helped or hurt the cash flow on a transitory basis. We do have, as Tim alluded to in his opening comments, probably a couple hundred million dollars of excess raw materials in inventory. We're going to work that down in 2024, so that'll have a cash flow impact for us in a positive manner. But I think generally what you're saying, EBITDA and cash flow should be the movement should be consistent. EBITDA and cash flow should be consistent. Yeah, and Duffy, this is Tim.

Speaker Change: Yeah, Steve, on the overhead, I'm going to just look at the whole year. There's always movement between quarters within a year, but on a full year basis.

Speaker Change: Yeah, Steve, on the overhead, I'm going to just look at the whole year. There's always movement between quarters within a year, but on a full year basis. You know, our overhead was up about $380 million. About a third of that is directly correlated to the increase in sales.

Speaker Change: Yes, Steve on overhead I'm going to just look at the whole year, because there's always movements between quarters within a year, but on a full year basis.

Speaker: Because when you look at the auto numbers, it seems like auto OE should be better than that unless there's some pricing in there. So can you just talk about what you're seeing in auto OE for Q1 prices versus... Yeah, hey Duffy, this is Tim. I'll do the auto one.

Speaker Change: You know, our overhead was up about $380 million.

Speaker Change: It was up about $380 million.

Speaker Change: About a third of that is directly correlated to the increase in sales.

Speaker Change: Whether it be volume, price, or ethics, Bye. Bye.

Either whether it be volume price or FX.

Speaker Change: So on a percentage basis, if you just do the percents comparison, you get about a third of that directly related to our sales movement. Another third of that on a year-over-year basis, and Tim alluded to this in his opening remarks, and we did have a higher shareholder-based and performance-based compensation in the reminder that in the prior year we had much lower and performance-based compensation in the prior year we had much lower uh compensation so the kind of a doubling effect on a year-over-year basis a year-over-year basis and the final third, roughly 100 million or so is inflation, and the remainder of that would be growth initiatives, initiatives, for some of the key programs we won throughout the year and including our Chromex growth exception.

Speaker Change: On a percentage basis. If you just do the percent comparison, you'll get about a third of that directly related to our.

Speaker: I'll let Vince do the cash versus EBITDA one. Otto had a really good year for us last year, and we are well-positioned for what we view as a multi-year recovery. So I personally continue to be bullish on Otto as we look into the full year, 2024.

Speaker Change: Sales movement.

Speaker Change: Another third of that on a year over year basis, and then Tim alluded to this in his opening remarks.

Tim Knabich: I'm going to come back with one additional point. Vince mentioned the EV situation, and we all see the headlines about EVs, but that's largely the U.S. and Europe right now, and as you know, two-thirds of the world's EVs are made in China. And that content number, if you look at the average PPG content across the EV space for 2023, was up by 20%. So our content per EV built was up by 20% in 2023, so that bodes well for us as well. Our next question comes from Steven Byrne with Bank of America, Merrill Lynch. Your line is open, please go ahead.

Speaker Change: and we did have a higher shareholder-based and performance-based compensation in the reminder that in the prior year we had much lower and performance-based compensation in the prior year we had much lower

Speaker Change: We did have higher.

Speaker Change: Shareholder based and performance based compensation.

Speaker Change: And the reminder, that in the prior year, we had much lower.

Speaker Change: uh compensation so the kind of a doubling effect on a year-over-year basis a year-over-year basis

Speaker Change: The compensation, so kind of a doubling effect on a year over year basis.

Speaker: When you look at our Q1, we went from up mid-single digits in Q4, and we're projecting low single digits down in Q1. A lot of that, if you go back to last year, we were a strong double-digit increase in Q1. And also, yeah, there is some, as I mentioned in my opening remarks, we do have some of our index pricing. We're rolling it back, and that has some impact. But I would not, personally; I'm not over-concerned about Otto volumes as we move through the year. I think total builds were, you know, 89-point-something last year.

Speaker Change: and the final third, roughly 100 million or so is inflation.

And the final third.

Speaker Change: Roughly $100 million of <unk> inflation.

Speaker Change: and the remainder of that would be growth initiatives, initiatives,

Speaker Change: And the remainder of that.

Would be growth initiatives for some of the key programs, we won throughout the year and including our comex growth et cetera.

Speaker Change: for some of the key programs we won throughout the year and including our Chromex growth exception. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from John Roberts with Missouri.

Speaker Change: Our next question comes from John Roberts of Missouri.

Speaker Change: Our next question comes from John Roberts with Mizuho. Your line is open. Please go ahead.

John Roberts: Your line is open, please.

John Roberts: Good morning is your China strength, primarily China for China or is it <unk>.

John Roberts: Good morning. Is your China strength primarily China for China, or is it the strong exports of cars that we're seeing out of China?

John Roberts: Good morning. Is your Chinese strength primarily for China, or is it the strong exports of cars that we're seeing out of China? Hey, John. It's both, but I mean, the vast majority of the vehicles that we paint in China stay in China. The exciting part on the export side is, you know, the largest producer of EVs now in the world, a Chinese producer, is beginning to export. So that'll just be incremental upside. But the vast majority of the cars that we paint in China stay in China.

John Roberts: Strong exports of cars that we're seeing out of China.

Speaker: I believe there's some incremental upside to that as we move through 2024. Our share position's good. Our China Otto position is really good. And as you know, out of the 90 million new builds, about 30 million. And then we come out of China.

Speaker Change: Hey, John.

John Roberts: Hey, John. It's both, but I mean, a vast majority of the vehicles that we paint in China stay in China. The exciting part on the export side is, you know, the largest producer EVs now in the world, a Chinese producer, is beginning to export. So that'll just be incremental upside. But the vast majority of the cars that we paint in China stay in China.

Speaker Change: It's.

Speaker Change: Both but I mean, the vast majority of the vehicles that we paint in China stay in China.

Tim Knabich: Yes, thank you. And you've been involved in this partnership with Home Depot for a long time. I'm curious to hear your view on whether it is going better or worse, and what you had expected and any potential for an inflection in that relationship in 2024. And if you don't mind, can you just comment on SG&A for 2020-2024. It seemed to really jump in the fourth quarter. Were there some unusuals in

Speaker Change: The exciting part on the export side is the.

The largest.

Speaker: So, overall, I'm feeling good about Otto. There's a little bit of a year-over-year comp soft point and a little bit of index pricing rolling off in Q1. Just to add, as we talked several times, Duffy, on the auto front, acceleration in China helps us from an EV perspective as well. So we have more content on a traditional EV than we do on an ICE. So that's a buffer for us, PPG in particular. To your cash flow question, yeah, I think the short answer is typically EBITDA would certainly serve as a proxy for cash flow, plus or minus.

Speaker Change: Producer Evs now in the World Chinese producer is beginning to export so that will just be incremental upside, but the vast majority of the cars that we paint in China stay in China.

Speaker Change: Yeah, and John, I think for our book of business,

Speaker Change: Yes, John I think for our book of business again, 2023, especially the beginning part of 2023 was a tougher year.

Speaker Change: Again, 2023, especially the beginning part of 2023, was a tougher year. We're starting to see industrial, some of our other businesses kind of turn the corner in the fourth quarter and now heading into 2024.

Speaker Change: Again, 2023, especially the beginning part of 2023, was a tougher year. We're starting to see industrial, and some of our other businesses kind of turn the corner in the fourth quarter and now heading into 2024.

Tim Knabich: Your strategic actions, any comments on that? How should we forecast that going forward? Yeah. Hey, good morning, Steve. Yeah. And the quick answer to your second question is that there were some unusual circumstances, and Vince will take that. But your first one.

Speaker Change: We're starting to see industrial some of our other businesses kind of turned the corner in the fourth quarter and now heading into 2024.

Speaker Change: One more, John, from John Bruno. Outside of AutoEM, a very high percentage of the coatings we sell in China are for products that stay in China.

Speaker Change: And one more John from John Bruno outside of auto OEM very high percentage of the coatings, we sell in China are for products that stay in China.

Speaker: The expanded answer is we have had working capital movement that has either helped or hurt the cash flow on a transitory basis. We do have, as Tim alluded to in his opening comments, probably a couple hundred million dollars of excess raw materials in inventory. We're going to work that down in 2024, so that'll have a cash flow impact for us in a positive manner. But I think generally what you're saying, EBITDA and cash flow should be the movement should be consistent. EBITDA and cash flow should be consistent. Yeah, and Duffy, this is Tim.

Tim Knabich: The Home Depot relationship and progress on the PRO program are going as expected. Quite frankly, the challenge that we have is that as it's growing off a relatively small denominator, as you know, it's still being offset by the challenges on the DIY side. We're, you know, DIY is still a, the Home Depot and the Glidden brand and Olympic brands are still a critical part of our DIY omni-channel strategy going forward. And unfortunately, the negatives there from a volume standpoint are offsetting the good progress that we have on our pro omni-channel between the Home Depot and our own network. If I look at, just to give some perspective, so Q4, despite the challenges out there, we were up low single digits on our pro omni-channel, and our... Sellout with the Home Depot was one of our better quarters yet.

No.

Our next question comes from Josh Spector with UBS. Your line is open. Please go ahead.

Speaker Change: Our next question comes from Josh Spector with UBS. Your line is open, please go ahead.

Josh Spector: Yes, hi, thanks, So I wanted to follow up on industrial pricing, so when you're talking about down modestly for the first quarter year on year, when maybe it's 500 basis points I guess in the frame of that does that.

Josh Spector: Yes, hi, thanks. So I wanted to follow up on industrial policy.

Josh Spector: Yes, hi, thanks. So I wanted to follow up on industrial policy. So when you're talking about down modestly for the first quarter year on year, maybe it's 50, 100 basis points, I guess in the frame of that, does that is it stabilized at that level through the year or do you expect it to decline so kind of separating the energy give back from maybe some of the index pricing and I guess when you look at this longer term then what does this mean for margin potential for the industrial segment are we looking at more normal incrementals from here to price raw still play into that or what are the factors that we're looking at for margin potential for the industrial segment are we looking at more normal incrementals from here to price raw still play into that or what are the factors that we're looking at more normal incrementals from here to price

Josh Spector: So when you're talking about down modestly for the first quarter year on year, maybe it's 50, 100 basis points, I guess in the frame of that, does that...

Josh Spector: is it stabilized at that level through the year or do you expect it to decline so kind of separating the energy give back from maybe some of the index pricing and I guess when you look at this longer term then what does this mean for margin potential for the industrial segment are we looking at more normal incrementals from here to price raw still play into that or what are the factors that we're looking at for margin potential for the industrial segment are we looking at more normal incrementals from here to price raw still play into that or what are the factors that we're looking at more normal incrementals from here to price

It's stabilized at that level through the year or do you expect it to decline for kind of separating the energy get back from maybe some of the index pricing and I guess when you look at this longer term then what does this mean for margin potential for the industrial segment are we looking at more normal incrementals from here the price raws still play.

Speaker: I'm going to come back with one additional point. Vince mentioned the EV situation, and we all see the headlines about EVs, but that's largely the U.S. and Europe right now, and as you know, two-thirds of the world's EVs are made in China. And that content number, if you look at the average PPG content across the EV space for 2023, was up by 20%. So our content per EV built was up by 20% in 2023, so that bodes well for us as well. Our next question comes from Steven Byrne with Bank of America, Merrill Lynch. Your line is open, please go ahead.

Josh Spector: Into that or what are the factors that may be moving margins up from current levels beyond this year. Thanks.

Speaker Change: Thanks for watching!

Speaker Change: Yes, Yes, Josh let me, let me start I'll, let Tim add some color here, but we.

Speaker Change: Yeah, Josh, let me start. I'll let Tim add some color here. But we did, I just want to remind people, and again, we talked about this in opening comments and our prepared remarks.

Speaker Change: Yeah, Josh, let me start. I'll let Tim add some color here. But we did, I just want to remind people, and again, we talked about this in our opening comments and our prepared remarks which we released last evening. Just a reminder, in Q1 last year in Europe, there were exceedingly high energy costs; natural gas costs were $30 to $40 per MMBTU depending on the day. Most companies, PPG included, invoked surcharges to pass those through. We're lapping that in Q1 of this year. That is a third to half of our price decline in the first quarter in the industrial coating segment. And the remainder is organic, based on the indices that Tim was talking about.

Speaker Change: We did I just want to remind people and again, we've talked about this in opening comments in our prepared remarks, we released last evening. Just a reminder, you know Q1 last year in Europe, there was exceedingly high.

Speaker Change: We released last evening. Just a reminder, Q1 last year in Europe, there was exceedingly high energy costs, natural gas costs were $30 to $40 per MMBTU depending on the day. Most companies, PPG included, invoked surcharges to pass those through. We're lapping that in Q1 of this year. That is a third to half of our price decline in the first quarter in the industrial coating segment. And the remainder is organic based on the indices that Tim was talking about. Tim, you have some coloration.

Speaker Change: Energy cost natural gas costs were $30 $40 per MB to you depending on the day.

Speaker Change: Most companies PPG included invoked surcharges to pass those through that.

Speaker Change: That we're lapping that in Q1 of this year.

Steve Byrne: Yes, thank you. And you've been involved in this partnership with Home Depot for a long time. I'm curious to hear your view on whether it is going better or worse, and what you had expected and any potential for an inflection in that relationship in 2024. And if you don't mind, can you just comment on SG&A?

Tim Knabich: So we're making progress there, but our DIY omnichannel, which includes not only what we do with the Home Depot but also, you know, our big partner in the Midwest, our DIY remained down. So that's the issue there, but the momentum continues to grow. It's, as I've said many times, we are building a business model for the future that's bricks and mortar light, and it's a marathon, not a sprint, and we continue to tick off miles on the marathon. So, good progress.

Speaker Change: It is.

A third to half of our price decline in.

Speaker Change: In the first quarter in the industrial coatings segment.

Speaker Change: And the remainder is organic based on the indices that Tim was talking about some colors.

Speaker Change: Tim, you have some coloration.

Tim: Yeah, I think the...

Speaker Change: Yes, I think the.

Speaker Change: Yes.

Speaker Change: you know the question about margin expansion beyond uh you know what would have been described in pricing is you know what would have been described in pricing is

Speaker Change: you know the question about margin expansion beyond uh you know what would have been described in pricing is you know what would have been described in pricing is volume leverage will be significant on the industrial segment because that's the segment that really got hit the hardest during COVID and COVID recovery and so we've still got significant margin upside driven by volume leverage the other side if you go back to you know our CEO day in May in New York we pointed to about 150 to 200 million dollars of manufacturing productivity gains that we had line of sight to in the coming years really not just to get back to where we were pre pre COVID but also as we you know modernize automate digitize our operations so those will really be the two levers that get us you know to the next horizon on on margin largely across the industrial segment but someone also somewhat also in the performance coding side

Speaker Change: The question about margin expansion beyond.

Speaker: 2020-2024, It seemed to really jump in the fourth quarter. Were there some unusuals in there, like with your strategic actions? Any comments on that? How should we forecast that going forward? Yeah. Hey, good morning, Steve. Yeah. And the quick answer to your second question is there were some unusuals, and Vince will take that. But your first one.

Speaker Change: What Vince described in pricing is.

Speaker Change: volume leverage will be significant on the industrial segment because that's the segment that really got hit the hardest during COVID and COVID recovery and so we've still got significant margin upside driven by volume leverage the other side if you go back to you know our CEO day in May in New York we pointed to about 150 to 200 million dollars of manufacturing productivity gains that we had line of sight to in the coming years really not just to get back to where we were pre pre COVID but also as we you know modernize automate digitize our operations so those will really be the two levers that get us you know to the next horizon on on margin largely across the industrial segment but someone also somewhat also in the performance coding side

Volume leverage will be significant on the industrial segment, because that's the segment that.

Speaker Change: It really got hit the hardest during COVID-19 and Covid recovery.

Speaker Change: And so we've still got significant margin upside driven by volume leverage the other side. If you go back to.

Vince Morales: Yeah, Steve, on the overhead, I'm going to just look at the whole year. There's always movement between quarters within a year, but on a full year basis, you know, our overhead was up about $380 million. About a third of that is directly correlated to the increase in sales. Whether it be volume, price, or ethics. Bye. Bye.

Speaker Change: Our CEO day in May in New York, we pointed to about $150 million to $200 million of manufacturing productivity gains that we had line of sight too.

Speaker: The Home Depot relationship and progress on the PRO program are going as expected. Quite frankly, the challenge that we have is that as it's growing off a relatively small denominator, as you know, it's still being offset by the challenges on the DIY side. We're, you know, DIY is still a, the Home Depot and the Glidden brand and Olympic brands are still a critical part of our DIY omni-channel strategy going forward. And unfortunately, the negatives there from a volume standpoint are offsetting the good progress that we have on our pro omni-channel between the Home Depot and our own network. If I look at, just to give some perspective, so Q4, despite the challenges out there, we were up low single digits on our pro omni-channel, and our... Sellout with the Home Depot was one of our better quarters yet.

Speaker Change: In the coming years really not just to get back to where we were pre pre COVID-19, but also as we modernize automate digitize our operations. So those are really the two levers that get us to the next horizon on on margin largely across the industrial segment, but someone else.

Jonathan Edwards: So on a percentage basis, if you just do the percent comparison, you get about a third of that directly related to our sales movement. Another third of that on a year-over-year basis, and Tim alluded to this in his opening remarks, and we did have higher shareholder-based and performance-based compensation, the reminder that in the prior year we had much lower uh compensation, so the kind of a doubling effect on a year-over-year basis, and the final third, roughly 100 million or so is inflation, and the remainder of that would be growth initiatives, initiatives, Thank you.

Somewhat also in the performance coatings side.

Speaker Change: Our next question comes from Kevin Mccarthy with <unk>. Your line is open. Please go ahead.

Speaker Change: Our next question comes from Kevin McCarthy with VRP.

Kevin W. McCarthy: Your line is open.

Kevin W. McCarthy: Your line is open. Thanks, and good morning everyone. Tim, would you elaborate on your volume outlook that's embedded?

Kevin W. McCarthy: Thanks and good morning everyone. Tim, would you elaborate on your volume outlook that's embedded

Kevin W. McCarthy: Thanks, and good morning, everyone. Tim would you elaborate on your volume outlook. That's embedded in your 2004 guide would you expect volumes to be flat or up a little bit part of the reason I ask is we've seen many chemical companies suffer from volume.

Tim: for Guide.

Tim: for Guide and David Begleiter.

Tim: and David Begleiter.

Speaker Change: Thank you for joining us.

Speaker Change: I've seen many chemical companies suffer for a long time.

Speaker Change: I've seen many chemical companies suffer for a long time, with volumes that are trending well below real GDP. So as you look across your portfolio and survey and forecast, do you think we'll see convergence? Are there pockets of residual destocking or other headwinds that might make that more immeasurable?

Speaker Change: Volumes that are trending well below real GDP.

Tim: So they're trending well below real GDP and so as you look across your portfolio in survey and forecast do you think we'll see convergence and Tucson.

Speaker: So we're making progress there, but our DIY omnichannel, which includes not only what we do with the Home Depot but also, you know, our big partner in the Midwest, our DIY remained down. So that's the issue there, but the momentum continues to grow. It's, as I've said many times, we are building a business model for the future that's bricks and mortar light, and it's a marathon, not a sprint, and we continue to tick off miles on the marathon. So, good progress.

Speaker Change: So as you look across your portfolio and survey and forecast, do you think we'll see convergence?

Speaker Change: Are there pockets of residual destocking or other headwinds that might make that more immeasurable?

Tim: 24 or.

Are there pockets of residual destocking or other headwinds that might make that more ambitious.

Jonathan Edwards: Our next question comes from John Roberts of Missouri. Your line is open, please. Good morning.

Tim: Yeah.

Speaker Change: Hey, Kevin. So first of all, we're going to have positive volume in 2024 for the year. Our sales, we said, are going to be up low single digits. We might have to start putting a fourth letter there because I think the volume will be a little higher on the low single digit side and the price will be a little lower on the low single digit side. But we have volume momentum for really five quarters now, minus three, minus two, a little lighter minus two. Our fourth quarter, we rounded it up to minus one. It was actually less than minus one. We're looking at a zero for Q1, and that includes the impact of the Walmart load-in. It includes the shift from... of Easter from one quarter to the next. So we have momentum on volume, some of it just because of the diversity of our portfolio and where we participate, but some of it because of the growth initiatives that we've worked on throughout 2023, where we've picked up share that will start to kick in this year. I think about our packaging coatings business, our industrial coatings business, our refineries. We've finished coatings business. So it's really the positivity on volume is one, even though they've had negative numbers in front of them for much of 2023, we do have volume momentum. We see it flipping in early 2024, and it's a combination of strength of our portfolio positioning and execution on our growth initiatives.

Speaker Change: Hey, Kevin.

Speaker Change: So first of all.

John Roberts: Is your Chinese strength primarily for China, or is it the strong exports of cars that we're seeing out of China? Hey, John. It's it's it's both, but I mean, a vast majority of the vehicles that we paint in China stay in China. The exciting part on the export side is, you know, the largest producer of EVs now in the world, a Chinese producer is beginning to export. So that'll just be an incremental upside. But the vast majority of the cars that we paint in China stay in China.

Speaker Change: We're going to have positive volume in 2024 for the year I would.

Speaker Change: Our sales, we said, we're going to be up low single digits.

Speaker Change: We might have to start putting a fourth letter there because I think the.

Speaker: Yeah, Steve, on the overhead, I'm going to just look at the whole year. There's always movement between quarters within a year, but on a full year basis, you know, our overhead was up about $380 million. About a third of that is directly correlated to the increase in sales. Whether it be volume, price, or ethics. Bye. Bye.

The more I am sorry, the volume will be a little higher on the low single digit side and the price will be a little lower on the low single digit side.

Speaker Change: We have we have volume momentum for really five quarters now.

Speaker Change: Minus three minus two a little lighter minus two our fourth quarter, we rounded it up to minus one it was actually less than minus one we're looking at.

Speaker: So on a percentage basis, if you just do the percent comparison, you get about a third of that directly related to our sales movement. Another third of that on a year-over-year basis, and Tim alluded to this in his opening remarks, and we did have higher shareholder-based and performance-based compensation, the reminder that in the prior year we had much lower uh compensation, so the kind of a doubling effect on a year-over-year basis, and the final third, roughly 100 million or so is inflation, and the remainder of that would be growth initiatives, initiatives, Thank you.

John Roberts: Yeah, and John, I think for our book of business, Again, 2023, especially the beginning part of 2023, was a tougher year. We're starting to see industrial, some of our other businesses kind of turn the corner in the fourth quarter and now heading into 2024. One more, John, from John Bruno.

Speaker Change: We're looking at a zero for Q1, and that includes the impact of the Walmart load-in. It includes the shift from... of Easter from one quarter to the next. So we have momentum on volume, some of it just because of the diversity of our portfolio and where we participate, but some of it because of the growth initiatives that we've worked on throughout 2023, where we've picked up share that will start to kick in this year. I think about our packaging coatings business, our industrial coatings business, and our refineries. We've finished the coatings business. So really, the positivity on volume is one, even though they've had negative numbers in front of them for much of 2023, we do have volume momentum. We see it flipping in early 2024, and it's a combination of the strength of our portfolio positioning and execution on our growth initiatives.

Speaker Change: We're looking at a zero for Q1.

Speaker Change: And that includes the impact of the Walmart loaded it includes.

Speaker Change: The shift from Easter from one quarter to the next so we have momentum on volume some of it just because of the diversity of our portfolio and where we participate but some of it because of the growth initiatives that we've we've worked on throughout 2002.

Speaker Change: <unk> three.

Speaker Change: Where we've picked up share that will start to kick in this year I think about our packaging coatings business, our industrial coatings business, our refinished coatings business. So it's really.

John Bruno: Outside of AutoEM, a very high percentage of the coatings we sell in China are for products that stay in China. Our next question comes from Josh Spector with UBS. Your line is open, please go ahead.

Speaker Change: The positivity on volume is one even though they've had negative numbers in front of them for much of 2023, we do have volume momentum we see at flipping in early 2024, and it's a combination of strength of our portfolio positioning and execution on our growth initiatives.

Tim Knabich: Yes, hi, thanks. So I wanted to follow up on industrial policy. So when you're talking about down modestly for the first quarter year on year, maybe it's 50, 100 basis points, I guess in the frame of that, does that.., is it stabilized at that level through the year or do you expect it to decline so kind of separating the energy give back from maybe some of the index pricing and I guess when you look at this longer term then what does this mean for margin potential for the industrial segment are we looking at more normal incrementals from here to price raw still play into that or what are the factors that we're looking at for margin potential for the industrial segment are we looking at more normal incrementals from here to price raw still play into that or what are the factors that we're looking at more normal incrementals from here to price, Thanks for watching! Yeah, Josh, let me start. I'll let Tim add some color here.

Speaker: Our next question comes from John Roberts of Missouri. Your line is open, please. Good morning.

John Roberts: Is your Chinese strength primarily for China, or is it the strong exports of cars that we're seeing out of China? Hey, John. It's both, but I mean, a vast majority of the vehicles that we paint in China stay in China.

Speaker Change: And just a couple of other items of note Kevin.

Speaker Change: And just a couple other items of note, Kevin. We expect Europe to stabilize, which really reflects a lack of a destock. We experienced a destocking, especially in the first half of 2023, and we feel that it's run its course. So stabilization with Europe, which has been a negative for us. And again, China in the first half of 2023 was light. So again, as that normalizes, the pandemic effect of that, hopefully, is behind us. And as that normalizes, it provides us with some uplift. And we do have this backlog that Tim alluded to in his opening remarks about aerospace.

Speaker Change: We expect Europe to stabilize which really reflects a lack of a destock, we experienced destocking, especially in the first half of 2023.

Speaker: The exciting part on the export side is, you know, the largest producer of EVs now in the world, a Chinese producer, is beginning to export. So that'll just be incremental upside. But the vast majority of the cars that we paint in China stay in China.

Speaker Change: And that's we feel that's run its course.

Speaker Change: Stabilization of Europe, which has it has been a negative.

For us and again China.

Speaker Change: 2023 first half basis was light.

Speaker Change: So again, as that normalizes, the pandemic effect of that hopefully is behind us. And as that normalizes, it provides us with some uplift. And we do have this backlog that Tim alluded to in the opening remarks in aerospace.

Speaker Change: So again as that normalizes.

Speaker: Yeah, and John, I think for our book of business, Again, 2023, especially the beginning part of 2023, was a tougher year. We're starting to see industrial, some of our other businesses kind of turn the corner in the fourth quarter and now heading into 2024. One more, John, from John Bruno.

Speaker Change: Does the pandemic effect of that hopefully is behind us and as that normalizes.

Speaker Change: Provides us with some uplift and we are we do have this backlog that Tim alluded to in the opening remarks in aerospace.

Speaker Change: So we continue to produce more products at our manufacturing sites, and we expect that to continue to grow throughout the year to work down that backlog, which is more than a half-year backlog.

Speaker Change: So we continue to produce more products.

Speaker Change: So we continue.

Speaker Change: Produce more product.

Speaker Change: at our manufacturing sites, and we expect that to continue to grow throughout the year to work down that backlog, which is more than a half a year backlog.

Speaker Change: Our manufacturing sites and that we expect that to continue to grow throughout the year to work down that backlog, which is more than a half of year backlog for us.

Tim Knabich: But we did, I just want to remind people, and again, we talked about this in our opening comments and our prepared remarks. We released it last evening. Just a reminder, in Q1 last year in Europe, there was exceedingly high energy costs; natural gas costs were $30 to $40 per MMBTU depending on the day. Most companies, PPG included, invoked surcharges to pass those through.

Speaker Change: Okay.

Speaker Change: Our next question comes from Michael Leithead with Mark.

Speaker Change: Our next question comes from Michael <unk> with Barclays. Your line is open. Please go ahead.

Michael Leithead: Your line is open, please go ahead.

Michael Leithead: Your line is open, please go ahead, great thanks, guys. I wanted to ask around cash deployment and your net leverage at the end of the year towards the lower end of where it's historically been. I guess three very brief questions. One, can you just remind us roughly what target leverage you intend to maintain? Two, how does the M&A market look today, say relative to returning more cash to shareholders this year? And then third, I think you're guiding to 15 million customers in one queue but about 95 million for the year.

Michael: Great. Thanks, Good morning, guys.

Michael Leithead: great thanks good morning guys um i wanted to ask around cash deployment your net leverage end of the year towards the lower end of where it's historically been i guess three very brief questions one can you just remind us roughly what target leverage you intend to maintain you intend to maintain

I wanted to ask around cash deployment. Your net leverage ended the year towards the lower end of where its historically been I guess three very brief questions. One can you just remind us roughly what target leverage you intend to maintain.

Tim: We're lapping that in Q1 of this year. That is a third to half of our price decline in the first quarter in the industrial coating segment. And the remainder is organic based on the indices that Tim was talking about. Tim, you have some coloration.

Michael Leithead: Two, how does the M&A market look today, say relative to returning more cash to shareholders this year? And then third, I think you're guiding to 15 million of interest in one queue, but about 95 million for the year. So why does that step up so much? I'm assuming that that takes into consideration more cash deployment. Could you just help clarify that?

Josh Spector: Yes, hi, thanks. So I wanted to follow up on industrial policy. So when you're talking about down modestly for the first quarter year on year, maybe it's 50, 100 basis points, I guess in the frame of that, does that.., is it stabilized at that level through the year or do you expect it to decline so kind of separating the energy give back from maybe some of the index pricing and I guess when you look at this longer term then what does this mean for margin potential for the industrial segment are we looking at more normal incrementals from here to price raw still play into that or what are the factors that we're looking at for margin potential for the industrial segment are we looking at more normal incrementals from here to price raw still play into that or what are the factors that we're looking at more normal incrementals from here to price, Thanks for watching! Yeah, Josh, let me start. I'll let Tim add some color here.

Michael: How does the M&A market look today say relative to returning more cash to shareholders. This year.

Michael: And then third I think youre guiding to $15 million of interest in <unk>, but about $95 million for the year. So why does that step up so much I'm, assuming that that takes into consideration more cash deployment could you just help clarify that thank you.

Tim Knabich: Yeah, I think the, you know the question about margin expansion beyond uh you know what would have been described in pricing is you know what would have been described in pricing is volume leverage will be significant on the industrial segment because that's the segment that really got hit the hardest during COVID and COVID recovery and so we've still got significant margin upside driven by volume leverage the other side if you go back to you know our CEO day in May in New York we pointed to about 150 to 200 million dollars of manufacturing productivity gains that we had line of sight to in the coming years really not just to get back to where we were pre pre COVID but also as we you know modernize automate digitize our operations so those will really be the two levers that get us you know to the next horizon on on margin largely across the industrial segment but someone also somewhat also in the performance coding side, Our next question comes from Kevin McCarthy with VRP. Your line is open. Thanks and good morning everyone.

Michael Leithead: So why does that step up so much? I'm assuming that that takes into consideration more cash deployment. Could you just help clarify that? Yes, Hey, Mike. It's Tim. I'll start. Target. We don't write a target in pen because it changes with time depending on where we are in the execution of our strategy. You know, we're doing some portfolio things. You've seen some announcements in that regard. And, you know, where we are on our strength of our balance sheet, very strong right now, but it would be different as the environment changes. M&A, you know; it was a little quiet there for some time.

Michael: Yeah, Hey, Mike, It's Tim I'll start.

Michael Leithead: Yep. Hey, Mike. It's Tim. I'll start. Target, we don't write a target in pen because it changes with time depending on where we are in the execution of our strategy. You know, we're doing some portfolio things. You've seen some announcements in that regard. And, you know, where we are on our strength of our balance sheet, very strong right now, but it would be different as the environment changes. M&A, you know, it was a little quiet there for some time. We're seeing some things come across our desk now. Nothing huge in the pipeline, but we're seeing some assets come across and we're evaluating those. Overall, on the strength of the balance sheet and deployment, you know, consistent with what I said throughout last year, number one, we're going to focus on continuing to generate strong cash. That gives us a great deal of flexibility. I'm very proud of what the team did in 2023. Just to be very clear, we will not let cash

Tim: Target, we don't we don't write a target and pen.

Tim: Because it changes with time, depending on where we are in the execution of our strategy.

Tim: We're doing some portfolio things you've seen some announcements in that regard.

And.

Tim: Where we are on on a strength of our balance sheet very strong right now, but it would be different as as the environment as the environment changes M&A. It has it was a little quiet there.

Tim: For some time.

Michael Leithead: We're seeing some things come across our desk now. Nothing huge in the pipeline, but we're seeing some assets come across, and we're evaluating those. Overall, on the strength of the balance sheet and deployment, you know, consistent with what I said throughout last year, number one, we're going to focus on continuing to generate strong cash. That gives us a great deal of flexibility. I'm very proud of what the team did in 2023. But, just to be very clear, we will not let cash.

Tim: Being some we're seeing some things come across our desk now.

Tim: Nothing huge.

Tim: In the pipeline, but we're seeing some assets come across and we're we're evaluating those.

Tim: Overall on the strength of the balance sheet and deployment consistent with what I've said throughout last year and number one we're going to we're going to focus on continuing to generate strong cash that gives us a great deal of flex flexibility I'm very proud of what the team did in 2023.

Speaker: But we did, I just want to remind people, and again, we talked about this in our opening comments and our prepared remarks. We released it last evening. Just a reminder, in Q1 last year in Europe, there was exceedingly high energy costs; natural gas costs were $30 to $40 per MMBTU depending on the day. Most companies, PPG included, invoked surcharges to pass those through.

Tim: Tim, would you elaborate on your volume outlook that's embedded for Guide and David Begleiter. Thank you for joining us. I've seen many chemical companies suffer for a long time, volumes that are trending well below real GDP. So as you look across your portfolio and survey and forecast, do you think we'll see convergence? Are there pockets of residual destocking or other headwinds that might make that more immeasurable? Hey, Kevin.

Speaker Change: Just to be very clear, we will not let cash sit on the balance sheet.

Tim: sit on the balance sheet. We'll do what we need to do from dividends. We've got some good organic growth investments that we'll invest in. Love to do some shareholder value accretive acquisitions. And if that doesn't come along, then we'll return cash by buying shares. We did some in Q4 for the first time in a long time. And if we've got excess cash sitting on the balance sheet, you can be assured that that's what we'll do. Now, Q1. We're sitting with a lot of cash right now, but we typically consume significant cash in Q1.

Tim: sit on the balance sheet. We'll do what we need to do from dividends. We've got some good organic growth investments that we'll invest in, and we would love to do some shareholder value accretive acquisitions. And if that doesn't come along, then we'll return cash by buying shares. We did some in Q4 for the first time in a long time. And if we've got excess cash sitting on the balance sheet, you can be assured that that's what we'll do. Now, Q1. We're sitting with a lot of cash right now, but we typically consume significant cash in Q1. And so we'll be a little cautious here in Q1 so that we don't get back into paying high-interest-cost debt, which we just got out of. But beyond that, you should expect us to not let the cash sit there.

Speaker Change: We will do what we need to do from dividends. We've got some good organic growth investments that we'll invest in love to do some shareholder value accretion accretive acquisitions.

Tim Knabich: So first of all, we're going to have positive volume in 2024 for the year. Our sales, we said, are going to be up low single digits. We might have to start putting a fourth letter there because I think the volume will be a little higher on the low single-digit side, and the price will be a little lower on the low single-digit side. But we have volume momentum for really five quarters now, minus three, minus two, a little lighter minus two. In our fourth quarter, we rounded it up to minus one, but it was actually less than minus one.

Speaker: We're lapping that in Q1 of this year. That is a third to half of our price decline in the first quarter in the industrial coating segment. And the remainder is organic based on the indices that Tim was talking about. Tim, you have some coloration.

Speaker Change: And if that doesn't come along then we will return we will return cash by buying shares.

Speaker: Yeah, I think the.., you know the question about margin expansion beyond uh you know what would have been described in pricing is you know what would have been described in pricing is volume leverage will be significant on the industrial segment because that's the segment that really got hit the hardest during COVID and COVID recovery and so we've still got significant margin upside driven by volume leverage the other side if you go back to you know our CEO day in May in New York we pointed to about 150 to 200 million dollars of manufacturing productivity gains that we had line of sight to in the coming years really not just to get back to where we were pre pre COVID but also as we you know modernize automate digitize our operations so those will really be the two levers that get us you know to the next horizon on on margin largely across the industrial segment but someone also somewhat also in the performance coding side, Our next question comes from Kevin McCarthy with VRP. Your line is open. Thanks and good morning everyone.

Speaker Change: Did some in Q4 for the first time in a long time.

Speaker Change: And if we've got excess cash sitting on the balance sheet you can be assured that that's what we'll do now Q1.

Sitting with a lot of cash right now, but we typically consume significant cash in Q1.

Tim: And so we'll be a little cautious here in Q1 so that we don't get back into paying high interest cost debt, which we just got out of. But beyond that, you should expect us to not let the cash sit there.

Speaker Change: And so we'll be a little a little cautious here in Q1, so that we don't get back into paying high interest cost debt, which which we just got out of but beyond that you should you should expect us to not let not let the cash sit there.

Tim Knabich: We're looking at a zero for Q1, and that includes the impact of the Walmart load-in. It includes the shift from... of Easter from one quarter to the next. So we have momentum on volume, some of it just because of the diversity of our portfolio and where we participate, but some of it because of the growth initiatives that we've worked on throughout 2023, where we've picked up share that will start to kick in this year. I think about our packaging coatings business, our industrial coatings business, and our refineries. We've finished the coatings business.

Speaker Change: Yes, let me just add this is Vince just want to reemphasize.

Tim: Yeah, let me just add, this is Vince, just want to reemphasize

Tim: Yeah, let me just add, this is Vince. I just want to reemphasize it.

Vince Morales: The key comment Tim said, we prefer a strong balance sheet due to the optionality it gives us on many fronts.

Vince Morales: The above text should be broken up into multiple paragraphs.

Vincent Andrew: Key comment Tim said, we prefer a strong balance sheet due to the optionality. It gives us on many fronts.

Vince Morales: 'The key comment Tim said we prefer a strong balance sheet due to the optionality it gives us on many fronts. We feel where we are today, we don't need to let cash grow. We will consume cash through April. That's the traditional seasonality of our businesses. So the billion five that sits on the balance sheet, we will consume through April.'

Vince Morales: We feel where we are today, we don't need to let cash grow.

We feel where we are today, we don't need the cash flow.

Vince Morales: We will consume cash through April. That's our traditional seasonality of our businesses.

Vincent Andrew: We will consume cash through April.

Vincent Andrew: Our traditional seasonality of our businesses. So the 1 billion five it sits on the balance sheet, we will consume through April.

Vince Morales: So the billion five that sits on the balance sheet, we will consume through April. That allows us to not, that allows us to not consume through April. That allows us to not consume through April. That allows us to not consume through April. That allows us to not consume through April. That allows

Vince Morales: 'That allows us to not, that allows us to not consume through April. That allows us to not consume meat through April. That allows us to not consume meat through April. That allows us to not consume meat through April. That allows'

Kevin W. McCarthy: So it's really the positivity on volume, even though they've had negative numbers in front of them for much of 2023, we do have volume momentum. We see it flipping in early 2024, and it's a combination of the strength of our portfolio positioning and execution on our growth initiatives. And just a couple other items of note, Kevin.

Vincent Andrew: That allows us to not.

Vincent Andrew: It allows us to not.

<unk> entered.

Speaker Change: David Begleiter As we generate that strong cash in the back half of the year, we'll look at other uses.

Vincent Andrew: Enter the debt markets as significantly as we normally would for commercial paper at this time of year, where typically.

Kevin W. McCarthy: Tim, would you elaborate on your volume outlook that's embedded for Guide and David Begleiter. Thank you for joining us. I've seen many chemical companies suffer from this. Volumes that are trending well below real GDP. So as you look across your portfolio and survey and forecast, do you think we'll see convergence? Are there pockets of residual destocking or other headwinds that might make that more immeasurable? Hey, Kevin.

Vincent Andrew: Having commercial paper throughout.

Vincent Andrew: From now through the end of April.

Vincent Andrew: So that's why our interest cost in Q1 will be lower because we're going to use the cash on hand to fund our seasonal inventory build.

Vincent Andrew: That cash flow will then what we typically generate strong cash in the back half of the year, which is we'll deplete our interest income and then.

Tim Knabich: We expect Europe to stabilize, which really reflects a lack of a destocking. We experienced a destocking, especially in the first half of 2023, and we feel that's run its course. So stabilization with Europe, which has been a negative for us. And again, China in the first half of 2023 was light.

Vincent Andrew: As we generate strong cash in the back half of the year.

Vincent Andrew: We'll look at other uses.

Speaker: So first of all, we're going to have positive volume in 2024 for the year. Our sales, we said, are going to be up low single digits. We might have to start putting a fourth letter there because I think the volume will be a little higher on the low single-digit side, and the price will be a little lower on the low single-digit side. But we have volume momentum for really five quarters now, minus three, minus two, a little lighter minus two. In our fourth quarter, we rounded it up to minus one, but it was actually less than minus one.

Speaker Change: Our next question comes from Jeff Secaucus with Jpmorgan. Your line is open. Please go ahead.

Speaker Change: Our next question comes from Jeff Zekauskas with J.P. Morgan. Your line is open, please go ahead.

Tim Knabich: So again, as that normalizes, the pandemic effect of that, hopefully, is behind us. And as that normalizes, it provides us with some uplift. And we do have this backlog that Tim alluded to in the opening remarks in aerospace. So we continue to produce more products at our manufacturing sites, and we expect that to continue to grow throughout the year to work down that backlog, which is more than a half-year backlog. Our next question comes from Michael Leithead with Mark. Your line is open, please go ahead. Great. Thanks.

Jeff Zekauskas: Thanks very much.

Jeff Zekauskas: I was wondering whether

Jeff Zekauskas: I was wondering whether to comment on the direction of Dioxide Press.

Jeff Zekauskas: I was wondering whether you could comment on the direction of titanium dioxide prices.

Jeff Zekauskas: comment on the direction

Jeff Zekauskas: on Dioxide Press.

Jeff Zekauskas: Secondly, you make a fuss over the different

Jeff Zekauskas: Secondly, you make a fuss over the different you make a fuss over your LIFO inventories. So if you would value things on LIFO instead of FIFO, what might make a fuss?

Jeff Zekauskas: Secondly, you makeup past ofer.

Jeff Zekauskas: The difference between the makeup has heavier LIFO inventory. So if you would.

Jeff Zekauskas: You make a fuss over your LIFO inventories. So if you would value things on LIFO instead of FIFO, what might make a fuss?

Jeff Zekauskas: Things sort of lifestyle instead of five so what might the difference has been at the end of the year.

Jeff Zekauskas: The Earth.

Jeff Zekauskas: And then finally, in your accounts payable and accrued liability, liabilities.

Jeff Zekauskas: And then finally.

Jeff Zekauskas: In your accounts payable and accrued liabilities line.

Speaker: We're looking at a zero for Q1, and that includes the impact of the Walmart load-in. It includes the shift from... of Easter from one quarter to the next. So we have momentum on volume, some of it just because of the diversity of our portfolio and where we participate, but some of it because of the growth initiatives that we've worked on throughout 2023, where we've picked up share that will start to kick in this year. I think about our packaging coatings business, our industrial coatings business, and our refineries. We've finished the coatings business.

Jeff Zekauskas: Your euro her year increase that as a benefit was about $380 million.

Jeff Zekauskas: Your year-over-year increase, that is the benefit, was about $380 million.

Jeff Zekauskas: Consequentially, maybe it was 250.

Michael Leithead: Good morning, guys. I wanted to ask around cash deployment, your net leverage at the end of the year towards the lower end of where it's historically been. I guess three very brief questions.

Jeff Zekauskas: <unk>, maybe it was 215.

Speaker Change: Now, you guys don't disaggregate accounts payable from accrued liabilities. Can you explain what's going on there?

Speaker Change: Now, you guys don't disaggregate accounts payable from accrued liabilities. Can you explain what's going on here? and many, many companies, and much lower accounts payable this year. And it seems to have really worked. And it seems to have really worked.

Speaker Change: You guys don't disaggregate accounts payable from accrued liabilities can you explain what's going on there and that many many companies had much slower accounts payable this year and it seems to have really worked in the other direction.

Speaker Change: and many, many companies.

Speaker Change: and much lower accounts payable this year. And it seems to have really worked. And it seems to have really worked.

Michael Leithead: One, can you just remind us roughly what target leverage you intend to make? Two, how does the M&A market look today, say relative to returning more cash to shareholders this year? And then third, I think you're guiding to 15 million in interest in one queue but about 95 million for the year. So why does that step up so much?

Okay.

Speaker Change: Hi, Jeff. It's Tim. I'll take the titanium dioxide question, and Vince, you can take the more finance-related questions there. TIO2, we see very good availability. We see a long supply chain upstream of us. It's still quite long, and so we're seeing some modestly lower pricing on TIO2 than what we would have seen last year. TIO2, we see very good availability. We see very good availability. We see very good availability.

Speaker Change: Hi Jeff, it's Tim. I'll take the titanium dioxide question, and Vince, you can take the more finance-related questions there. For TIO2, we see very good availability. We see a long supply chain upstream of us. It's still quite long, and so we're seeing some modestly lower pricing on TIO2 than what we would have seen last year. TIO2, we see very good availability. We see very good availability. We see that there is very good availability.

Speaker Change: Hi, Jeff It's Tim.

Tim: Titanium dioxide question.

Tim: Vince you can take the more finance related questions there.

Speaker: So it's really the positivity on volume, even though they've had negative numbers in front of them for much of 2023, we do have volume momentum. We see it flipping in early 2024, and it's a combination of the strength of our portfolio positioning and execution on our growth initiatives. And just a couple other items of note, Kevin.

Tim: Tio too we.

Tim: We see very good availability.

Tim: I'm assuming that that takes into consideration more cash deployment. Could you just help clarify that? Yeah. Hey, Mike. It's Tim.

Tim: We see a long.

Tim: Supply chain upstream of us, it's still quite long and so where we're seeing some.

Tim: Modestly lower pricing on <unk> than we would have seen last year, it's not.

Tim: I'll start. Target. We don't write a target in pen because it changes with time depending on where we are in the execution of our strategy. You know, we're doing some portfolio things. You've seen some announcements in that regard. And, you know, where we are on our strength of our balance sheet, very strong right now, but it would be different as the environment changes. M&A, you know; it was a little quiet there for some time.

Speaker: We expect Europe to stabilize, which really reflects a lack of a destocking. We experienced a destocking, especially in the first half of 2023, and we feel that's run its course. So stabilization with Europe, which has been a negative for us. And again, China in the first half of 2023 was light.

Tim: down as much as some other parts of our basket but it's definitely down from where we were last year Jeff and you know on TIO2 in addition to pricing I do have to mention that a key part of our strategy is is to continue the the research work that we do to reduce our titanium dioxide content in our formulas every year without sacrificing any performance and our team's done a great job there we're down about one percent per formula over the last several years and we achieved that again in 2023 and we achieved that again in 2023

Tim: As much as some other parts of our basket, but it's definitely down from where we were last year, Jeff and <unk>.

Tim: <unk> <unk> two in addition to pricing I do have to mention that a key part of our strategy is is to continue the research work that we do to reduce our titanium dioxide content in our formulas every year without sacrificing any performance and our team has done a great.

Tim: We're seeing some things come across our desk now. Nothing huge in the pipeline, but we're seeing some assets come across, and we're evaluating those. Overall, on the strength of the balance sheet and deployment, consistent with what I said throughout last year, number one, we're going to focus on continuing to generate strong cash. That gives us a great deal of flexibility. I'm very proud of what the team did in 2023.

Speaker: So again, as that normalizes, you know, the pandemic effect of that hopefully is behind us, and as that normalizes, you know, it provides us with some uplift. And we do have this backlog that Tim alluded to in the opening remarks in aerospace. So we continue to produce more products at our manufacturing sites, and we expect that to continue to grow throughout the year to work down that backlog, which is more than a half-year backlog. Our next question comes from Michael Leithead with Mark. Your line is open, please go ahead. Great. Thanks.

Tim: Job there were down about 1% per formula over the last several years and we achieved that again in 2023.

Job: Yes, Jeff.

Speaker Change: Yeah, Jeff, on the balance sheet questions, I'm not going to be able to calculate the FIFO, LIFO impact on the fly here. Just a reminder, everybody, we're at 75% or so FIFO. The difference between, again, the invoice cost and what we're realizing on the income statement for raw material moderation, that is significant.

Speaker Change: Yeah, Jeff, on the balance sheet questions, I'm not going to be able to calculate the FIFO, and LIFO impact on the fly here. Just a reminder, everybody, we're at 75% or so FIFO. The difference between, again, the invoice cost and what we're realizing on the income statement for raw material moderation is significant. Tens of millions of dollars if we moved that to FIFO, but I can't calculate it precisely. As it relates to payables, you know, for us, we had a couple items in the fourth quarter. Our tax provisioning is about $100 million higher. We ended the year on a weekend, a two-day weekend, so our accounts payable are higher because of that.

Speaker Change: The balance sheet questions.

Speaker Change: I'm not going able to calculate the FIFO LIFO impact.

Speaker Change: On the fly here, if you could just remind everybody where 75% or so FIFO the.

Tim: Just to be very clear, we will not let cash sit on the balance sheet. We'll do what we need to do from dividends. We've got some good organic growth investments that we'll invest in. And we'd love to do some shareholder value accretive acquisitions.

Speaker Change: The difference between again, the invoice cost and what we're realizing on the income statement.

Speaker Change: Raw material moderation.

Speaker Change: That that.

Speaker Change: <unk>.

Speaker Change: Tens of millions of dollars if we if we move that to a FIFO I can't calculate it precisely.

Speaker Change: Tens of millions of dollars if we moved that to a FIFO, but I can't calculate it precisely. As it relates to payables, you know, for us, we had a couple items in the fourth quarter. Our tax provisioning is about $100 million higher.

As it relates to payables for us.

Tim Knabich: And if that doesn't come along, then we'll return cash by buying shares. We did some in Q4 for the first time in a long time. And if we've got excess cash sitting on the balance sheet, you can be assured that that's what we'll do. Now, Q1.

Speaker Change: We had a couple items in the fourth quarter.

Michael Leithead: Good morning, guys. I wanted to ask about cash deployment, your net leverage at the end of the year towards the lower end of where it's historically been. I have three very brief questions. One, can you just remind us roughly what target leverage you intend to make? Two, how does the M&A market look today, say relative to returning more cash to shareholders this year? And then third, I think you're guiding to 15 million in interest in one queue but about 95 million for the year. So why does that step up so much?

Speaker Change: Our tax provisioning is about $100 million higher.

Speaker Change: We ended the year on a weekend, two-day weekend, so our accounts payable is higher because of that.

Speaker Change: We ended the year on a weekend day weekend, so our accounts payable.

Vince Morales: We're sitting with a lot of cash right now, but we typically consume significant cash in Q1. And so we'll be a little cautious here in Q1 so that we don't get back into paying high-interest-cost debt, which we just got out of. But beyond that, you should expect us to not let the cash sit there. Yeah, let me just add, this is Vince. I just want to reemphasize the key comment Tim said: we prefer a strong balance sheet due to the optionality it gives us on many fronts. We feel where we are today; we don't need to let cash grow. We can consume cash through April.

Speaker Change: Is higher because of that.

Speaker Change: There's natural FX in that number on a year-over-year basis.

Speaker Change: There is natural FX in that number on a year-over-year basis. And we had, as you saw, an environmental special for about $30 million where we accrued $30 million for future environmental spending. And we talked about the compensation increase in the fourth quarter. So those are the big elements in our payables on a year-over-year basis.

Speaker Change: There is natural FX in that number on a year over year basis.

Speaker Change: And we had, as you saw, an environmental special for about $30 million where we accrued $30 million for future environmental spending.

Speaker Change: And we had as you saw in environmental special for about $30 million, where we accrued $30 million for future environmental spending.

Speaker Change: and we talked about the compensation increase in the fourth quarter. So those are the big elements in our payables on a year-over-year basis.

Speaker Change: And we talked about.

Speaker Change: The compensation and increasing in the fourth quarter. So those are the big elements in our in our payables on a year over year basis.

Speaker: I'm assuming that that takes into consideration more cash deployment. Could you just help clarify that? Yeah. Hey, Mike. It's Tim.

Speaker Change: Okay.

Speaker Change: Our next question comes from Vincent Andrews with Morgan Street.

Speaker Change: Our next question comes from Vincent Andrews with Morgan Stanley. Your line is open. Please go ahead.

Vincent Stephen Andrews: Your line is open, please go ahead.

Vincent Stephen Andrews: Your line is open, please go ahead. Thank you. A few quick ones from me. In the first quarter, we get the timing shift of Easter, but February also has an extra day this year. So does that not offset the Easter impact? And then also on TiO2, how much Chinese TiO2 are you guys buying these days, and how much of it is in Europe, and have you changed? and many purchasing patterns as a function of the EU's investigation into Chinese imports. And then lastly,

Vince Morales: That's our traditional seasonality in our businesses. So the billion five that sits on the balance sheet, we will consume through April. That allows us to not, that allows us to not consume through April. That allows us to not consume through April. That allows us to not consume through April.

Vincent Stephen Andrews: Thank you. A few quick ones from me. In the first quarter, I get the timing shift of Easter, but February also has an extra day this year. So does that not offset the Easter impact?

Vincent Stephen Andrews: Thank you a few quick ones from me.

Speaker: I'll start. Target. We don't write a target in pen because it changes with time depending on where we are in the execution of our strategy. You know, we're doing some portfolio things. You've seen some announcements in that regard. And, you know, where we are on our strength of our balance sheet, very strong right now, but it would be different as the environment changes. M&A, you know; it was a little quiet there for some time.

Vincent Stephen Andrews: First quarter I guess.

Vincent Stephen Andrews: Timing shift of Easter, but February also has an extra day. This year. So does that not offset the Easter impact and then also on tier two how much how much Chinese tax hearing you guys find these days and how much of it is in Europe, and as you changed any purchasing patterns as a function of the us.

Vincent Stephen Andrews: And then also on TiO2, how much Chinese TiO2 are you guys buying these days and how much of it's in Europe and have you changed?

Vince Morales: That allows David Begleiter. As we generate that strong cash in the back half of the year, we'll look at other uses. Our next question comes from Jeff Zekauskas with J.P. Morgan. Your line is open, please go ahead. Thanks very much.

Vincent Stephen Andrews: and many purchasing patterns as a function of the EU's investigation into Chinese imports. And then lastly,

Vincent Stephen Andrews: Investigation.

Vincent Stephen Andrews: Chinese imports and then lastly.

Vincent Stephen Andrews: The pro architectural business has been holding up an awful lot better than the DIY business.

Vincent Stephen Andrews: You know, the pro architecture, the pro architecture,

Vincent Stephen Andrews: You know, the pro architecture, the pro architecture.

Speaker: We're seeing some things come across our desk now. Nothing huge in the pipeline, but we're seeing some assets come across, and we're evaluating those. Overall, on the strength of the balance sheet and deployment, consistent with what I said throughout last year, number one, we're going to focus on continuing to generate strong cash. That gives us a great deal of flexibility. I'm very proud of what the team did in 2023.

Speaker Change: Thank you so much for joining us.

Vincent Stephen Andrews: Fortunately far enough away from Covid now that I think we should be able to have a conversation about what's driving the DIY weakness other than just a pull forward of volumes and what's keeping the pro business. So hi, Arthur So strong is it just seems like.

Vince Morales: I was wondering whether to comment on the direction of Dioxide Press. Secondly, you make a fuss over the different. You make a fuss over your LIFO inventories. So if you would value things on LIFO instead of FIFO, what might make a fuss? The Earth.

David I. Begleiter: And then finally... in your accounts payable and accrued liabilities, your year-over-year increase, that is the benefit, was about $380 million. Consequentially, maybe it was 250. Now, you guys don't disaggregate accounts payable from accrued liabilities. Can you explain what's going on there?

Arthur: There's a disconnect between.

Speaker Change: Disconnects between, you know, sort of pro-demand being there, but DIY being so weak. So if you could help with those three things, I'd appreciate it.

Speaker Change: Disconnects between, you know, sort of the pro-demand being there, but DIY being so weak. So if you could help with those three things, I'd appreciate it.

Arthur: Pro demand being there, but DIY being so weak. So if you could help with those three things I'd appreciate it.

Speaker: Just to be very clear, we will not let cash sit on the balance sheet. We'll do what we need to do from dividends. We've got some good organic growth investments that we'll invest in. And we'd love to do some shareholder value accretive acquisitions.

Speaker Change: Okay. Vincent this is Tim.

Speaker Change: Okay, Vincent, this is Tim. On the Q1,

Speaker Change: Okay, Vincent. This is Tim on the Q1.

Vincent: On the Q1.

Tim: Yeah, I'd say, you know, correct. There is an extra day in February. I think that the negativity of Easter impacts that more significantly in one day because particularly some parts of the world, Europe, vacations before, some vacations after, other parts of the world, we do have, you know, Easter time is typically a good month for us in Mexico. And so it's more significant than the one day. But you are correct. Also on Q1, though, we have

Tim: Yeah, I'd say, you know, correct. There is an extra day in February. I think that the negativity of Easter impacts that more significantly in one day because, particularly, some parts of the world, Europe, vacations before, some vacations after, other parts of the world, we do have, you know, Easter time is typically a good month for us in Mexico. And so it's more significant than just one day. But you are correct. Also in Q1, though, we have In addition to the Easter impact, you do have that customer load-in that we mentioned and the energy pricing issue that Vince mentioned earlier.

David I. Begleiter: and many, many companies, and much lower accounts payable this year. And it seems to have really worked. And it seems to have really worked. Hi Jeff, it's Tim.

Yes, I'd say correct or is there is an extra day in February.

Vincent: I think the negativity of Easter impacts that more significantly in one day, because particularly some parts of the world Europe.

Speaker: And if that doesn't come along, then we'll return cash by buying shares. We did some in Q4 for the first time in a long time. And if we've got excess cash sitting on the balance sheet, you can be assured that that's what we'll do. Now, Q1.

Tim Knabich: I'll take the titanium dioxide question, and Vince, you can take the more finance-related questions there. You know, TIO2, we see very good availability. We see a long supply chain upstream of us that's still quite long, and so we're seeing some modestly lower pricing on TIO2 than what we would have seen last year. It's not, down as much as some other parts of our basket but it's definitely down from where we were last year Jeff and you know on TIO2 in addition to pricing I do have to mention that a key part of our strategy is is to continue the the research work that we do to reduce our titanium dioxide content in our formulas every year without sacrificing any performance and our team's done a great job there we're down about one percent per formula over the last several years and we achieved that again in 2023 and we achieved that again in 2023, Yeah, Jeff, on the balance sheet questions, I'm not going to be able to calculate the FIFO, LIFO impact on the fly here.

Vincent: Vacations before some vacations after other parts of the world.

We do have.

Easter time is typically is a good month for us in Mexico, and so it's more more significant.

Vincent: Then then the one and then the one day.

Speaker: We're sitting with a lot of cash right now, but we typically consume significant cash in Q1. And so we'll be a little cautious here in Q1 so that we don't get back into paying high-interest-cost debt, which we just got out of. But beyond that, you should expect us to not let the cash sit there. Yeah, let me just add, this is Vince. I just want to reemphasize the key comment Tim said: we prefer a strong balance sheet due to the optionality it gives us on many fronts. We feel where we are today; we don't need to let cash grow. We can consume cash through April.

Vincent: But but.

Vincent: But you are correct also in Q1, though we have.

Tim: In addition to the Easter impact, you do have that customer load-in that we mentioned and the energy pricing issue that Vince mentioned earlier. On the pro-DIY, first of all, DIY remains down, and yes, some of it, I don't know if we can put a timestamp exactly on it, but some of it you could call a post-COVID hangover as people did a lot of pull forward. I think now it's more general inflation and general consumer spending and confidence on...

In addition to the Easter impact you do have that customer loading that we've mentioned and the energy pricing issue that Vince mentioned earlier.

Tim: On the pro-DIY, first of all, DIY remains down, and yes, some of it, I don't know if we can put a timestamp exactly on it, but some of it you could call a post-COVID hangover as people did a lot of pull forward. I think now it's more general inflation and general consumer spending and confidence on you know on on remodeling at home and some of it is existing home resale too where sellers DIY sellers will paint their house DIY buyers will paint their house so I do think some of it is is related to what's happening with existing home sales as well but I do think it's some combination of that and just overall inflation and how it's hitting the average consumer's pocketbook and the decisions that they're they're having to make you know in the pro side does does remain strong we do see some some areas of weakness again you know things like existing home resale some of that's done by pros as well but we see strength in in commercial strength in in maintenance and I think that's why it's holding up well and that's not only a US a US phenomena that's a phenomena that we see in Europe as well and that's why it's holding up well and that's why it's holding up well

On the pro DIY.

Vincent: Well first of all DIY remains down and yes. Some of it I don't know if we can put a timestamp exactly on it but some of it you could call a COVID-19 or post COVID-19 hangover as people did a lot of pull forward I think now it's more.

Vincent: General inflation, and general consumer spending and confidence on.

Tim: you know on on remodeling at home and some of it is existing home resale too where sellers DIY sellers will paint their house DIY buyers will paint their house so I do think some of it is is related to what's happening with existing home sales as well but I do think it's some combination of that and just overall inflation and how it's hitting the average consumer's pocketbook and the decisions that they're they're having to make you know in the pro side does does remain strong we do see some some areas of weakness again you know things like existing home resale some of that's done by pros as well but we see strength in in commercial strength in in maintenance and I think that's why it's holding up well and that's not only a US a US phenomena that's a phenomena that we see in Europe as well and that's why it's holding up well and that's why it's holding up well

Vincent: On on remodeling at home.

Speaker: That's our traditional seasonality in our businesses. So the billion five that sits on the balance sheet, we will consume through April. That allows us to not, that allows us to not consume through April. That allows us to not consume through April. That allows us to not consume through April.

Vincent: Some of it is existing home resale to where sellers DIY sellers will paint their house DIY buyers will paint their house. So I do think some of it is related to what's happening with existing home sales as well, but I do think it's some combination of that and just overall.

Tim Knabich: Just a reminder, everybody, we're at 75% FIFO. The difference between, again, the invoice cost and what we're realizing on the income statement for raw material moderation is significant. Tens of millions of dollars if we moved that to FIFO, but I can't calculate it precisely. As it relates to payables, you know, for us, we had a couple of items in the fourth quarter. Our tax provisioning is about $100 million higher. We ended the year on a weekend, a two-day weekend, so our accounts payable are higher because of that.

Vincent: Inflation and how it's hitting the average consumer's pocket book and the decisions that they're having to make.

Vincent: And the pro side.

Vincent: Does does remain strong.

Speaker: That allows David Begleiter. As we generate that strong cash in the back half of the year, we'll look at other uses. Our next question comes from Jeff Zekauskas with J.P. Morgan. Your line is open, please go ahead. Thanks very much.

Vincent: We do see some some areas of weakness again.

Vincent: And things like existing home resale some of Thats done by pros as well, but we see strength in commercial strength in maintenance.

Vincent: And I think that's why it's holding up well and thats not only a U S. A U S phenomenon, that's a phenomena that we see in Europe as well.

Jeff Zekauskas: I was wondering whether to comment on the direction of Dioxide Press. Secondly, you make a fuss over the different. You make a fuss over your LIFO inventories. So if you would value things on LIFO instead of FIFO, what might make a fuss? The Earth.

Tim Knabich: There is natural FX in that number on a year-over-year basis. And we had, as you saw, an environmental special for about $30 million where we accrued $30 million for future environmental spending. And we talked about the compensation increase in the fourth quarter. So those are the big elements in our payables on a year-over-year basis. Our next question comes from Vincent Andrews with Morgan Street. Your line is open, please go ahead. Thank you. A few quick ones from me. In the first quarter, we get the timing shift of Easter, but February also has an extra day this year.

Speaker Change: Oh, Europe. I'm sorry. I missed that element. Yeah, the TIO2 Europe. You know, we're watching this process very closely. A couple of things. We have not dramatically shifted. We do buy a good bit from the Chinese TIO2 suppliers. They're an important part of our supply portfolio. And we're watching this process in Europe. We think, number one, it'll be a very lengthy process. Number two, it'll be a very lengthy process.

Speaker Change: Oh, Europe, I'm sorry. I missed that element. Yeah, the TIO2 Europe. You know, we're watching this process very closely. There are a couple of things. We have not dramatically shifted, but we do buy a good bit from the Chinese TIO2 suppliers. They're an important part of our supply portfolio, and we're watching this process in Europe. We think, number one, it'll be a very lengthy process. Number two, it'll be a very costly process. Number two, we're constantly working on the diversity of our supply base for TiO2 and the flexibility of that supply base, and we've made significant improvements there and where else we can use various TiO2 from different parts of the world, including China.

Tier two.

Speaker Change: I'm, sorry, I missed that element, yes, the tio to Europe, we're watching this process very closely.

Speaker Change: A couple of things we have not dramatically shifted we do buy a good bit from from the Chinese Tio two suppliers that are important part of our supply portfolio.

Speaker: And then finally... in your accounts payable and accrued liabilities, your year-over-year increase, that is the benefit, was about $380 million. Consequentially, maybe it was 250. Now, you guys don't disaggregate accounts payable from accrued liabilities. Can you explain what's going on there?

Speaker Change: And we're watching this process in Europe, we think number one it will be a very lengthy process.

Speaker Change: Number two, we're constantly working on the diversity of our supply base in TiO2 and the flexibility of that supply base. And we've made significant improvements there and where else we can use various TiO2 from different parts of the world, including China. And again, we continue our longer term initiative of reducing our dependence solely on TiO2 by removing it from our formulations without sacrifice and performance. So those three things I would point to. Again, we're watching it very closely and we'll adapt. And I'm confident that between the upstream supply being in a long situation and the diversification work that we've done, we'll do what we need to run our business.

Speaker Change: Number two we have we're constantly working on the diversity of our supply base in tier two and the flexibility.

Tim Knabich: So does that not offset the Easter impact? And then also on TiO2, how much Chinese TiO2 are you guys buying these days, and how much of it is in Europe, and have you changed? and many purchasing patterns as a function of the EU's investigation into Chinese imports. And then lastly, you know, the pro architecture. Thank you so much for joining us. Disconnects between, you know, sort of the pro-demand being there, but DIY being so weak. So if you could help with those three things, I'd appreciate it. Okay, Vincent. This is Tim.

Speaker Change: That supply base, and we've made significant improvements there and where else we can use.

Yes.

Speaker: and many, many companies, and much lower accounts payable this year. And it seems to have really worked. And it seems to have really worked. Hi Jeff. It's Tim.

Speaker Change: Two from different parts of the world, including including China, and again, we continue our longer term initiative of reducing our dependence solely on <unk> by by removing it from our formulations without sacrificing performance. So those three things I would point to yes, we're watching it we're watching it very closely and we will adapt and I'm confident.

Speaker Change: And again, we continue our longer-term initiative of reducing our dependence solely on TiO2 by removing it from our formulations without sacrifice or performance. So those three things I would point out. Again, we're watching it very closely, and we'll adapt. And I'm confident that between the upstream supply being in a long situation and the diversification work that we've done, we'll do what we need to run our business.

Speaker: I'll take the titanium dioxide question, and Vince, you can take the more finance-related questions there. TIO2, we see very good availability. We see a long supply chain upstream of us. It's still quite long, and so we're seeing some modestly lower pricing on TIO2 than what we would have seen last year.

Speaker Change: <unk> that the.

Speaker Change: Between the upstream supply being in a long situation and the diversification work that we've done we will do we need to run our business and just to expand on diversification capability. We continue to add slurry capabilities around the world, which allows us to mix different tier twos.

Speaker: We see very good availability. We see very good availability, down as much as some other parts of our basket but it's definitely down from where we were last year Jeff and you know on TIO2 in addition to pricing I do have to mention that a key part of our strategy is is to continue the the research work that we do to reduce our titanium dioxide content in our formulas every year without sacrificing any performance and our team's done a great job there we're down about one percent per formula over the last several years and we achieved that again in 2023 and we achieved that again in 2023, Yeah, Jeff, on the balance sheet questions, I'm not going to be able to calculate the FIFO, LIFO impact on the fly here.

Tim Knabich: On the Q1, Yeah, I'd say, you know, correct. There is an extra day in February. I think that the negativity of Easter impacts that more significantly in one day because, particularly, some parts of the world, Europe, vacations before, some vacations after, other parts of the world, we do have, you know, Easter time is typically a good month for us in Mexico. And so it's more significant than just one day. But you are correct.

Speaker Change: Yeah, and just to expand on that diversification capability, we continue to add slurry capabilities around the world, which allows us to mix different PI2 suppliers' products.

Speaker Change: Yeah, and just to expand on that diversification capability, we continue to add slurry capabilities around the world, which allows us to mix different PI2 suppliers' products, and efficiency. We're at a multi-year six to seven percent efficiency in TI2 for the last four or five years, and we have very active projects you can see. Continuing to become more efficient, some of those could be recognizable in terms of the breadth of our buy.

Speaker Change: Appliance products.

Speaker Change: and efficiency we're at a multi-year six seven percent of efficiency in TI2 the last four or five years and we have very active projects you

Speaker Change: And efficiency, we're at a multi year, 67% of efficiency and tier two in the last four or five years.

Speaker Change: We have very active projects.

Speaker Change: Continuing to become more efficient, some of those could be recognizable in terms of the breadth of our buy.

Speaker Change: Continuing to become more efficient some of those could be.

Tim Knabich: Also on Q1, though, we have, In addition to the Easter impact, you do have that customer load-in that we mentioned and the energy pricing issue that Vince mentioned earlier. On the pro-DIY, first of all, DIY remains down, and yes, some of it, I don't know if we can put a timestamp exactly on it, but some of it you could call a post-COVID hangover as people did a lot of pull forward. I think now it's more general inflation and general consumer spending and confidence on.., you know on on remodeling at home and some of it is existing home resale too where sellers DIY sellers will paint their house DIY buyers will paint their house so I do think some of it is is related to what's happening with existing home sales as well but I do think it's some combination of that and just overall inflation and how it's hitting the average consumer's pocketbook and the decisions that they're they're having to make you know in the pro side does does remain strong we do see some some areas of weakness again you know things like existing home resale some of that's done by pros as well but we see strength in in commercial strength in in maintenance and I think that's why it's holding up well and that's not only a US a US phenomena that's a phenomena that we see in Europe as well and that's why it's holding up well and that's why it's holding up well, Oh, Europe. I'm sorry.

Speaker Change: Could be.

Speaker Change: <unk> in terms of our the breadth of R.

Speaker Change: Our bi.

Speaker Change: Our next question comes from Frank Mitsch with Fermium Research. Your line is open, please go ahead.

Speaker Change: Our next question comes from Frank Mitsch with Fermium Research. Your line is open. Please go ahead.

Speaker: Just a reminder, everybody, we're at 75% FIFO. The difference between, again, the invoice cost and what we're realizing on the income statement for raw material moderation is significant. Tens of millions of dollars if we moved that to FIFO, but I can't calculate it precisely. As it relates to payables, you know, for us, we had a couple of items in the fourth quarter. Our tax provisioning is about $100 million higher. We ended the year on a weekend, a two-day weekend, so our accounts payable are higher because of that.

Good morning, and congrats on the new roles Jonathan.

Frank J. Mitsch: Good morning and congrats on the new role, Jonathan. I wanted to come back to the volume questions. Tim, it sounded from your answer that, you know, flattish in Q1 basically, but you would expect

Frank J. Mitsch: Good morning and congratulations on the new role, Jonathan. I wanted to come back to volume questions. Tim, it sounded from your answer that, you know, flattish in Q1 basically, but you would expect, as we progress through the year, Q2, we'd probably see positive volumes. It sounded like that. I'm wondering if you could clarify that. Vince, when you mentioned Europe stabilizing, which is obviously a positive sign, but if I think about the mass of Europe deteriorating in the earlier parts of 23, if it's stabilizing at these low levels, it might suggest that, 24, you know, the net would be negative in terms of volume.

Frank J. Mitsch: Wanted to come back to the volume questions Tim It sounded from your answer that.

Frank J. Mitsch: Flattish in.

Frank J. Mitsch: Q1, basically, but you would expect.

Frank J. Mitsch: You know, as we progress through the year Q2, we'd probably see positive volumes. It sounded like that. I'm wondering if you could clarify that. And Vince, when you mentioned Europe stabilizing, which is obviously a positive sign, but if I think about mass of Europe deteriorating in the earlier parts of 23, if it's stabilizing at these low levels, it might suggest that 24, you know, the net would be negative in terms of volume. So I was wondering if you could speak to that and also any sort of comments you have with respect to, I know you indicated that China, you anticipate positive volumes there, particularly with the weak comps, but you know, what you're expecting in the Americas as well would be fantastic.

Speaker Change: As we progress through the year Q2, we'd probably see positive volumes. It sounded like that Im wondering if you could clarify that and Vince when you mentioned Europe stabilizing which is obviously a positive sign but if I think about math of Europe deteriorating in the earlier parts of 'twenty three if it's stabilizing at these low levels it might suggest.

Speaker Change: That 24 the.

Speaker Change: Net would be negative.

Speaker: There is natural FX in that number on a year-over-year basis. And we had, as you saw, an environmental special for about $30 million where we accrued $30 million for future environmental spending. And we talked about the compensation increase in the fourth quarter. So those are the big elements in our payables on a year-over-year basis. Our next question comes from Vincent Andrews with Morgan Street. Your line is open, please go ahead. Thank you. A few quick ones from me. In the first quarter, we get the timing shift of Easter, but February also has an extra day this year.

Speaker Change: In terms of volume. So I was wondering if you could.

Frank J. Mitsch: So I was wondering if you could speak to that and also any sort of comments you have with respect to, I know you indicated that China, you anticipate positive volumes there, particularly with the weak comps, but you know, what you're expecting in the Americas as well would be fantastic. Okay, Frank, I'll start. It's Tim. I think your interpretation of my volume comments are spot on. Positive volume for the year, flat-ish in Q1, and then you should see an uptick soon thereafter. So I do think that's spot on. I know you asked Vince the Europe question, and I'm going to give a quick lead in on Europe, you know despite the very benign 2023 volume environment in Europe we had a record year of earnings in 2023 in Europe so you know yes it does impact the top line but our team has really executed well and we had all-time record earnings and also it's not all of our businesses in Europe we have you know arrows very strong in Europe auto had a better than expected year in Europe and frankly we do expect that to continue it's really mostly around the the the deco the the deco market particularly the retail deco market in in in Europe that saw a negative volume and PMC PMC had a great a great European year with particularly driven by both protective and marine aftermarket so that I give that lead into Europe and hand it over to Vince yeah we say Europe stabilizing in Europe Europe stabilizing in volumes for 24 we're looking at quarter over quarter Frank and I know as you know we're a very seasonal business there in our deco our architectural coatings business so each quarter we expect that stabilization respective to the last prior year quarter so again on a full year basis we expect that to be to be flat reflecting that year over year comp quarter by quarter again our view of China is a bit different I think than what most markets are seeing we always have to remind folks we do not we do not have a large architectural presence in China you know one of the heaviest unfavorable items in China is the construction and housing market very little exposure for us again we're turning the corner on industrial auto is growing our refinished businesses is returning in China because of the higher miles driven and aerospace is starting to come back so our mix of businesses in China helps us and again the fact we don't have that architectural content and architectural the architectural industry draws a lot of raw materials as well so the fact that that's down is supportive of our of our earnings in China and the last part of your question what are we seeing in the in the US relative relative to volume we've got you know the PMC business mostly on the peace side the protective side doing well in the US driven a lot by you know energy spending and infrastructure traffic with infrastructure spending will will be stronger this year refinish doing very well and you know auto the the US SAR is holding up very well I know inventories have ticked up a bit but they're still only at about 40 days so those would be on the and of course arrow we're selling everything we can make so those would be on the and of course arrow we're selling everything we can make so those would be on the positive side of the US ledger the the negative side again we've said DIY multiple times we do expect at least the first half of this year to be to be soft there the only upside there might be that we do believe the stocking in that space is behind us

Speaker Change: Speak to that and also any sort of comments you have with respect to I know I know you indicated that China, you anticipate positive volumes, there, particularly with the weak comps, but what youre expecting in the Americas as well it would be fantastic.

Speaker Change: Okay, Hey, Frank I'll start it's Tim.

Frank J. Mitsch: Okay, Frank, I'll start. It's Tim. I think your interpretation of my volume comments are spot on. Positive volume for the year, flat-ish in Q1, and then you should see an uptick soon thereafter. So I do think that's spot on. I know you asked Vince the Europe question, and I'm going to give a quick lead in on Europe.

Tim: I think your interpretation of my volume comments are spot on positive.

Tim: Positive volume for the year flat ish in Q1, and then you should see an uptick.

Tim Knabich: I missed that element. Yeah, TIO2 Europe. You know, we're watching this process very closely. A couple of things. We have not dramatically shifted. We do buy a good bit from the Chinese TIO2 suppliers.

Tim: Soon thereafter, so I do think that.

Speaker Change: That's spot on I know you asked Vince the Europe question, and I'm going to I'm going to give a quick.

Vincent Stephen Andrews: So does that not offset the Easter impact? And then also on TiO2, how much Chinese TiO2 are you guys buying these days, and how much of it is in Europe, and have you changed? and many purchasing patterns as a function of the EU's investigation into Chinese imports. And then lastly, you know, the pro architecture. Thank you for joining us. Disconnects between, you know, sort of the pro-demand being there, but DIY being so weak. So if you could help with those three things, I'd appreciate it. Okay, Vincent. This is Tim.

Speaker Change: Quick lead in on Europe.

Frank J. Mitsch: you know despite the very benign 2023 volume environment in Europe we had a record year of earnings in 2023 in Europe so you know yes it does impact the top line but our team has really executed well and we had all-time record earnings and also it's not all of our businesses in Europe we have you know arrows very strong in Europe auto had a better than expected year in Europe and frankly we do expect that to continue it's really mostly around the the the deco the the deco market particularly the retail deco market in in in Europe that saw a negative volume and PMC PMC had a great a great European year with particularly driven by both protective and marine aftermarket so that I give that lead into Europe and hand it over to Vince yeah we say Europe stabilizing in Europe Europe stabilizing in volumes for 24 we're looking at quarter over quarter Frank and I know as you know we're a very seasonal business there in our deco our architectural coatings business so each quarter we expect that stabilization respective to the last prior year quarter so again on a full year basis we expect that to be to be flat reflecting that year over year comp quarter by quarter again our view of China is a bit different I think than what most markets are seeing we always have to remind folks we do not we do not have a large architectural presence in China you know one of the heaviest unfavorable items in China is the construction and housing market very little exposure for us again we're turning the corner on industrial auto is growing our refinished businesses is returning in China because of the higher miles driven and aerospace is starting to come back so our mix of businesses in China helps us and again the fact we don't have that architectural content and architectural the architectural industry draws a lot of raw materials as well so the fact that that's down is supportive of our of our earnings in China and the last part of your question what are we seeing in the in the US relative relative to volume we've got you know the PMC business mostly on the peace side the protective side doing well in the US driven a lot by you know energy spending and infrastructure traffic with infrastructure spending will will be stronger this year refinish doing very well and you know auto the the US SAR is holding up very well I know inventories have ticked up a bit but they're still only at about 40 days so those would be on the and of course arrow we're selling everything we can make so those would be on the and of course arrow we're selling everything we can make so those would be on the positive side of the US ledger the the negative side again we've said DIY multiple times we do expect at least the first half of this year to be to be soft there the only upside there might be that we do believe the stocking in that space is behind us

Tim Knabich: They're an important part of our supply portfolio, and we're watching this process in Europe. We think, number one, it'll be a very lengthy process. Number two, it'll be a very lengthy process.

Speaker Change: Despite the very benign 2023 volume environment in Europe.

Speaker Change: We had a record year of earnings in 2023 in Europe. So.

Speaker Change: Yes, it doesn't impact the top line, but our team has really executed well and we had all time record earnings and also it's not all of our businesses in Europe, we have.

Tim Kanavish: Number two, we're constantly working on the diversity of our supply base for TiO2 and the flexibility of that supply base. And we've made significant improvements there and where else we can use various TiO2 from different parts of the world, including China. And again, we continue our longer-term initiative of reducing our dependence solely on TiO2 by removing it from our formulations without sacrifice or performance.

Speaker Change: It was very strong in Europe.

Auto had a.

Speaker Change: Our better than expected year in Europe, and frankly, we do expect that to continue its really mostly around the deco.

Speaker: On the Q1, Yeah, I'd say, you know, correct. There is an extra day in February. I think that the negativity of Easter impacts that more significantly in one day because, particularly, some parts of the world, Europe, vacations before, some vacations after, other parts of the world, we do have, you know, Easter time is typically a good month for us in Mexico. And so it's more significant than just one day. But you are correct.

Speaker Change: The deco market, particularly the retail deco market.

In Europe, it's a negative volume and PMC PMC had a great a great European year, with particularly driven by both protective and marine aftermarket. So I'll give that lead into Europe and hand, it over to Vince Yeah. When we say Europe stabilizing in Europe, Europe stabilizing and volumes for 'twenty four we're looking at quarter over.

Tim Knabich: So those three things I would point to. Again, we're watching it very closely, and we'll adapt. And I'm confident that between the upstream supply being in a long situation and the diversification work that we've done, we'll do what we need to run our business. Yeah, and just to expand on that diversification capability, we continue to add slurry capabilities around the world, which allows us to mix different PI2 suppliers' products, and efficiency. We're at a multi-year six to seven percent efficiency in TI2 for the Our next question comes from Frank Mitsch with Fermium Research.

Vincent Andrew: Quarter Frank.

Vincent Andrew: I know as you know, we're a very seasonal business, there and our deco.

Vincent Andrew: Architectural coatings business, so each quarter, we expect that stabilization respective to the last.

Speaker: Also on Q1, though, we have, In addition to the Easter impact, you do have that customer load-in that we mentioned and the energy pricing issue that Vince mentioned earlier. On the pro-DIY, first of all, DIY remains down, and yes, some of it, I don't know if we can put a timestamp exactly on it, but some of it you could call a post-COVID hangover as people did a lot of pull forward. I think now it's more general inflation and general consumer spending and confidence on.., you know on on remodeling at home and some of it is existing home resale too where sellers DIY sellers will paint their house DIY buyers will paint their house so I do think some of it is is related to what's happening with existing home sales as well but I do think it's some combination of that and just overall inflation and how it's hitting the average consumer's pocketbook and the decisions that they're they're having to make you know in the pro side does does remain strong we do see some some areas of weakness again you know things like existing home resale some of that's done by pros as well but we see strength in in commercial strength in in maintenance and I think that's why it's holding up well and that's not only a US a US phenomena that's a phenomena that we see in Europe as well and that's why it's holding up well and that's why it's holding up well, Oh, Europe. I'm sorry.

Vincent Andrew: Higher year quarter.

Vincent Andrew: So again on a full year basis, we expect that to be to be flat, reflecting that year over year comps quarter by quarter.

Vincent Andrew: Again, our view of China is a bit different I think than most markets. We're seeing that we always have to remind folks. We do not we do not have a large architectural presence in China, one of the heaviest unfavorable items in China.

Vincent Andrew: Construction and housing market very little exposure for us again.

Again, we're turning the corner on industrial auto is growing our refinish business is returning in China because of higher miles driven and aerospace is starting to come back so our mix of businesses in China helps us and again, the fact that we don't have that architectural content.

Frank J. Mitsch: Your line is open, please go ahead. Good morning and congratulations on the new role, Jonathan. I wanted to come back to the volume questions. Tim, it sounded from your answer that, you know, flattish in Q1 basically, but you would expect, as we progress through the year, in Q2, we'd probably see positive volumes. It sounded like that.

Vincent Andrew: Architectural the architectural industry draws a lot of raw materials as well so the fact that thats down is supportive.

Vincent Andrew: Of our of our earnings in China.

Vincent Andrew: And the last part of your question what do we see any in the U S relative relative to volume.

Tim Knabich: I'm wondering if you could clarify that. Vince, when you mentioned Europe stabilizing, which is obviously a positive sign, but if I think about the mass of Europe deteriorating in the earlier parts of 23, if it's stabilizing at these low levels, it might suggest that, 24, you know, the net would be negative in terms of volume. So I was wondering if you could speak to that and also any sort of comments you have with respect to, I know you indicated that China, you anticipate positive volumes there, particularly with the weak comps, but you know, what you're expecting in the Americas as well would be fantastic. Okay, Frank, I'll start. It's Tim.

Vincent Andrew: We've got the PMC business, mostly on the Pes side, the protective side doing well in the U S driven a lot by energy spending and infrastructure.

Vincent Andrew: Traffic with infrastructure spending will be stronger this year refinish doing very well and auto the USR is holding up very well I know inventories have picked up a bit but they are still only at about 40 days. So those would be on the and of course arrow, we're selling everything we can make so those would be on the path.

Positive side of the U S ledger the negative side again, we've said DIY multiple times, we do expect at least the first half of this year to be to.

Speaker: I missed that element. Yeah, TIO2 Europe. You know, we're watching this process very closely. A couple of things. We have not dramatically shifted. We do buy a good bit from the Chinese TIO2 suppliers.

Vince Morales: I think your interpretation of my volume comments are spot on. Positive volume for the year, flat-ish in Q1, and then you should see an uptick soon thereafter. So I do think that's spot on. I know you asked Vince the Europe question, and I'm going to give a quick lead in on Europe, you know despite the very benign 2023 volume environment in Europe we had a record year of earnings in 2023 in Europe so you know yes it does impact the top line but our team has really executed well and we had all-time record earnings and also it's not all of our businesses in Europe we have you know arrows very strong in Europe auto had a better than expected year in Europe and frankly we do expect that to continue it's really mostly around the the the deco the the deco market particularly the retail deco market in in in Europe that saw a negative volume and PMC PMC had a great a great European year with particularly driven by both protective and marine aftermarket so that I give that lead into Europe and hand it over to Vince yeah we say Europe stabilizing in Europe Europe stabilizing in volumes for 24 we're looking at quarter over quarter Frank and I know as you know we're a very seasonal business there in our deco our architectural coatings business so each quarter we expect that stabilization respective to the last prior year quarter so again on a full year basis we expect that to be to be flat reflecting that year over year comp quarter by quarter again our view of China is a bit different I think than what most markets are seeing we always have to remind folks we do not we do not have a large architectural presence in China you know one of the heaviest unfavorable items in China is the construction and housing market very little exposure for us again we're turning the corner on industrial auto is growing our refinished businesses is returning in China because of the higher miles driven and aerospace is starting to come back so our mix of businesses in China helps us and again the fact we don't have that architectural content and architectural the architectural industry draws a lot of raw materials as well so the fact that that's down is supportive of our of our earnings in China and the last part of your question what are we seeing in the in the US relative relative to volume we've got you know the PMC business mostly on the peace side the protective side doing well in the US driven a lot by you know energy spending and infrastructure traffic with infrastructure spending will will be stronger this year refinish doing very well and you know auto the the US SAR is holding up very well I know inventories have ticked up a bit but they're still only at about 40 days so those would be on the and of course arrow we're selling everything we can make so those would be on the and of course arrow we're selling everything we can make so those would be on the positive side of the US ledger the the negative side again we've said DIY multiple times we do expect at least the first half of this year to be to be soft there the only upside there might be that we do believe the stocking in that space is behind us and then finally I would say general industrial coatings uh driven by just industrial activity and this could be you know all kinds of widgets that get painted that that's still a bit soft in the U.S. so that's a bit of the positive and and negative ledger here at home Frank, Our next question comes from Aleksey Yefremov with Key Corp. Your line is open, please. Thanks. Good morning, everyone.

Vincent Andrew: Be soft there the only upside there might be that we do believe destocking in that space is behind us.

Vince Morales: and then finally I would say general industrial coatings uh driven by just industrial activity and this could be you know all kinds of widgets that get painted that that's still a bit soft in the U.S. so that's a bit of the positive and and negative ledger here at home Frank

Vincent Andrew: And then finally, I would say general industrial coatings.

Speaker: They're an important part of our supply portfolio, and we're watching this process in Europe. We think, number one, it'll be a very lengthy process. Number two, it'll be a very lengthy process.

Vincent Andrew: Driven by just industrial activity and this could be all kinds of widgets that get painted that's still a bit soft in the U S. So that's a bit of a positive.

Speaker: Number two, we're constantly working on the diversity of our supply base for TiO2 and the flexibility of that supply base. And we've made significant improvements there and where else we can use various TiO2 from different parts of the world, including China. And again, we continue our longer-term initiative of reducing our dependence solely on TiO2 by removing it from our formulations without sacrifice or performance.

Vincent Andrew: And negative ledger here at home.

Vincent Andrew: Okay.

Speaker Change: Our next question comes from Aleksey Yefremov with Key Corp. Your line is open, please.

Speaker Change: Our next question comes from Alexia <unk> with key Cook. Your line is open. Please go ahead.

Alexia: Thanks, Good morning, everyone.

Aleksey V. Yefremov: Thanks. Good morning, everyone. Can you just provide an update on your strategic efforts to broaden the product lines with COMEX? Where are you versus your goals? What are your plans for 2024? And maybe broader, any update on other strategic organic growth initiatives that you talked about last?

Aleksey V. Yefremov: Thanks. Good morning, everyone. Can you just provide an update on your strategic efforts to broaden product lines with COMEX? Where are you versus your goals? What are your plans for 2024? And maybe more broadly, any update on other strategic organic growth initiatives that you talked about last?

Alexia: Just provide an update on your strategic efforts to broaden the product lines of Carmax, where are you versus your goals.

What are your plans for 2004.

Speaker: So those three things I would point to. Again, we're watching it very closely, and we'll adapt. And I'm confident that between the upstream supply being in a long situation and the diversification work that we've done, we'll do what we need to run our business. Yeah, and just to expand on that diversification capability, we continue to add slurry capabilities around the world, which allows us to mix different PI2 suppliers' products, and efficiency. We're at a multi-year six to seven percent efficiency in TI2 for the Our next question comes from Frank Mitsch with Fermium Research.

Alexia: And maybe broader.

Alexia: Date on other strategic organic growth initiatives that you talked about last year.

Speaker Change: Yes sure Alexia.

Speaker Change: Yeah, sure, Aleksey. So in PPG COMEX in Mexico,

Speaker Change: Yeah, sure, Aleksey. So at PPG COMEX in Mexico,

Speaker Change: And PPG Comex in Mexico.

Speaker Change: We said in May one of our key initiatives was to continue our robust performance in growth in the Deco space and the team did that another another record year double digit sales up on the year, but also too.

Speaker Change: Introduce other parts of our portfolio to that strong concessionaire network and and we've done that protective coatings were up.

Let's call it very high single digits.

Speaker Change: Adding again, adding that fourth letter, but traffic sales were up double digit and I. Just returned we just had all of our Concessionaires together this past weekend.

Speaker Change: And I was down there meeting with them and they are very bullish on their ability to.

Speaker Change: To sell not only deco, but these protective traffic powder light industrial light industrial coatings. So so we're often running we just literally on.

Speaker Change: I believe it was Monday of this week.

Speaker: I'm wondering if you could clarify that. Vince, when you mentioned Europe stabilizing, which is obviously a positive sign, but if I think about the mass of Europe deteriorating in the earlier parts of 23, if it's stabilizing at these low levels, it might suggest that, 24, you know, the net would be negative in terms of volume. So I was wondering if you could speak to that and also any sort of comments you have with respect to, I know you indicated that China, you anticipate positive volumes there, particularly with the weak comps, but you know, what you're expecting in the Americas as well would be fantastic. Okay, Frank, I'll start. It's Tim.

Speaker Change: Introduced.

Speaker Change: Powder powder.

Speaker Change: Powder brands and refinish brands that are specific and dedicated and exclusive to the concessionaire network and that got a very very good very good reception.

Speaker Change: Your other question on the initiatives that we kicked off last year as part of our enterprise growth strategy.

Speaker Change: I would say very pleased with the first year of execution of that enterprise growth strategy.

Speaker Change: As we said in the opening remarks, those initiatives just in the first year generated about $150 million of incremental sales.

Speaker Change: As we said in the opening remarks, those initiatives just in the first year generated about $150 million of incremental sales, and some of those initiatives are longer-term initiatives than others and still in development, so you know between between powder films and the Mexico opportunity that we just talked about EVs up 20 percent content per per vehicle. They're all off and running, and I'm very pleased with the progress that we have seen so far. And if I could just add a I think that has come through in space for us and in the region.

Speaker Change: As we said in the opening remarks those initiatives.

Speaker Change: Just in the first year generated about $150 million of incremental sales.

Speaker Change: and some of those initiatives are are longer term initiatives than others and still in development so you know between between powder films the the Mexico opportunity that we just talked about EVs up 20 percent content per per vehicle uh they're all off and running and I'm very pleased with the progress that we have seen so far

Speaker Change: And some of those initiatives are longer term initiatives than others and still in development. So.

Speaker Change: Queen between powder films.

Speaker Change: Mexico opportunity that we just talked about evs up 20% content per per vehicle, they're all up and running and I'm very pleased with the progress that we have seen so far.

Vince: I think your interpretation of my volume comments are spot on. Positive volume for the year, flat-ish in Q1, and then you should see an uptick soon thereafter. So I do think that's spot on. I know you asked Vince the Europe question, and I'm going to give a quick lead in on Europe, you know despite the very benign 2023 volume environment in Europe we had a record year of earnings in 2023 in Europe so you know yes it does impact the top line but our team has really executed well and we had all-time record earnings and also it's not all of our businesses in Europe we have you know arrows very strong in Europe auto had a better than expected year in Europe and frankly we do expect that to continue it's really mostly around the the the deco the the deco market particularly the retail deco market in in in Europe that saw a negative volume and PMC PMC had a great a great European year with particularly driven by both protective and marine aftermarket so that I give that lead into Europe and hand it over to Vince yeah we say Europe stabilizing in Europe Europe stabilizing in volumes for 24 we're looking at quarter over quarter Frank and I know as you know we're a very seasonal business there in our deco our architectural coatings business so each quarter we expect that stabilization respective to the last prior year quarter so again on a full year basis we expect that to be to be flat reflecting that year over year comp quarter by quarter again our view of China is a bit different I think than what most markets are seeing we always have to remind folks we do not we do not have a large architectural presence in China you know one of the heaviest unfavorable items in China is the construction and housing market very little exposure for us again we're turning the corner on industrial auto is growing our refinished businesses is returning in China because of the higher miles driven and aerospace is starting to come back so our mix of businesses in China helps us and again the fact we don't have that architectural content and architectural the architectural industry draws a lot of raw materials as well so the fact that that's down is supportive of our of our earnings in China and the last part of your question what are we seeing in the in the US relative relative to volume we've got you know the PMC business mostly on the peace side the protective side doing well in the US driven a lot by you know energy spending and infrastructure traffic with infrastructure spending will will be stronger this year refinish doing very well and you know auto the the US SAR is holding up very well I know inventories have ticked up a bit but they're still only at about 40 days so those would be on the and of course arrow we're selling everything we can make so those would be on the and of course arrow we're selling everything we can make so those would be on the positive side of the US ledger the the negative side again we've said DIY multiple times we do expect at least the first half of this year to be to be soft there the only upside there might be that we do believe the stocking in that space is behind us and then finally I would say general industrial coatings uh driven by just industrial activity and this could be you know all kinds of widgets that get painted that that's still a bit soft in the U.S. so that's a bit of the positive and and negative ledger here at home Frank, Our next question comes from Aleksey Yefremov with Key Corp. Your line is open, please. Thanks. Good morning, everyone.

Speaker Change: And if I could just add a little broader commentary, you know, we've talked in May about being bullish on the Mexico economy. I think that has come through in space for us and in the region. We continue to see a reshoring of industrial activity into Mexico. We'll support that with our industrial companies. We'll support that certainly with our COMEX brand. In addition, one of the things we haven't, you know, Tim alluded to it on the opening comments, but we haven't talked about in the Q&A is, you know, a second economy for us that's well outpacing most other regional economies is India. And again, we've got a good position in India as well. And that's supported by a call reshoring into India or shoring into India that is just starting.

And if I could just add a little broader commentary.

Speaker Change: We talked in May about being bullish on the Mexico economy, I think that has come through.

Speaker Change: We continue to see a reshoring of industrial activity into Mexico, and we'll support that with our industrial companies. We'll support that certainly with our COMEX brand. In addition, one of the things we haven't, you know, Tim alluded to it in his opening comments, but we haven't talked about in the Q&A is, you know, a second economy for us that's well outpacing most other regional economies is India. And again, we've got a good position in India as well, and that's supported by a call to reshoring into India or shoring into India that is just starting.

Speaker Change: In space for Us in the region, we continue to see a reassuring of industrial activity into Mexico.

Speaker Change: We will support that with our industrial coatings will support that certainly with our <unk> brand.

Speaker Change: In addition, one of the things, we Havent Tim alluded to it on the opening comments that we haven't talked about in the Q&A.

Speaker Change: Second economy for us.

Speaker Change: Well outpacing most other regional economies is India.

Jonathan Edwards: Can you just provide an update on your strategic efforts to broaden the product lines with COMEX? Where are you versus your goals? What are your plans for 2024? And maybe more broadly, any update on other strategic organic growth initiatives that you talked about last? Yeah, sure, Aleksey.

Speaker Change: And we've got good position in India, as well and that's supported by.

Speaker Change: I'll call. It re shoring into India are shoring into India that is just starting.

Speaker Change: Our next question comes from Lauren Favre with BNP Paribas. Your line is open, please go ahead.

Speaker Change: Our next question comes from Laurent <unk> with BNP Paribas. Your line is open. Please go ahead.

Lauren Favre: Yes, good morning. In the presentation in the list...

Lauren Favre: Yes, good morning. In the presentation on the list...

Vince Morales: So at PPG COMEX in Mexico, you know, we said in May one of our key initiatives was to continue our robust performance and growth in the DECO space, and the team did that again another record year, double-digit sales up on the year, but also to introduce other parts of our portfolio to that strong concessionaire network. And and we've done that, you know, protective coatings were up, let's call it very high single digits, adding again, adding that fourth letter, but traffic sales were up double digits. And I just returned.

Laurent: Yes, good morning.

Laurent: In the presentation in the list of watch outs, you've mentioned the Red Sea situation.

Lauren Favre: The Red Seas

Lauren Favre: The Red Sea

Speaker Change: Tim, I was wondering if you could talk about, I guess, how you're looking at the risks there in terms of ability to source impact on cost. Have you seen any in terms of ability to source impact on cost. Have you seen any

Speaker Change: Tim, I was wondering if you could talk about, I guess, how you're looking at the risks there in terms of ability to source impact on cost. Have you seen any Have you seen any And on the flip side, on the positive or potential positive, there's such a thing as there being such a thing, could it be a reason for a bit of a restocking along the chain?

Speaker Change: Tim I was wondering if you could talk about I guess, how youre looking at the risks in terms of ability to source impacts on costs have you seen anything on that side yet.

Speaker Change: And on the flip side, on the positive or potential positive, there's such a thing, could it be a reason for a bit of a restocking along the chain?

Speaker Change: On the flip side on the subsidies or potential because it is such a thing.

Speaker Change: Would it be a reason for restocking and your customers, what you're just not big enough.

Speaker Change: Was he just not big enough as a dealer?

Speaker Change: Enough of a deal right now thank you.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Hey, LeBron.

Speaker Change: Hey, LeBron, it's really not been any kind anything near material to us to this point um first of all from our direct products you know paint and coatings don't do very well shipping uh shipping around the world we're mostly local for locals so minimal impact on our our direct uh products our suppliers you know we have our suppliers have plenty of capacity there's plenty of inventory upstream of us and uh our suppliers are seeing some delays uh but they're accounting for that in their um you know in their production planning and in their their logistics planning so we're not expecting any any impact to us there to the financial impact we've seen a few minor small surcharges being implemented but uh frankly to this point pretty pretty insignificant so the piece that we're watching and the reason we we listed listed it on uh on that part of our slide was um We're not certain of the impact on customers, particularly if you think about European auto OEMs where they've got sourcing from around the world, and if they're missing any critical parts, it may impact production scheduling. We have seen none of that so far, but that's really the piece we're watching, more of our customer impact than on any internal impact.

Speaker Change: Yeah, Hey, Ron.

Speaker Change: it's really not been any kind anything near material to us to this point um first of all from our direct products you know paint and coatings don't do very well shipping uh shipping around the world we're mostly local for locals so minimal impact on our our direct uh products our suppliers you know we have our suppliers have plenty of capacity there's plenty of inventory upstream of us and uh our suppliers are seeing some delays uh but they're accounting for that in their um you know in their production planning and in their their logistics planning so we're not expecting any any impact to us there to the financial impact we've seen a few minor small surcharges being implemented but uh frankly to this point pretty pretty insignificant so the piece that we're watching and the reason we we listed listed it on uh on that part of our slide was um

Ron: It's really not been any anything near material to us to this point.

Vince Morales: We just had all of our concessionaires together this past weekend, and I was down there meeting with them. And they're very bullish on their ability to sell not only DECO but these protective traffic powders, light industrial, and light industrial coatings. So, we're off and running. We just literally, on Monday of this week, introduced powder powder brands and refinish brands that are specific and dedicated and exclusive to the concessionaire network. And that got a very, very good, very good reception.

Ron: First of all from our direct products paint and coatings don't do very well shipping shipping around the world, where mostly local for local so minimal impact on our our direct products. Our suppliers. We have our suppliers have plenty of capacity there is plenty of <unk>.

Ron: Inventory upstream of us.

Ron: <unk>.

Ron: Our suppliers are seeing some delays.

Ron: But they are accounting for that in there.

Ron: And their production planning and in there their logistics planning so we're not expecting any any impact to us there to the financial impact we have seen a few minor or small surcharges being implemented but.

Vince Morales: You know, your other question about the initiatives that we kicked off last year as part of our enterprise growth strategy. I'd say I was very pleased with the first year of execution of that enterprise growth strategy. As we said in the opening remarks, those initiatives just in the first year generated about $150 million of incremental sales, and some of those initiatives are longer-term initiatives than others and still in development, so you know between between powder films and the Mexico opportunity that we just talked about, EVs up 20 percent content per per vehicle, they're all off and running, and I'm very pleased with the progress that we have seen so far. And if I could just add We continue to see a shift of industrial activity into Mexico.

Ron: Frankly to this point pretty pretty insignificant. So the piece that we're watching and the reason we listed listed it on.

Ron: That part of our slide.

Ron: Was.

Ron: We're not certain of the impact on customers, particularly if you think about European auto Oems, where they've got sourcing from around the world and if they are missing any critical parts. It may impact production scheduling we've seen none of that so far but that's really the piece where we're.

Speaker Change: We're not certain of the impact on customers, particularly if you think about European auto OEMs where they've got sourcing from around the world, and if they're missing any critical parts, it may impact production scheduling. We have seen none of that so far, but that's really the piece we're watching, more of our customer impact than on any internal impact. Here, restocking, maybe, I doubt that we'll see any significant inventory build of paints and coatings as a result of this. I think it'll be more a movement of inventories upstream of us and how our suppliers deal with their own logistics planning, but again, the fact that they're pretty long right now, we're not expecting any issues.

Ron: Watching more of our customer impact then on any any internal impact tier restocking.

Speaker Change: Here, restocking, maybe, I doubt that we'll see any significant inventory build of paints and coatings as a result of this. I think it'll be more a movement of inventories upstream of us and how our suppliers deal with their own logistics planning, but again, the fact that they're pretty long right now, we're not expecting any issues.

Ron: Maybe I doubt that we will see any significant.

Ron: Inventory build of paints and coatings as a result of this.

Ron: I think it'll be more movement of inventories upstream of us and how our suppliers deal with deal with their own logistics planning, but again. The fact that they are pretty long right now we're not expecting any issues.

Speaker Change: And Laurent, just to put numbers to it, you know, typically the average delay

Speaker Change: And Laurent, just to put numbers on it, you know, typically, the average delay to do to not go into the Red Sea is about 10 to 12 days. So certainly, we can plan for that in our raw material purchase. Thank you for watching.

Speaker Change: And Ron just to put numbers to it.

Tim Knabich: We'll support that with our industrial companies, and we'll certainly support that with our COMEX brand. In addition, one of the things we haven't, you know, Tim alluded to it in his opening comments, but we haven't talked about in the Q&A is, you know, a second economy for us that's well outpacing most other regional economies is India. And again, we've got a good position in India as well.

Ron: Typically.

Ron: The average delay.

Speaker Change: to do to not go into the Red Sea is about 10 to 12 days. So certainly we can plan for that in our raw material purchase. Thank you for watching.

Due to not go into the Red Sea is about 10 to 12 days. So certainly plan, we could plan for that in our raw material purchases and Laura one more for me we have nothing in the guide for the first quarter for this area.

Speaker Change: And Laurent, one more for me. We have nothing in the guide for the first quarter for this area.

Speaker Change: And Laurent, one more for me. We have nothing in the guide for the first quarter in this area.

Aleksey V. Yefremov: Can you just provide an update on your strategic efforts to broaden the product lines with COMEX? Where are you versus your goals? What are your plans for 2024? And maybe more broadly, any update on other strategic organic growth initiatives that you talked about last? Yeah, sure, Aleksey.

Speaker Change: Our next question comes from Patrick Cunningham with Citigroup. Your line is open. Please go ahead.

Speaker Change: Our next question comes from Patrick Cunningham with Citigroup. Your line is open.

Tim Knabich: And that's supported by a call to reshoring into India or shoring into India that is just starting. Our next question comes from Lauren Favre with BNP Paribas. Your line is open, please go ahead. Yes, good morning.

Patrick Cunningham: Hi, good morning.

Patrick Cunningham: Hi, good morning. Just on auto refinish, you know, it seems like there's maybe some normalization there. So I guess my first question is what's causing, you know, lower collision claims in the U.S.? Is there anything structural you can point to, like, you know, balance of total vehicles trending upwards? And how should we think about the outlook for refinish for the full year?

Patrick Cunningham: Hi, good morning. Just on auto refinish, you know; it seems like there's maybe some normalization there. So I guess my first question is, "What's causing, you know, lower collision claims in the U.S.?" Is there anything structural you can point to, like, you know, the balance of total vehicles trending upwards? And what should we think about the outlook for refinish for the full year?

Patrick Cunningham: Refinish it seems like there's maybe some normalization there. So I guess my first question is what's causing lower collision claims in the U S is there anything structurally you can point to like no balances total vehicles trending upwards and how should we think about the outlook for refinish for the full year by region.

Speaker: So at PPG COMEX in Mexico, you know, we said in May one of our key initiatives was to continue our robust performance and growth in the DECO space, and the team did that again another record year, double-digit sales up on the year, but also to introduce other parts of our portfolio to that strong concessionaire network. And and we've done that, you know, protective coatings were up, let's call it very high single digits, adding again, adding that fourth letter, but traffic sales were up double digits. And I just returned.

Tim Knabich: In the presentation on the list... The Red Seas, Tim, I was wondering if you could talk about, I guess, how you're looking at the risks there in terms of ability to source impact on cost. Have you seen any in terms of ability to source impact on cost? Have you seen any, and on the flip side, on the positive or potential positive, there's such a thing, could it be a reason for a bit of a restocking along the chain? Was he just not big enough as a dealer?

Speaker Change: I'll take this one. Refinish had a good year, a record quarter, and that was off of tough comps. Claims still down in the U.S., still down versus 2019, but we're able to achieve our results even at that level. And what I'll tell you is body shop activity is up and strong. And the only thing, most of our body shop customers have backlogs driven mostly by labor availability. So even though claims are down and we watch that closely, we're still performing. I would also add, largely because of our digital tools, we had a really good share gain year. And even the revenue that we get. The revenue that we get from those digital tools was up more than 100% year over year. So we feel good about that moving into this year. We've got a good order book as we sit here today. So yes, we are watching claims and miles driven. The only thing I can hypothesize is that the type of driving is maybe a bit different. Most downtowns and cities are still not as crowded as they used to be. We see more crowds. We see more claims coming from suburbia than we used to. But overall, feel positive about this business moving into the year. I'm confident in our best in class productivity, value proposition. We're winning shops. So I would say we expect to have another really strong year out of our refinish business.

Speaker Change: I'll take this one. Refinish had a good year, a record quarter, and that was on tough comps. Claims are still down in the U.S., still down versus 2019, but we're able to achieve our results even at that level. And what I'll tell you is body shop activity is up and strong. And the only thing is that most of our body shop customers have backlogs driven mostly by labor availability. So even though claims are down, and we watch that closely, we're still performing. I would also add, largely because of our digital tools, we had a really good share gain last year.

Speaker Change: Yes, I'll take I'll take this one refinish.

Speaker Change: Refinish had a good year and a record quarter and that was off of off of tough comps.

Speaker Change: Yes claims still down in the in the U S still down versus 2019.

Tim Knabich: Thank you. Hey, LeBron, it's really not been any kind anything near material to us to this point um first of all from our direct products you know paint and coatings don't do very well shipping uh shipping around the world we're mostly local for locals so minimal impact on our our direct uh products our suppliers you know we have our suppliers have plenty of capacity there's plenty of inventory upstream of us and uh our suppliers are seeing some delays uh but they're accounting for that in their um you know in their production planning and in their their logistics planning so we're not expecting any any impact to us there to the financial impact we've seen a few minor small surcharges being implemented but uh frankly to this point pretty pretty insignificant so the piece that we're watching and the reason we we listed listed it on uh on that part of our slide was um, We're not certain of the impact on customers, particularly if you think about European auto OEMs where they've got sourcing from around the world, and if they're missing any critical parts, it may impact production scheduling.

Speaker Change: But we're able to achieve achieve our results even even at that level and what I'll tell you is body shop activity is is up and strong.

Speaker: We just had all of our concessionaires together this past weekend, and I was down there meeting with them. And they're very bullish on their ability to sell not only DECO but these protective traffic powders, light industrial, and light industrial coatings. So, we're off and running. We just literally, on Monday of this week, introduced powder powder brands and refinish brands that are specific and dedicated and exclusive to the concessionaire network. And that got a very, very good, very good reception.

Speaker Change: And the only thing most of our body shop customers have backlogs driven mostly by labor availability. So even though claims are down and we watch that watch that closely.

Speaker Change: And even the revenue that we get. The revenue that we get from those digital tools was up more than 100% year over year. So we feel good about that moving into this year. We've got a good order book as we sit here today. So yes, we are watching claims and miles driven. The only thing I can hypothesize is that the type of driving is maybe a bit different. Most downtowns and cities are still not as crowded as they used to be, but we see more crowds. We see more claims coming from suburbia than we used to. But overall, I feel positive about this business moving into the year. I'm confident in our best in class productivity and value proposition. We're winning shops. So I would say we expect to have another really strong year in our refinish business.

Speaker Change: We're still performing I would also add largely because of our digital tools. We had a really good share gain year end and even the revenue that we get from those digital tools was up more than 100% year over year. So we feel good about.

Speaker Change: About that moving into into this year, we've got a good order book as we sit here today. So yes, we are watching claims in miles driven and the only thing I can.

Speaker Change: Hypothesize is that the type of driving us is maybe a bit different most downtowns and cities are still not as crowded as they used to be we'd be more.

Speaker: You know, your other question about the initiatives that we kicked off last year as part of our enterprise growth strategy. I'd say I was very pleased with the first year of execution of that enterprise growth strategy. As we said in the opening remarks, those initiatives just in the first year generated about $150 million of incremental sales, and some of those initiatives are longer-term initiatives than others and still in development, so you know between between powder films and the Mexico opportunity that we just talked about, EVs up 20 percent content per per vehicle, they're all off and running, and I'm very pleased with the progress that we have seen so far. And if I could just add We continue to see a shift of industrial activity into Mexico.

Speaker Change: Claims coming from suburbia than we than we used to but overall feel positive about this business moving into into the year I'm confident in our best in class.

Speaker Change: Productivity value proposition, we're winning shops so.

Speaker Change: I would say.

Speaker Change: We expect to have another really strong year out of our refinish business.

Tim Knabich: We have seen none of that so far, but that's really the piece we're watching, more of our customer impact than any internal impact. Here, restocking, maybe, but I doubt that we'll see any significant inventory build of paints and coatings as a result of this. I think it'll be more a movement of inventories upstream of us and how our suppliers deal with their own logistics planning, but again, the fact that they're pretty long right now, we're not expecting any issues. And Laurent, just to put numbers to it, you know, typically the average delay to do to not go into the Red Sea is about 10 to 12 days.

Speaker Change: Yeah, and then regionally, we expect the U.S. and Europe, you know, to hang around zero plus or minus for the year. As we said earlier, we expect China to grow as we see kind of a reopening on a full year basis there. So that's the regional aspects. And just again, to hit on Tim's comment about our digital tools, these are tools we think are best in class. We have body shop productivity, focus on those tools, and those are a support for us. A subscription model for us that didn't exist three or four years ago.

Speaker Change: Yeah, and then regionally, we expect the U.S. and Europe to hang around zero plus or minus for the year. As we said earlier, we expect China to grow as we see kind of a reopening on a full year basis there. So that's the regional aspects. And just again, to hit on Tim's comment about our digital tools, these are tools we think are best in class. We have Body Shop productivity, focus on those tools, and those are a support for us. A subscription model for us that didn't exist three or four years ago.

Speaker Change: And then regionally.

Speaker Change: We expect the U S and Europe.

Speaker Change: To hang around zero, plus or minus for the year as we said earlier, we expect China to grow as we see.

Speaker Change: Kind of a reopening on a full year basis, there. So thats the regional aspects I'm, just just again to hit on Tim's comment about our digital tools and these are tools. We think are best in class.

Speaker Change: Have a body shop productivity focus on those tools and those are on a subscription model for us that didn't exist.

Speaker Change: Three or four years ago.

Speaker: We'll support that with our industrial companies, and we'll certainly support that with our COMEX brand. In addition, one of the things we haven't, you know, Tim alluded to it in his opening comments, but we haven't talked about in the Q&A is, you know, a second economy for us that's well outpacing most other regional economies is India. And again, we've got a good position in India as well.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Michael Sisson with Wells Fargo.

Speaker Change: Our next question comes from Michael system with Wells Fargo.

Tim Knabich: So certainly we can plan for that in our raw material purchase. Thank you for watching. And Laurent, one more for me.

Michael Sisson: Your line is open, please go.

Michael Sisson: Your line is open, please go ahead. Hey guys, good morning. I guess just one question, Tim. When you think about achieving the 10% EPS growth to the midpoint, can you sort of break down the key drivers? I know you talked about volume growth quite a bit, but is that low single digits kind of half a little bit more? Maybe how much is deflation and anything else that sort of gets you to that 10%? Thank you.

Michael: Your line is open. Please go ahead.

Michael Sisson: Hey guys, good morning. I guess just one question, Tim. When you think about the achieving the 10% EPS growth to the midpoint, can you sort of break down sort of the key drivers? I know you talked about volume growth quite a bit. Is that low single digits kind of half a little bit more? Maybe how much is deflation and anything else that sort of gets you to that 10%? Thank you.

Michael: Hey, guys good morning.

Michael: I guess, just one question Tim when you think about the achieving the 10% EPS growth to the midpoint can you sort of breakdown sort of the.

Laurent: We have nothing in the guide for the first quarter for this area. Our next question comes from Patrick Cunningham with Citigroup. Your line is open. Hi, good morning. Just on auto refinish, you know, it seems like there's maybe some normalization there.

Tim: A key driver as I know you talked about volume growth quite a bit is that low single digits kind of half of it a bit more maybe how much is deflation and anything else that sort of gets you to that 10%. Thank you.

Speaker: And that's supported by a call to reshoring into India or shoring into India that is just starting. Our next question comes from Lauren Favre with BNP Paribas. Your line is open, please go ahead. Yes, good morning.

Laurent: So I guess my first question is, "What's causing, you know, lower collision claims in the U.S.?" Is there anything structural you can point to, like, you know, the balance of total vehicles trending upwards? And how should we think about the outlook for refinish for the full year?

Tim: Yep. Hey, Mike. I guess we'll both have a little bit of extra time this weekend, so we won't be glued to the TV screen based on last week's results. So wish you the best for that. We'll have some, it's a number of things. We'll certainly have positive price, as I mentioned earlier. We will have higher low single digits on volume, which will bring not only the benefit of margin dropping, but we will get it.

Tim: Yep. Hey Mike. I guess we'll both have a little bit of extra time this weekend, so we won't be glued to the TV screen based on last week's results. So I wish you the best for that. We'll have some, it's a number of things. We'll certainly have a positive price, as I mentioned earlier. We will have higher low single digits on volume, which will bring not only the benefit of margin dropping, but we will get it, better leverage out of our manufacturing assets by finally starting to get positive volume. We'll have manufacturing productivity that will be a piece of that.

Speaker Change: Yeah, Hey, Mike I guess will both have a little bit of extra time. This weekend. So we won't be glued to the television screen based on last week's results. So.

Lauren Favre: In the presentation in the list... and the Red Seas. Tim, I was wondering if you could talk about, I guess, how you're looking at the risks there in terms of ability to source impact on cost. Have you seen any in terms of ability to source impact on cost? Have you seen any, and on the flip side, on the positive or potential positive, there's such a thing, could it be a reason for a bit of a restocking along the chain? Was he just not big enough as a dealer?

Speaker Change: Wish you the best for that.

Speaker Change: We will have some it's a number of things we will certainly have positive price as I mentioned earlier, we will have.

Laurent: Refinish had a good year, a record quarter, and that was off of tough comps. Claims are still down in the U.S., still down versus 2019, but we're able to achieve our results even at that level. And what I'll tell you is body shop activity is up and strong. And the only thing is most of our body shop customers have backlogs driven mostly by labor availability.

Speaker Change: Higher low single digits on volume.

Speaker Change: Which will bring not only the benefit of margin dropping but we will get.

Tim: better leverage out of our manufacturing assets by finally starting to get positive volume. We'll have manufacturing productivity that will be a piece of that. We do expect, even though it's a bit early to say what will happen on raws in the second half of the year, we do expect price net inflation to continue to be a good guy for us. We'll have manufacturing productivity that will be a good guy for us.

Speaker Change: Better leverage out of our manufacturing assets by finally, starting to get.

Tim: We do expect, even though it's a bit early to say what will happen on raws in the second half of the year, we do expect price net inflation to continue to be a good guy for us. We'll have manufacturing productivity that will be a good guy for us, and you know beyond that I just I just answered some of the enterprise growth initiatives that we talked about uh you know those things will start to some of them already started kicking in with that 150 million that I mentioned but we'll see continued momentum on those enterprise growth initiatives additionally we got cash deployment uh we haven't talked about that uh we certainly didn't talk about it we were rebuilding last year and paying down debt but that'll be another piece of the equation that uh that wasn't there last year thank you

Speaker Change: Get positive volume.

Speaker Change: We will have manufacturing productivity that will be a piece of that we do expect.

Speaker: Thank you. Hey, LeBron, it's really not been any kind anything near material to us to this point um first of all from our direct products you know paint and coatings don't do very well shipping uh shipping around the world we're mostly local for locals so minimal impact on our our direct uh products our suppliers you know we have our suppliers have plenty of capacity there's plenty of inventory upstream of us and uh our suppliers are seeing some delays uh but they're accounting for that in their um you know in their production planning and in their their logistics planning so we're not expecting any any impact to us there to the financial impact we've seen a few minor small surcharges being implemented but uh frankly to this point pretty pretty insignificant so the piece that we're watching and the reason we we listed listed it on uh on that part of our slide was um, We're not certain of the impact on customers, particularly if you think about European auto OEMs where they've got sourcing from around the world, and if they're missing any critical parts, it may impact production scheduling.

Speaker Change: Even though it's a bit early to say what will happen on raws in the second half of the year, we do expect.

Speaker Change: Price net of inflation to continue to be a good a good guy for us and beyond that I just I just answered some of the enterprise growth initiatives that we talked about those.

Tim: and you know beyond that I just I just answered some of the enterprise growth initiatives that we talked about uh you know those things will start to some of them already started kicking in with that 150 million that I mentioned but we'll see continued momentum on those enterprise growth initiatives additionally we got cash deployment uh we haven't talked about that uh we certainly didn't talk about it we were rebuilding last year and paying down debt but that'll be another piece of the equation that uh that wasn't there last year thank you

Patrick Cunningham: So even though claims are down, and we watch that closely, we're still performing. I would also add, largely because of our digital tools, we had a really good share gain last year. And even the revenue that we get.

Speaker Change: Those things will start to some of them already started kicking in with that $150 million that I mentioned, but we will see continued momentum on those enterprise growth initiatives. Additionally, we got cash deployment.

Tim Kanavish: The revenue that we get from those digital tools was up more than 100% year over year. So we feel good about that moving into this year. We've got a good order book as we sit here today. So yes, we are watching claims and miles driven. The only thing I can hypothesize is that the type of driving is maybe a bit different.

Speaker Change: We haven't talked about that.

Speaker Change: We certainly didn't talk about it as we were rebuilding last year and paying down debt, but that'll be another piece of the equation that that wasn't there last year.

Speaker Change: Yeah, and Mike, just, I think it's important, a midpoint of 10%, I think it's important, a midpoint of 10%,

Speaker Change: Yeah, and Mike, just, I think it's important, a midpoint of 10%. I think it's important, a midpoint of 10%. Our operating results are going to be better than that. We do have some tax headwinds, like most companies will have as some of the tax rates around the world move up. So we got a higher year-over-year tax rate, so operating results above 10% are modestly offset by this tax. A higher tax rate would be better.

Speaker Change: Yes.

Speaker Change: Just.

Speaker Change: I think it's important to a midpoint of 10%.

Speaker Change: Our operating results are going to be better than that. We do have some tax headwinds like most companies will have as some of the tax rates around the world move up. So we got a higher year-over-year tax rate. So operating results above 10% modestly offset by this tax.

Speaker Change: Our operating results are going to be better than that.

Speaker Change: We do have a tax.

Tim Kanavish: Most downtowns and cities are still not as crowded as they used to be. We see more crowds. We see more claims coming from suburbia than we used to. But overall, I feel positive about this business moving into the year. I'm confident in our best in class productivity and value proposition. We're winning shops.

Speaker Change: Do you have some tax headwinds like most companies will have some of the tax rates around the world move up.

Speaker Change: So we guided to a higher year over year tax rate. So operating operating results above 10% offset modestly offset by this tax a higher tax rate.

Speaker Change: A higher tax rate.

Speaker Change: Our next question comes from Lawrence Alexander with Jeff.

Speaker Change: Our next question comes from Lawrence Alexander, with Jeff.

Tim Kanavish: So I would say we expect to have another really strong year out of our refinish business. Yeah, and then regionally, you know, we expect the US and Europe to hang around zero plus or minus for the year. As we said earlier, we expect China to grow, as we see a kind of reopening on a four-year basis there. So that's the regional aspects.

Speaker Change: Our next question comes from Laurence Alexander with Jefferies. Your line is open. Please go ahead.

Laurence Alexander: Your line is open, please go ahead.

Laurence Alexander: Your line is open; please go ahead. Good morning. This is Dan Rizzo on for Lawrence. Thank you for squeezing me in. Obviously, the focus is on China for good reason. But I was just wondering where India is in terms of sales versus China, and if there's any time in the coming years where India will be kind of competing in terms of importance versus China. Hey Dan, this is John Bruno. I can take this. You know, most people know India is going to be one of the best economies in the world in 2023. We have a really good position there. We have a JV with Asia Paints. Our sales growth was circa 10% in 2023, and we expect continued good growth in 2024.

Laurence Alexander: Good morning. This is Dan Rizzo on for Lawrence. Thank you for squeezing me in. Obviously, the focus is on China for good reason. But I was just wondering if what India is in terms of sales versus China, and if there's any time in the coming years where India will be kind of competing in terms of importance versus China.

Speaker: We have seen none of that so far, but that's really the piece we're watching, more of our customer impact than any internal impact. Here, restocking, maybe, but I doubt that we'll see any significant inventory build of paints and coatings as a result of this. I think it'll be more a movement of inventories upstream of us and how our suppliers deal with their own logistics planning, but again, the fact that they're pretty long right now, we're not expecting any issues. And Laurent, just to put numbers to it, you know, typically the average delay due to not going through the Red Sea is about 10 to 12 days. So certainly plan, we can plan for that in our raw material purchase. And Laurent, one more for me.

Speaker Change: Good morning. This is Dan Rizzo on for Laurence. Thank you for squeezing me in.

Dan Rizzo: Obviously, the focus is on China for good reason, but I was just wondering if what India is it in terms of sales versus China and if there is any time in the coming years, where India will be kind of competing in terms of importance.

Speaker Change: Versus China.

Tim Knabich: And just again, to hit on Tim's comment about our digital tools. These are tools we think are best in class. We have Body Shop productivity, focus on those tools, and those are a subscription model for us that didn't exist three or four years ago.

Speaker Change: Hey, Dan This is John Bruno I can take this.

Laurence Alexander: Hey Dan, this is John Bruno. I can take this. You know, most people know India's been one of the best economies in the world in 2023. We have a really good position there. We have JV with Asia Paints. Our sales growth was circa 10% in 2023, and we expect continued good growth in 2024. Yeah, we, our partnership with Asian Paints in India

John Bruno: Most people know India has been one of the best economies in the World in 2023, we have a really good position there we had JV with Asia paints.

John Bruno: Our sales growth was circa 10% in 2023, and we expect continued good growth in 2024.

Tim Knabich: Our next question comes from Michael Sisson with Wells Fargo. Your line is open, please go ahead. Hey guys, good morning.

Laurence Alexander: We, in our partnership with Asian Paints in India,

John Bruno: <unk>.

John Bruno: Our partnership with the Asian paints in India.

Tim: I guess just one question, Tim. When you think about achieving the 10% EPS growth to the midpoint, can you sort of break down sort of the key drivers? I know you talked about volume growth quite a bit. Is that low single digits kind of half a little bit more?

John Bruno: is fantastic and continues to perform very well and, you know, across the same segments that were really strong in the rest of the world, which are doing well over there, automotive OEM, automotive refinish, industrial coatings, protective coatings. So, that partnership is really world-class and helps us take our global technology advantage solutions to someone and partner with someone that's, you know, best in class within India. And so, it's a really good story for us, not only in 2023, but going forward. And again, going forward, as I alluded to earlier, again, there's a multitude of industries that are establishing or expanding their footprint in India, electronics.

John Bruno: is fantastic and continues to perform very well and, you know, across the same segments that were really strong in the rest of the world, which are doing well over there, automotive OEM, automotive refinish, industrial coatings, and protective coatings. So, that partnership is really world-class and helps us take our global technology advantage solutions to someone and partner with someone that's, you know, best in class within India. And so, it's a really good story for us, not only in 2023 but going forward. And again, going forward, as I alluded to earlier, again, there's a multitude of industries that are establishing or expanding their footprint in India, electronics, automotive, some aerospace, so again, a multitude of global industries that are expanding their footprint you

John Bruno: Is fantastic and continues to perform very well.

Speaker: We have nothing in the guide for the first quarter for this area. Our next question comes from Patrick Cunningham with Citigroup. Your line is open. Hi, good morning. Just on auto refinish, you know, it seems like there's maybe some normalization there.

John Bruno: Okay.

John Bruno: Cross across the same segments that were really strong in the rest of the world, which are doing well over there automotive OEM automotive refinish industrial coatings protective coatings. So.

Tim Knabich: Maybe how much is deflation and anything else that sort of gets you to that 10%? Thank you. Yeah, Mike. I guess we'll both have a little bit of extra time this weekend, so we won't be glued to the TV screen based on last week's results.

John Bruno: That partnership is really world class and helps us take our global technology advantage solutions to someone and partner with someone that's best in class within India and so it's a really good story for us not only in 2023, but going forward.

Patrick Cunningham: So I guess my first question is, "What's causing, you know, lower collision claims in the U.S.?" Is there anything structural you can point to, like, you know, the balance of total vehicles trending upwards? And how should we think about the outlook for refinish for the full year?

Tim Knabich: So I wish you the best for that. We'll have some; there are a number of things. We'll certainly have a positive price, as I mentioned earlier. We will have higher low single digits on volume, which will bring not only the benefit of margin dropping, but we will get it, better leverage out of our manufacturing assets by finally starting to get positive volume. We'll have manufacturing productivity that will be a piece of that. We do expect, even though it's a bit early to say what will happen with raw materials in the second half of the year, we do expect price net inflation to continue to be a good friend for us. We'll have manufacturing productivity, that will be a good guy for us, and you know beyond that, I just answered some of the enterprise growth initiatives that we talked about, uh, those things will start to, some of them have already started kicking in with that 150 million that I mentioned, but we'll see continued momentum on those enterprise growth initiatives. Additionally, we got cash deployment, which we haven't talked about, uh, we certainly didn We do have some tax headwinds, like most companies will have as some of the tax rates around the world move up. So we got a higher year-over-year tax rate. So operating results above 10% are modestly offset by this tax. A higher tax rate would be better.

John Bruno: Again going forward as I alluded to earlier and again Theres a multitude of industries that are establishing or expanding their footprint in India electronics automotive Sameer.

Speaker: Refinish had a good year, a record quarter, and that was off of tough comps. Claims are still down in the U.S., still down versus 2019, but we're able to achieve our results even at that level. And what I'll tell you is body shop activity is up and strong. And the only thing is most of our body shop customers have backlogs driven mostly by labor availability.

John Bruno: automotive some aerospace so again a multitude of global industries that are expanding their footprint you

John Bruno: Some aerospace.

Speaker Change: So again, a multitude of global industries that are.

Speaker Change: Spanning their footprint.

Speaker Change: Yes.

Speaker Change: Our next question comes from Arun Viswanathan with RBC. Your line is open. Please go ahead.

Speaker Change: Next question comes from Arun Viswanathan with RBC. Your line is open, please go ahead.

Speaker Change: The next question comes from Arun Viswanathan with RBC. Your line is open, please go ahead.

Arun Viswanathan: Great. Thanks for taking my question.

Arun Viswanathan: Great, thank you.

Arun Viswanathan: Uh,

Arun Viswanathan: Congrats on the strong results in 2003 so.

Arun Viswanathan: Congrats on the strong results in 23. So just a question on the guidance.

Arun Viswanathan: Congratulations on the strong results in 23. So just a question on the guidance.

Arun Viswanathan: A question on the guidance so.

Arun Viswanathan: If I look at the sales guidance, it looks like you are

Arun Viswanathan: If I look at the sales guidance. It looks like you are hoping to get to low single digit organic growth in 2024.

Speaker Change: Thank you for joining us.

Speaker: So even though claims are down, and we watch that closely, we're still performing. I would also add, largely because of our digital tools, we had a really good share gain last year. And even the revenue that we get.

Arun Viswanathan: Just wanted to confirm that that would be also including low single digit volumes and if so.

Arun Viswanathan: How do you see that kind of playing out cadence wise through the quarters that youre guiding to flat volume Q1, you get to maybe 2% to 3% in Q2, and then mid single digits in the back half and similarly on the earnings growth Bridge.

Speaker: The revenue that we get from those digital tools was up more than 100% year over year. So we feel good about that moving into this year. We've got a good order book as we sit here today. So yes, we are watching claims and miles driven. The only thing I can hypothesize is that the type of driving is maybe a bit different.

Speaker Change: And similarly, on the earnings growth bridge, you know, your guidance kind of implies 1% growth EPS in Q1. So, that would kind of require, you know, low double digits in Q2 through Q4, maybe something on the order of 13%. Is that is that the right way to think about it? That really some of these one time items in Q1 holds back your growth and you get more into the little things.

Speaker Change: And similarly, on the earnings growth bridge, you know, your guidance kind of implies 1% growth in EPS in Q1. So, that would kind of require, you know, low double digits in Q2 through Q4, maybe something on the order of 13%. Is that the right way to think about it? That really some of these one-time items in Q1 hold back your growth, and you get more into the little things.

Arun Viswanathan: Your guidance kind of implies.

Arun Viswanathan: The 1% growth EPS in Q1.

Arun Viswanathan: So that would kind of require.

Arun Viswanathan: Yes, low double digits.

Arun Viswanathan: Q2 <unk>.

Arun Viswanathan: Q4, maybe something on the order of 13%.

Speaker: Most downtowns and cities are still not as crowded as they used to be. We see more crowds. We see more claims coming from suburbia than we used to. But overall, I feel positive about this business moving into the year. I'm confident in our best in class productivity and value proposition. We're winning shops.

Arun Viswanathan: Is that is that the right way to think about it.

Arun Viswanathan: Really some of these onetime items in Q1 holds back your growth and you get more into the low single digits to mid single digits on sales Q2 to Q3.

Speaker Change: Dave Begleiter

Dave Begleiter: Thank you for and.

Dave Begleiter: Thank you for and. Low and double digits to mid.

Arun Viswanathan: Q4, and maybe low double digits to mid teens, Q <unk> Q2 through Q4 EPS growth.

Dave Begleiter: Low and double digits to mid.

Dave Begleiter: Q2 through Q4 on EPS growth.

Speaker: So I would say we expect to have another really strong year out of our refinish business. Yeah, and then regionally, we expect the U.S. and Europe to hang around zero plus or minus for the year. As we said earlier, we expect China to grow as we see kind of a reopening on a full year basis there. So those are the regional aspects.

Speaker Change: I think the math you have Arun is definitely accurate and we talked a lot on the call already about factors that affect Q1 some comp some comparable factors last year etc you know again we're a seasonal business for us Q2 and Q3 are very large quarters for our deco architectural businesses they're very large even larger for our traffic businesses so again we'll see a pickup in those businesses seasonally but we're also expecting some different volume tenor than we had last year in those businesses Tim went through I think a laundry list of items earlier that included the leverage on those higher volumes we also would expect improved manufacturing that we've been working on and we alluded to in our May CEO update that manufacturing should grow throughout the year so again I definitely agree that Q1 on a year-over-year basis you know up modestly but the back half of the year we expect to grow in terms of size

Speaker Change: I think the math you have Arun is definitely accurate.

<unk> talked a lot on the call already about factors that affect Q1, some comp some comparable factors last year et cetera.

Tim Knabich: Our next question comes from Lawrence Alexander with Jeff. Your line is open, please go ahead. Good morning. This is Dan Rizzo on behalf of Lawrence.

Again, we're a seasonal business for US Q2, and Q3 are very large quarters for our deco architectural businesses, they're very large even larger for our traffic businesses. So again, we will see a pickup in those businesses.

Tim Knabich: Thank you for squeezing me in. Obviously, the focus is on China for good reason. But I was just wondering where India is in terms of sales versus China, and if there's any time in the coming years where India will be kind of competing in terms of importance versus China. Hey Dan, this is John Bruno.

Speaker: And just again, to hit on Tim's comment about our digital tools, these are tools we think are best in class. We have Body Shop productivity, focus on those tools, and those are a support for us. A subscription model for us that didn't exist three or four years ago.

Speaker Change: Seasonally but we're also expecting some some different volume tenor than we had last year in those businesses.

Speaker: Our next question comes from Michael Sisson with Wells Fargo. Your line is open, please go ahead. Hey guys, good morning.

Speaker Change: Tim went through I think.

John Bruno: I can take this. You know, most people know India will be one of the best economies in the world in 2023. We have a really good position there. We have a JV with Asia Paints. Our sales growth was circa 10% in 2023, and we expect continued good growth in 2024. Yeah, our partnership with Asian Paints in India is fantastic and continues to perform very well across the same segments that were really strong in the rest of the world, which are doing well over there, automotive OEM, automotive refinish, industrial coatings, protective coatings.

Speaker Change: A laundry list of items earlier.

That included the leverage on that on those higher volumes.

Speaker Change: We also would expect improved manufacturing that we've been working on and we alluded to in our May.

Michael Sisson: I guess just one question, Tim. When you think about achieving the 10% EPS growth to the midpoint, can you sort of break down sort of the key drivers? I know you talked about volume growth quite a bit. Is that low single digits kind of half a little bit more?

Speaker Change: Update.

Speaker Change: Manufacturing should grow throughout the year. So again I definitely agree that Q1 on a year over year basis.

Speaker Change: Modestly, but the back half of the year, we expect to grow.

Speaker: Maybe how much is deflation and anything else that sort of gets you to that 10%? Thank you. Yeah, Mike. I guess we'll both have a little bit of extra time this weekend, so we won't be glued to the TV screen based on last week's results.

In terms of our size.

Speaker Change: Thank you for watching!

Speaker Change: Our next question comes from Aaron Ciaccarelli with Berenberg. Your line is open, please go ahead.

Speaker Change: Our next question comes from Aaron <unk> with Bahrenburg. Your line is open. Please go ahead.

John Bruno: So, that partnership is really world-class and helps us take our global technology advantage solutions to someone and partner with someone that's, you know, best in class within India. And so, it's a really good story for us, not only in 2023 but going forward. And again, going forward, as I alluded to earlier, again, there's a multitude of industries that are establishing or expanding their footprint in India, electronics, automotive, some aerospace, so again, a multitude of global industries that are expanding their footprint you. The next question comes from Arun Viswanathan with RBC.

Aaron Ciaccarelli: Thanks and good morning. I would like to go back to the topic of raw materials cost for a second. Your guidance has been improving throughout 2023, you were guiding down high single digit

Aaron Ciaccarelli: Thanks and good morning. I would like to go back to the topic of raw materials costs for a second. Your guidance has been improving throughout 2023; you were guiding down high single-digit inflationary So why are you guiding just for mid-single-digit declines? What has changed, if anything? Because when I look at gross margin, it expanded by 450 basis points here already in Q4. It looks to me like this is accelerating. So what is driving this mid-single digit guidance for Q4? I think, as we alluded to earlier, we do expect sequential improvement in the moderation of raw materials from Q4 to Q1. The mix of business for us as we build inventories and we deplete inventories in Q4, we're building inventories in Q1, so that has a factor. But again, for the full year, we still expect moderation, further moderation of raw materials for the full year, 2024 versus 2023.

Speaker: So I wish you the best for that. We'll have some; there are a number of things. We'll certainly have a positive price, as I mentioned earlier. We will have higher low single digits on volume, which will bring not only the benefit of margin dropping, but we will get it, better leverage out of our manufacturing assets by finally starting to get positive volume. We'll have manufacturing productivity that will be a piece of that. We do expect, even though it's a bit early to say what will happen with raw materials in the second half of the year, we do expect price net inflation to continue to be a good friend for us. We'll have manufacturing productivity, that will be a good guy for us, and you know beyond that, I just answered some of the enterprise growth initiatives that we talked about, uh, those things will start to, some of them have already started kicking in with that 150 million that I mentioned, but we'll see continued momentum on those enterprise growth initiatives. Additionally, we got cash deployment, which we haven't talked about, uh, we certainly didn We do have some tax headwinds, like most companies will have as some of the tax rates around the world move up. So we got a higher year-over-year tax rate. So operating results above 10% are modestly offset by this tax. A higher tax rate would be better.

Aaron: Thanks, and good morning, I would like to go back to the topic of raw material cost for a second.

Aaron: Your guidance has been improving throughout 2023.

Aaron: We're guiding down high single digits in Q3 to Q4, when I look at Q1 2023 euro materials costs were still slightly.

Aaron Ciaccarelli: Inflationary

Aaron: Stationary. So why are you guiding just for mid single digit decline now.

Aaron Ciaccarelli: So why are you guiding just for mid-single-digit declines?

Aaron Ciaccarelli: What has changed, if anything? Because when I look at gross margin, it expanded 450 basis points here already in Q4. It looks to me this is accelerating. So what is driving this mid-single digit guidance for Q4?

Aaron: What's changed if anything because when I look at gross margin. It expanded 450 basis points you had already in Q4. It looks to me. This is accelerating so what's driving this mid single digit guidance for Q1. Please thank you.

Aaron Ciaccarelli: I think as we alluded to earlier, we do expect sequential improvement in the moderation of raw materials, Q4 to Q1. The mix of business for us as we build inventories, and we deplete inventories in Q4, we're building inventories in Q1, so that has a factor. But again, for the full year, we still expect moderation, further moderation of raw materials for the full year, 2024 versus 2023.

Aaron: I think as we alluded to earlier, we do expect sequential improvement.

John Bruno: Your line is open. Please go ahead. Great, thank you. Uh, congratulations on the strong results in 23. So just a question on the guidance. If I look at the sales guidance, it looks like you are. We talked about that little problem that was taking great efforts to get to low single-digit organic growth in 2024. Just wanted to confirm that that would also include low single-digit volumes. And if so, how do you see that kind of playing out cadence-wise through the former?

Aaron: Improvement in the moderation of raw materials Q4 to Q1.

Aaron: The mix of business for us as we build inventories were depleted inventories in Q4 were building inventories in Q1, so that has a factor, but again for the full year, we still expect moderation further moderation of raw materials for the full year 2024 versus 2023.

Aaron: Yes.

Speaker Change: Our final question today comes from J D <unk> with on field investment Research. Your line is open. Please go ahead.

Speaker Change: The final question today comes from J.D. Pandya with Onfield Investment Research.

John Bruno: As you're guiding the flat volume in Q1, you get to maybe two to 3% in Q2, And similarly, on the earnings growth bridge, your guidance kind of implies 1% growth in EPS in Q1. So, that would kind of require, you know, low double digits in Q2 through Q4, maybe something on the order of 13%. Is that the right way to think about it? That really some of these one-time items in Q1 hold back your growth, and you get more into the little things. Dave Begleiter, Thank you for and. Low and double digits to mid.

J.D. Pandya: Your line is open, please go ahead.

J.D. Pandya: Your line is open, please go ahead. Thanks. Maybe it's not relevant, but given how low volumes are across the value chain, could you tell us, like, what is the spare capacity you have? I'm basically asking this question because a lot of investors are wondering, you know, is there margin growth left in the coding sector beyond 2024? And given that it looks like in 25, 26, growth will come from volume, just wondering, you know, what is the spare capacity you have in the system these days? That's my first question. The second question is really around raw materials.

J.D. Pandya: Thanks. Maybe it's not relevant, but given how low volumes are across the value chain, could you tell us like, what is the spare capacity you have? I'm basically asking this question because a lot of investors are wondering, you know, is there margin growth left in the coding sector beyond 2024? And given that it looks like in 25, 26, growth will come from volume, just wondering, you know, what is the spare capacity you have in the system these days? That's my first question. The second question is really around raw materials. Do you expect to buy in sync with your volume growth this year, or would you still destock? And therefore, if your volume growth is, let's say, up two, we shouldn't really expect raw material purchasing to be up two. It should be maybe zero. And the last question really is on marine protection.

Dan Rizzo: We leased not relevant but given how low volumes are across the value chain could you tell us like what is the static capacity you have basically asking this question because a lot of investors are wondering.

Dan Rizzo: Is the margin growth left in the clothing sector beyond 2024, and given that it looks like in 'twenty five 'twenty six growth will come from volume just wondering what is the spare capacity you have in the system. These days. That's my first question second question is really around raw materials.

J.D. Pandya: Do you expect to buy in sync with your volume growth this year, or would you still destock? And therefore, if your volume growth is, let's say, up two, we shouldn't really expect raw material purchasing to be up two. It should be maybe zero. And the last question really is about marine protection.

Dan Rizzo: Do you expect to buy in sync with your volume growth this year or would you still destock and therefore, if your volume growth is let's say up to <unk>.

Dan Rizzo: Shouldn't really expect raw material purchasing can be up to we should be maybe and the last question really is on marine protective.

Speaker: Our next question comes from Lawrence Alexander with Jeff. Your line is open, please go ahead. Good morning. This is Dan Rizzo on behalf of Lawrence.

Tim Knabich: Q2 through Q4 on EPS growth. I think the math you have Arun is definitely accurate and we talked a lot on the call already about factors that affect Q1 some comp some comparable factors last year etc you know again we're a seasonal business for us Q2 and Q3 are very large quarters for our deco architectural businesses they're very large even larger for our traffic businesses so again we'll see a pickup in those businesses seasonally but we're also expecting some different volume tenor than we had last year in those businesses Tim went through I think a laundry list of items earlier that included the leverage on those higher volumes we also would expect improved manufacturing that we've been working on and we alluded to in our May CEO update that manufacturing should grow throughout the year so again I definitely agree that Q1 on a year-over-year basis you know up modestly but the back half of the year we expect to grow in terms of size, Thank you for watching! Our next question comes from Aaron Ciaccarelli with Berenberg. Your line is open, please go ahead. Thanks and good morning.

J.D. Pandya: You alluded to, you know, firefighting protection.

J.D. Pandya: You alluded to, you know, firefighting protection; now, one of your competitors is very strong in that area, so have you launched new products and, therefore, gained share from that competitor, or is the market just doing very well? Okay, let me take those on, Jay Deep. It's Tim.

Dan Rizzo: Alluded to.

Dan Rizzo: Fighting protective.

J.D. Pandya: now one of your competitors is very strong in that area so have you launched new products and therefore gaining share from that competitor or is that the market is just doing very well?

Dan Rizzo: Now one of your competitors is very strong in that area. So have you launched new products and therefore, gaining share from that competitor or is that the market is just doing very well. Thanks a lot.

Laurence Alexander: Thank you for squeezing me in. Obviously, the focus is on China for good reason. But I was just wondering where India is in terms of sales versus China, and if there's any time in the coming years where India will be kind of competing in terms of importance versus China. Hey Dan, this is John Bruno.

Speaker Change: Okay, Let me take those on J deep it's Tim.

J.D. Pandya: Okay, let me take those on, Jay Deep. It's Tim.

Tim: First of all, capacity, we got plenty of capacity. We have capacity, you know, volumes are still down significantly versus 2019. And, you know, we haven't taken capacity out since 2019. And frankly, I would say our industry peers and certainly our suppliers, there's capacity. So, yes, you're exactly right. You should expect that as volume comes up, certainly we will get leverage from that volume, which will drop as margin improvement, um second question raw materials and inventories uh we we do still have probably a few days higher doi that we would like to have 100 150 million dollars more raw material inventory than we would like to have so yet we will be buying raw materials in q1 as we get ready for the peak paint season and some of them are more seasonal businesses but maybe a little bit less than what uh with links to directly uh to demand because of that uh excess uh that we're sitting on today and finally on marine and protective uh the the quick answer is yes we have launched some new products new technologies recently in the fire protection area uh that uh that are quite strong and being well received by the market uh for hydrocarbon fire protection it's a product called pit char nx uh that are quite strong and being well received by the market uh for hydrocarbon fire protection it's a product called pit char which is being very well received and on the cellulosic fire protection side a product called steel guard 651 which is also being very well received so those new technologies are delivering share gain for us but separate from fire protection we've got really a fantastic product on the marine dry dock side that's very sustainable very fuel efficient and drives it's really getting really good market receptivity and we've got a lot of share gains that'll be will reap the benefits of those share gains in 2024 and beyond and that's a product called Sigma Glide so it is technology driven in those spaces. and that's a product called Sigma Glide so it is technology driven in those spaces.

Speaker Change: First of all capacity, we got plenty of capacity we have capacity.

Speaker Change: <unk> are still down significantly versus 2019.

Speaker Change: And yes, we haven't taken capacity out since 2019, and frankly I would say.

<unk> <unk>.

Speaker Change: Industry peers, and certainly our suppliers there's capacity so yes, youre exactly right you should expect that is as volume comes up.

Speaker Change: Certainly we will get leverage from that volume, which we will.

Speaker Change: Which will drop as margin margin improvement.

Tim: um second question raw materials and inventories uh we we do still have probably a few days higher doi that we would like to have 100 150 million dollars more raw material inventory than we would like to have so yet we will be buying raw materials in q1 as we get ready for the peak paint season and some of them are more seasonal businesses but maybe a little bit less than what uh with links to directly uh to demand because of that uh excess uh that we're sitting on today and finally on marine and protective uh the the quick answer is yes we have launched some new products new technologies recently in the fire protection area uh that uh that are quite strong and being well received by the market uh for hydrocarbon fire protection it's a product called pit char nx uh that are quite strong and being well received by the market uh for hydrocarbon fire protection it's a product called pit char

Speaker Change: Second question raw materials and inventories.

Speaker Change: We do still have probably a few days higher DIY that we would like to have 100 $150 million more raw material inventory than we would like to have so yes, we will be buying raw materials in Q1, as we get ready for the peak paint season on some.

Tim Knabich: I would like to go back to the topic of raw materials cost for a second. Your guidance has been improving throughout 2023. You were guiding down high single-digits for inflationary, so why are you guiding just for mid-single-digit declines? What has changed, if anything? Because when I look at gross margin, it expanded 450 basis points here already in Q4. It looks to me this is accelerating.

Speaker: So, that partnership is really world-class and helps us take our global technology advantage solutions to someone and partner with someone that's, you know, best in class within India. And so, it's a really good story for us, not only in 2023 but going forward. And again, going forward, as I alluded to earlier, again, there's a multitude of industries that are establishing or expanding their footprint in India, electronics, automotive, some aerospace, so again, a multitude of global industries that are expanding their footprint you. The next question comes from Arun Viswanathan with RBC.

Our more seasonal businesses, but maybe a little bit less than what with links directly to demand because of that.

Speaker Change: Excess that we're sitting on today.

Arun Ciaccarelli: So what is driving this mid-single digit guidance for Q4? I think, as we alluded to earlier, we do expect sequential improvement in the moderation of raw materials, Q4 to Q1. The mix of business for us, as we build inventories, and we deplete inventories in Q4, we're building inventories in Q1, so that has a factor.

Speaker Change: Finally on marine and protective.

Speaker Change: The quick answer is yes, we have launched some new products New technologies recently in the fire protection area.

Speaker Change: That are quite strong and being well received by the market for hydrocarbon fire protection is a product called pitch our nx.

Tim: which is being very well received and on the cellulosic fire protection side a product called steel guard 651 which is also being very well received so those new technologies are delivering share gain for us but separate from fire protection we've got really a fantastic product on the marine dry dock side that's very sustainable very fuel efficient and drives it's really getting really good market receptivity and we've got a lot of share gains that'll be will reap the benefits of those share gains in 2024 and beyond and that's a product called Sigma Glide so it is technology driven in those spaces. and that's a product called Sigma Glide so it is technology driven in those spaces.

Speaker Change: Which is being very well received and on the Cellulosic fire protection side, a product called steel guard $6 51, which is also being very well received so those new technologies are delivering share gain share gain for us but.

Arun Ciaccarelli: But again, for the full year, we still expect moderation, further moderation of raw materials for the full year, 2024 versus 2023. The final question today comes from J.D. Pandya with Onfield Investment Research. Your line is open, please go ahead.

Arun Viswanathan: Your line is open, please go ahead. Great, thank you. Uh, congratulations on the strong results in 23.

Speaker: So just a question on the guidance. If I look at the sales guidance, it looks like you are. Thank you so much for joining us. And similarly, on the earnings growth bridge, you know, your guidance kind of implies 1% growth in EPS in Q1. So, that would kind of require, you know, low double digits in Q2 through Q4, maybe something on the order of 13%. Is that the right way to think about it?

Speaker Change: Separate from fire protection, we've got really a fantastic product on the marine dry dock side, it's very sustainable very fuel efficient and drives it's really getting really good market receptivity and we've got a lot of share gains it will be.

J.D. Pandya: Thanks. Maybe it's not relevant, but given how low volumes are across the value chain, could you tell us, like, what is the spare capacity you have? I'm basically asking this question because a lot of investors are wondering, you know, is there margin growth left in the coding sector beyond 2024? And given that it looks like in 25, 26, growth will come from volume, just wondering, you know, what is the spare capacity you have in the system these days? That's my first question. The second question is really about raw materials.

Speaker Change: We will reap the benefits of those share gains in 2024, and beyond and Thats a product called Sigma glide. So it is technology driven in those spaces.

Speaker: That really some of these one time items in Q1 holds back your growth and you get more into the little things. Dave Begleiter, Thank you for and, low and double digits to mid. Q2 through Q4 on EPS growth. I think the math you have Arun is definitely accurate and we talked a lot on the call already about factors that affect Q1 some comp some comparable factors last year etc you know again we're a seasonal business for us Q2 and Q3 are very large quarters for our deco architectural businesses they're very large even larger for our traffic businesses so again we'll see a pickup in those businesses seasonally but we're also expecting some different volume tenor than we had last year in those businesses Tim went through I think a laundry list of items earlier that included the leverage on those higher volumes we also would expect improved manufacturing that we've been working on and we alluded to in our May CEO update that manufacturing should grow throughout the year so again I definitely agree that Q1 on a year-over-year basis you know up modestly but the back half of the year we expect to grow in terms of size, Thank you for watching! Our next question comes from Aaron Ciaccarelli with Berenberg. Your line is open, please go ahead. Thanks and good morning.

Speaker Change: There are no further questions at this time. I'll now firmly call back over to Jonathan. Thank you, Jonathan.

Speaker Change: There are no further questions at this time I will now turn the call back over to Jonathan Edwards.

Jonathan Edwards: Thank you Elliot while done today, we appreciate your interest in comprehensive PPG and this concludes our fourth quarter earnings call have a good day.

Jonathan Edwards: Thank you, Elliot. Well done today. We appreciate your interest and confidence in PPG, and this concludes our fourth quarter earnings.

Speaker Change: Have a good day.

Speaker Change: Have a good day!

Jonathan Edwards: <unk>.

Speaker Change: This concludes today's conference call. You may now disconnect.

Speaker Change: This concludes today's conference call you may now disconnect.

Speaker Change: And this concludes our fourth quarter turning.

Speaker Change: And this concludes our fourth quarter turn.

Speaker Change: And this concludes our fourth quarter earnings.

J.D. Pandya: And the last question really is on marine protection. You alluded to, you know, firefighting protection. Now, one of your competitors is very strong in that area, so have you launched new products and therefore gained share from that competitor, or is the market just doing very well? Okay, let me take those on, Jay Deep. It's Tim.

Aaron Ciaccarelli: I would like to go back to the topic of raw materials cost for a second. Your guidance has been improving throughout 2023; you were guiding down high single-digits for Questionaries? So why are you guiding just for mid-single-digit declines? What has changed, if anything? Because when I look at gross margin, it expanded by 450 basis points here already in Q4. It looks to me like this is accelerating. So what is driving this mid-fingal digit guidance forward?

Speaker: I think, as we alluded to earlier, we do expect sequential improvement in the moderation of raw materials, Q4 to Q1. The mix of business for us, as we build inventories, and we deplete inventories in Q4, we're building inventories in Q1, so that has a factor. But again, for the full year, we still expect moderation, further moderation of raw materials for the full year, 2024 versus 2023. The final question today comes from J.D. Pandya with Onfield Investment Research. Your line is open; please go ahead.

Jonathan Edwards: There are no further questions at this time. I'll now firmly call back over to Jonathan. Thank you, Jonathan. Thank you, Elliot. Well done today. We appreciate your interest and confidence in PPG, and this concludes our fourth quarter earnings. Have a good day. This concludes today's conference call. You may now disconnect. Thanks for watching! And this concludes our fourth quarter earnings presentation.

Speaker: Do you expect to buy in sync with your volume growth this year, or would you still destock? And therefore, if your volume growth is, let's say, up two, we shouldn't really expect raw material purchasing to be up two. It should be, maybe, zero.

Speaker: And the last question really is on marine protection. You alluded to, you know, firefighting protection. Now, one of your competitors is very strong in that area, so have you launched new products and therefore gained share from that competitor, or is the market just doing very well? Okay, let me take those on, Jay Deep. It's Tim.

Speaker: First of all, capacity, we got plenty of capacity. We have capacity, you know, volumes are still down significantly versus 2019. And, you know, we haven't taken capacity out since 2019. And frankly, I would say our industry peers and certainly our suppliers, there's capacity. So, yes, you're exactly right. You should expect that as volume comes up, certainly we will get leverage from that volume, which will drop as margin improvement, um second question raw materials and inventories uh we we do still have probably a few days higher doi that we would like to have 100 150 million dollars more raw material inventory than we would like to have so yet we will be buying raw materials in q1 as we get ready for the peak paint season and some of them are more seasonal businesses but maybe a little bit less than what uh with links to directly uh to demand because of that uh excess uh that we're sitting on today and finally on marine and protective uh the the quick answer is yes we have launched some new products new technologies recently in the fire protection area uh that uh that are quite strong and being well received by the market uh for hydrocarbon fire protection it's a product called pit char nx uh that are quite strong and being well received by the market uh for hydrocarbon fire protection it's a product called pit char which is being very well received and on the cellulosic fire protection side a product called steel guard 651 which is also being very well received so those new technologies are delivering share gain for us but separate from fire protection we've got really a fantastic product on the marine dry dock side that's very sustainable very fuel efficient and drives it's really getting really good market receptivity and we've got a lot of share gains that'll be will reap the benefits of those share gains in 2024 and beyond and that's a product called Sigma Glide so it is technology driven in those spaces. and that's a product called Sigma Glide so it is technology driven in those spaces.

Speaker: There are no further questions at this time. I'll now firmly call back over to Jonathan. Thank you, Jonathan. Thank you, Elliot. Well done today. We appreciate your interest and confidence in PPG, and this concludes our fourth quarter earnings. Have a good day. This concludes today's conference call. You may now disconnect. Thanks for watching! And this concludes our fourth quarter earnings presentation.

Q4 2023 PPG Industries Inc Earnings Call

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