Q1 2024 PPG Industries Inc Earnings Call

Good morning.

Angela: My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter PPG earnings conference call. All lines have been placed on mute to prevent any background noise.

Angela: My name is Angela and I will be your conference operator today at this time I would like to welcome everyone to the first quarter <unk> earnings Conference call.

Angela: All lines have been placed on mute to prevent any background noise. After just speakers remarks, there will be a question and answer section.

Angela: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star below by the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. To allow everyone an opportunity to ask a question, the company requests that each analyst ask only one question. Thank you. I would now like to turn the conference over to Jonathan Edwards, Director of Investor Relations. Please go ahead, Sam. Thank you, Angela, and good morning, everyone. This is Jonathan Edwards.

Angela: If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to draw. Your question press the pound key to allow everyone an opportunity to ask a question. The company requests that each analyst to ask only one question. Thank you I would now like to turn the call.

Angela: Prince of Ritchie, Jonathan Edwards Director of Investor Relations. Please go ahead Sir.

Angela: Thank you Angela and good morning, everyone. This is Jonathan Edwards. We appreciate your continued interest in PPG and welcome you to our first quarter 2024 financial results conference call joining.

Jonathan Edwards: We appreciate your continued interest in PPG and welcome you to our first quarter 2024 Financial Results Conference Call. Joining me on the call from PPG are Tim Knavish, Chairman and Chief Executive Officer, and Vince Morales, Senior Vice President and Chief Financial Officer. Our comments relate to the financial information released after U.S. equity markets closed on Thursday, April 18, 2024. We have posted detailed commentary and accompanying presentation slides on the Investor Center of our website, ppg.com. These slides are also available on the webcast site for this call and provide additional support for the opening comments Tim will make shortly.

Jonathan Edwards: Joining me on the call from PPG are Timken, Davis, Chairman and Chief Executive Officer, and Vince morale as senior Vice President and Chief Financial Officer, our comments relate to the financial information released after U S equity markets closed on Thursday April 18 2024.

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

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

Jonathan Edwards: Following management's perspective on the company's results for the quarter, we will move to a Q&A session. Both the prepared commentary and discussion during this call may contain forward-looking statements reflecting the company's current view of future events and their potential effect on PPG's operating and financial performance. These statements involve uncertainties and risks, which may cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements.

Speaker Change: Following management's perspective on the company's results for the quarter, 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. 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. The presentation also contains certain non-GAAP financial measures.

Jonathan Edwards: 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. For additional information, please refer to PPG's filings with the SEC. Now, Jonathan, and good morning, everyone.

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: For additional information please refer to Ppg's filings with the SEC.

Speaker Change: Now, let me introduce PPG, chairman and CEO, Tim can knavish. Thank.

Timothy M. Knavish: Thank you Jonathan and good morning, everyone. Welcome to our first quarter 2024 earnings call I'd like to start by providing a few highlights on our first quarter 2024 financial performance and then I'll move to our outlook.

Timothy M. Knavish: Welcome to our first quarter 2024 earnings call. I'd like to start by providing a few highlights on our first quarter 2024 financial performance. And then I'll move to our outlook. The PPG team delivered sales of $4.3 billion, a solid sales performance despite a very challenging macro environment, and we delivered our sixth consecutive quarter of year-over-year segment margin increases. This culminated in first quarter adjusted earnings per diluted share of $1.86, which is two cents above the midpoint of the range that we provided in January.

Timothy M. Knavish: The PPG team delivered sales of $4 $3 billion, a solid sales performance. Despite a very challenging macro environment and we delivered our sixth consecutive quarter of year over year segment margin increases.

Timothy M. Knavish: This culminated in first quarter adjusted earnings per diluted share of $1 86, which is <unk> <unk> above the midpoint of the range that we provided in January.

Timothy M. Knavish: This was also the second best Q1 adjusted EPS in the company's history, falling just two cents short of the record achieved during the early COVID surge in house paint sales. Our first quarter adjusted EPS was once again up year over year with moderating input costs and improving manufacturing performance mitigated by lower sales volumes and higher wage and benefit costs. As we indicated in January, we had a large customer win last year at Walmart, and a significant portion of lower volumes year over year was driven by this prior year $40 million load in. We're also impacted by lower demand in Europe, including the effect of fewer selling days in March stemming from an early Easter holiday this year. We also experience ongoing, tepid global industrial production.

Timothy M. Knavish: This was also our second best Q1, adjusted EPS in the company's history falling just short of the record achieved during the early COVID-19 surge in house paint sales.

Timothy M. Knavish: Our first quarter adjusted EPS was once again up year over year with moderating input costs and improving manufacturing performance mitigated by lower sales volumes and higher wage and benefit costs as.

Timothy M. Knavish: As we indicated in January we had a large customer win late last year at Walmart and a significant portion of the lower volumes year over year was driven by this prior year $40 million load in.

Timothy M. Knavish: Were also impacted by lower demand in Europe, including the effect of fewer selling days in March stemming from an early Easter holiday this year.

Timothy M. Knavish: We also experienced ongoing tepid global industrial production.

Timothy M. Knavish: Adjusting for these year-over-year comparison items, volumes were nearly flat, continuing the underlying positive volume trajectory over the last five quarters. As I'll discuss in our outlook, I fully expect positive sales volumes in Q2. A benefit for us during the quarter was China, where despite a challenging general economy, our portfolio delivered double-digit organic sales growth, reflecting our strong mix of well-established businesses in the country. For PPG, India also grew by double digits in the quarter.

Timothy M. Knavish: Adjusting for these year over year comparison items volumes were nearly flat continuing the underlying positive volume trajectory over the last five quarters.

Timothy M. Knavish: As I'll discuss in our outlook I fully expect positive sales volumes in Q2.

Timothy M. Knavish: A benefit for us during the quarter was China, where despite a challenging general economy, our portfolio delivered double digit organic sales growth, reflecting our strong mix of well established businesses in the country.

Timothy M. Knavish: For PPG, India also grew by double digits in the quarter. In addition, our commercial teams executed well and drove solid global organic sales growth in our aerospace specialty coatings and materials and protective and marine coatings businesses.

Timothy M. Knavish: In addition, our commercial teams executed well and drove solid global organic sales growth in our aerospace, specialty coatings, and materials, and protective and marine coatings business. Selling prices were flat, with positive pricing in the performance segment offsetting lower pricing in the industrial segment. First quarter pricing comparisons and comparisons include a transitory unfavorable impact from European energy-related pricing indices that were put in place during a period of extremely high energy prices in that region in the first quarter of 2023. We experienced lower energy input costs in the quarter to offset this lower index base price.

Timothy M. Knavish: Selling prices were flat with positive pricing in the performance segment offset or offsetting lower pricing in the industrial segment first.

First quarter pricing comparisons comparisons include a transitory unfavorable impact from European energy related pricing indices that were put in place during a period of extremely high energy prices in that region in the first quarter of 2023 weeks.

Timothy M. Knavish: We experienced lower energy input cost in the quarter to offset this lower index based pricing.

Timothy M. Knavish: We expect total company selling prices to be slightly positive overall in 2024, as targeted structural selling price increases have been implemented in several of our performance segment businesses, offsetting some index-based pricing contracts in the industrial segment. Our operations have benefited from further improvement as we experience stable upstream and downstream supply chains and customer order patterns. From a supply perspective, the vast majority of our suppliers have sufficient or excess capacity as we continue to experience moderating input costs. This is noteworthy as we are just entering the peak buying period due to the overall seasonality of the paint industry.

Timothy M. Knavish: We expect total.

Timothy M. Knavish: Company selling prices to be slightly positive overall in 2024 as targeted structural selling price increases have been implemented in several of our performance segment businesses offsetting some index based pricing contracts in the industrial segment.

Our operations have benefited from further improvement as we experienced stable upstream and downstream supply chains and customer order patterns.

Timothy M. Knavish: A supply perspective, the vast majority of our suppliers have sufficient or excess capacity as we continue to experience moderating input costs.

Timothy M. Knavish: This is noteworthy as we are just entering the peak buying period due to the overall seasonality of the paint industry.

We also increased our growth related investments supporting initiatives that will deliver volume gains later this year and going forward.

Timothy M. Knavish: We also increased our growth-related investments, supporting initiatives that will deliver volume gains later this year and going forward. Building off of the full year 310 basis point improvement in total segment margins in 2023, further margin improvement remains a priority in 2024. This will be driven by stronger sales volumes as the year progresses, improved manufacturing productivity, and moderating input costs from historical highs. Specifically, on manufacturing productivity, our improved operating cadence will be more financially impactful during our peak seasonal quarters as we deliver additional volume growth.

Timothy M. Knavish: Building off of the full year 310 basis point improvement in total segment margins in 2023 further margin improvement remains a priority in 2024. This will be driven by stronger sales volumes as the year progresses improved manufacturing productivity and moderating input costs from here.

Timothy M. Knavish: Stork, Ohio.

Timothy M. Knavish: Specifically on manufacturing productivity, our improved operating cadence will be more financially impactful during our peak seasonal quarters as we deliver additional volume growth.

Timothy M. Knavish: In the first quarter, we delivered on our margin improvement commitment with the industrial segment margins, improving by 100 basis points versus prior year and the performance coatings business as margins were also up by about 40 basis points as favorable pricing and moderating input costs were mitigated by lower volumes and higher wage.

Timothy M. Knavish: Inflation.

Timothy M. Knavish: From a cash perspective, we expect another year of excellent cash flow and our balance sheet remained strong including lower inventories year over year. We will continue to follow our legacy of utilizing our strong cash flow and balance sheet to create shareholder value.

Timothy M. Knavish: In the first quarter, we delivered on our margin improvement commitment with the industrial segment margins improving by 100 basis points versus the prior year, and the performance coatings businesses' margins were also up by about 40 basis points as favorable pricing and moderating input costs were mitigated by lower volumes and higher wage inflation.

Timothy M. Knavish: In the first quarter, we repurchased approximately $150 million of PPG stock, reflecting our commitment to use excess cash to create shareholder value.

Timothy M. Knavish: Additionally, yesterday, our board of directors increased our share buyback authorization by an additional $2 $5 billion, bringing.

Timothy M. Knavish: From a cash perspective, we expect another year of excellent cash flow, and our balance sheet remains strong, including lower inventories year-over-year. We'll continue to follow our legacy of utilizing our strong cash flow and balance sheet to create shareholder value. In the first quarter, we repurchased approximately $150 million of PPG stock, reflecting our commitment to use excess cash to create shareholder value. Additionally, yesterday, our Board of Directors increased our share buyback authorization by an additional $2.5 billion, bringing our total share repurchase authorization to approximately $3.4 billion.

Timothy M. Knavish: Bringing our total share repurchase authorization to approximately $3 4 billion.

I am pleased with the progress we've made on our enterprise growth initiatives, we executed strong growth from our from selling our innovative products into the mobility space and continued to further utilize our world class distribution of 5200 concessionaire locations in Mexico to drive additional non architectural.

Timothy M. Knavish: <unk> products into the one to one of the worlds fastest growing economy.

Timothy M. Knavish: And automotive refinished customer adoption of our industry, leading digital tools increased yielding nearly 400 additional net body shop wins. These digital tools include our linked services and moonwalk mixing machines, both of which are best in class and our focus.

Timothy M. Knavish: I'm pleased with the progress we've made on our enterprise growth initiatives. We executed strong growth from selling our innovative products into the mobility space and continued to further utilize our world-class distribution of 5,200 concessionaire locations in Mexico to drive additional non-architectural coatings products into one of the world's fastest growing economies. In Automotive Refinish, customer adoption of our industry-leading digital tools increased, yielding nearly 400 additional 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.

Timothy M. Knavish: On improving body shop productivity.

Timothy M. Knavish: To date, we've sold over 2000, moonwalk mixing machines and approximately 2700 link subscriptions.

Timothy M. Knavish: We announced strategic reviews of the architectural U S and Canada business and the global silicone product business in the first quarter strategically we are driving this portfolio optimization with the goal of transforming to a higher growth higher margin company.

Timothy M. Knavish: As an example, excluding the architectural coatings business in the U S and Canada performance coatings segment margins would be an average of 200 to 300 basis points higher than the last several years.

Timothy M. Knavish: We will communicate the determination of our path forward on the strategic assessments when appropriate with our target of no later than the third quarter.

Timothy M. Knavish: To date, we've sold over 2,000 moonwalk mixing machines and approximately 2,700 link subscriptions. We will announce strategic reviews of the architectural U.S. and Canada business and the global silica product business in the first quarter. Strategically, we are driving this portfolio optimization with a goal of transforming to a higher growth, higher margin company. As an example, excluding the architectural coding business in the US and Canada, performance coding segment margins would be an average of 200 to 300 basis points higher than the last several years.

Timothy M. Knavish: Now I'll comment on our second quarter outlook.

Timothy M. Knavish: We expect to deliver adjusted Q2 EPS between $2 42.

Timothy M. Knavish: And $2 52 per share, which is at midpoint would be 10% higher than our previous record quarterly EPS, while we anticipate global industrial production to remain at low absolute levels and demand to be uneven by geography, we expect our overall second quarter sales volumes to be.

Timothy M. Knavish: Positive.

Timothy M. Knavish: By a low single digit percentage aided by organic growth in aerospace protective and marine and our share gains in packaging coatings.

Timothy M. Knavish: We'll communicate the determination of a path forward on these strategic assessments when appropriate with our target of no later than the third quarter. Now, I'll comment on our second quarter outlook. We expect to deliver adjusted Q2 EPS between $2.42 and $2.52 per share, which is at the midpoint, would be 10% higher than our previous record quarterly EPS. While we anticipate global industrial production to remain at low absolute levels and demand to be uneven by geography, we expect our overall second quarter sales volumes to be positive, by a low single-digit percentage, aided by organic growth in aerospace, protective, and marine and our share gains in packaging coating

Timothy M. Knavish: We project continuing solid growth from our businesses in China, our third largest country for sales led by our automotive OEM business, where our strong positioning with electric vehicle OEM producers will drive further sales. Additionally, we expect to deliver further sales growth in Mexico, our second largest lara.

Timothy M. Knavish: <unk> country per sales leveraging our strong position across many businesses as well as our world class distribution network.

Timothy M. Knavish: We are confident that PPG has unique geographic profile with strong and growing positions in China, Mexico and India.

Timothy M. Knavish: Along with stabilization and eventually modest growth in Europe, and the continued improvements in the U S will support Ppg's consistent sales volume growth as we move forward.

Timothy M. Knavish: We project continuing solid growth from our businesses in China, our third-largest country for sales, led by our automotive OEM business, where our strong positioning with electric vehicle OEM producers will drive further sales. Additionally, we expect to deliver further sales growth in Mexico, our second-largest country for sales, leveraging our strong position across many businesses, as well as our world-class distribution network.

Timothy M. Knavish: We anticipate overall company selling prices to be flat to slightly positive in the second quarter as the impact of in the index based contracts in our industrial segment will be offset by selling price increases in our performance coating segment.

Timothy M. Knavish: There is still some unfavorable pricing impact in off-center offsetting energy input cost benefits.

Timothy M. Knavish: <unk> prior year European energy surcharges, but it's less than the first quarter.

Timothy M. Knavish: We are confident that PPG's unique geographic profile, with strong and growing positions in China, Mexico, and India, along with stabilization and eventually modest growth in Europe and the continued improvements in the U.S., will support PPG's consistent sales volume growth as we move forward. We anticipate overall company selling prices to be flat to slightly positive in the second quarter as the impact of index-based contracts in our industrial segment will be offset by selling price increases in our performance coding segment.

Timothy M. Knavish: With regard to commodity raw materials supply remains ample and we will continue to realize benefits from moderating input costs.

Timothy M. Knavish: We expect mid single digit percentage raw material deflation in the second quarter. Following the realization of high single digit percentage decreases in Q1.

Timothy M. Knavish: We're watching oil price and feedstock volatility and we will manage any impact accordingly.

Timothy M. Knavish: Although we expect that recent oil price increases will be absorbed upstream.

Timothy M. Knavish: Looking at the remainder of 2024, we remain confident that we will deliver positive sales volumes in each remaining quarter in 2024, including our growth in China, and India will also execute on our more than $270 million and growing order backlog in aerospace driving.

Timothy M. Knavish: There is still some unfavorable pricing impact and offsetting energy input cost benefits from prior year European energy surcharges, but it's less than the first. With regard to commodity raw materials, supply remains ample, and we will continue to realize benefits from moderating input costs. We expect mid single-digit percentage raw materials deflation in the second quarter following the realization of high single-digit percentage decreases in Q1.

Further growth and are well positioned businesses in Mexico, and driving expanded benefits of our key growth initiatives across electric vehicle auto parts powder coatings and various digital solutions.

Timothy M. Knavish: <unk> remains focused on our enterprise growth initiatives to drive higher sales volumes and fully capitalize on our technical and service capabilities.

Timothy M. Knavish: We're watching oil price and feedstock volatility, and we will manage any impact accordingly, although we expect that recent oil price increases will be absorbed upstream. Looking at the remainder of 2024, we remain confident that we will deliver positive sales volumes in each remaining quarter of 2024, including our growth in China and India. We'll also execute on our more than $270 million and growing order backlog in aerospace, driving further growth in our well-positioned businesses in Mexico, and driving expanded benefits of our key growth initiatives across electric vehicle, auto parts, powder coatings, and various digital services. PPG remains focused on our enterprise growth initiatives to drive higher sales volumes and fully capitalize on our technical and service capability.

Timothy M. Knavish: We will drive further improvement of our operating margins aided by sales volume growth leverage and our initiatives to drive manufacturing productivity. Following several years of supply chain and other disruptions.

Timothy M. Knavish: And we will diligently manage our costs and continue to execute against previously approved restructuring actions.

Timothy M. Knavish: Lastly, we ended the second quarter of 2024 with a strong balance sheet, which provides us with flexibility for further shareholder value creation.

Timothy M. Knavish: Thank you to our more than 50000 employees around the world who partner with our customers every day to drive mutual success by providing best in class paints coatings specialty materials, including productivity enhancing and sustainable solutions.

Timothy M. Knavish: Thank you for your continued confidence in PPG. This.

Speaker Change: This concludes our prepared remarks, and now would you. Please open the lines for questions.

Speaker Change: Thank you.

Timothy M. Knavish: We'll drive further improvement in our operating margins, aided by sales volume growth leverage and our initiatives to drive manufacturing productivity following several years of supply chain and other disruptions, and we will diligently manage our costs and continue to execute against previously approved restructuring actions. Lastly, we entered the second quarter of 2024 with a strong balance sheet, which provides us with flexibility for further shareholder value creation. Thank you to our more than 50,000 employees around the world who partner with our customers every day to drive mutual success by providing best-in-class paints, coatings, and specialty materials, including productivity-enhancing and sustainable solutions.

Speaker Change: Time, I would like to remind everyone in order to ask a question Chris Dodd then the number one on your telephone keypad.

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

Speaker Change: Your first question comes from the line of Ghansham.

Ghansham Panjabi: Ghansham Panjabi from Baird.

Ghansham Panjabi: Your line is now open.

Ghansham Panjabi: Thank you operator, and good morning, everybody.

Ghansham Panjabi: Kevin I know you have a lot going on across the portfolio by business and also by geography by your guidance Embeds quite a bit of an earnings improvement during the back half of the year on a year over year basis.

Speaker Change: So I guess just on that can you just lay out the specifics that underlay our confidence.

For that dynamic to play out, especially with some of the upstream input costs, such as energy trading higher thank you.

Yes sure Ghansham. Thanks for the question.

Kevin: I will tell you how I'm feeling about the full year guide here, we have a bold 10% EPS growth.

Timothy M. Knavish: Thank you for your continued confidence in PPG. This concludes our prepared remarks, and now would you please open the lines for questions. At this time, I would like to remind everyone that in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roughly. Your first question comes from the line of Ghansham Panjabi from BAT.

The target off of a strong record year last year and on a very challenging plan.

Kevin: But.

We've got strong reasons to believe and we're confident in that first of all we've already proven.

Kevin: Over the last several quarters, what we can do one on margin and cash that gives us optionality.

Kevin: We believe that our strong volume momentum will continue.

Ghansham Panjabi: Your line is open. Thank you, operator. I know you have a lot going on across the portfolio by business and also, you know, by geography, but your guidance embeds, I guess, just on that. Transcripts provided by Transcription Outsourcing, LLC. Yeah, sure, Ghansham, thanks for the question. You know, I'll tell you how I feel about the full year guide later. You know, we have a bold 10% EPS growth target off of a strong record year last year and on a very challenging planet.

Kevin: We went from minus three minus two minus one now essentially flat without the one timers were expecting positive volume the rest of the year.

Kevin: I'm satisfied with where pricing is we continue to get price and performance we've got some indexing offsets.

Kevin: In.

Kevin: In industrial but I'm confident in that we've got manufacturing momentum, we're starting to deliver on the productivity initiatives as well as some incremental volume leverage.

Kevin: Portfolio.

Kevin: And we're starting from a position of strength in a number of our countries and businesses.

Ghansham Panjabi: But, you know, we've got strong reasons to believe, and we're confident in that. First of all, we've already proven over the last several quarters what we can do on margin and cash that that gives us optionality. We believe that our strong volume momentum will continue. We went from minus three, minus two, minus one. Now, essentially flat without the one-timer.

Kevin: Aerospace, Mexico, China, India PMC automotive.

Kevin: We've got some share gains in the process of being launched across packaging refinish industrial coatings.

Kevin: We've got our enterprise growth strategy initiatives, and we do have some optionality again with capital deployment. So we feel good about the ramp.

Timothy M. Knavish: We're expecting positive volume the rest of the year. We've, you know, I'm satisfied with where pricing is. We continue to get price and performance. We've got some indexing offsets in industrial, but I'm confident in that. We've got manufacturing momentum. We're starting to deliver on the productivity initiatives as well as some incremental volume leverage. Portfolio, and we're starting from a position of strength in a number of our countries and businesses. Aerospace, Mexico, China, India, PMC, automotive; we've got some share gains in the process of being launched across packaging, refinish, and industrial coatings.

Kevin: <unk> Q1 to Q2 in the second half of the year Ghansham.

Kevin: Yes, Ghansham this is Vince.

Vince: As we talk strong balance sheet and our full year guide and we don't have any further cash deployment baked in at this point.

Vince: We alluded to in our press release, and we did purchase about $150 million of shares in the first quarter, but our full year guide does not assume.

Additional cash deployment at this point.

Vince: And the remainder of the year, we will make those decisions.

Vince: On a real time basis.

Vince: Okay.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of John Mcnulty with BMO. Your line is open.

John Patrick McNulty: Yes. Good morning, Thanks for taking my question.

John Patrick McNulty: So maybe on the on the price versus raws dynamic I guess can you speak to whether you expect to see your raw material basket down from one <unk> to Q and then on the pricing side, if we take out the indexing, which really should be kind of a net neutral.

Vincent J. Morales: We've got our enterprise growth strategy initiatives, and we do have some optionality again with capital deployment. So we feel good about the ramp between Q1 and Q2 in the second half of the year, Ghansham. Yeah, Ghansham, this is Vince.

John Patrick McNulty: What portion of your business do you expect to see real pricing as we're pushing forward because it does sound like you've got a number of initiatives to push further price. So can you help us to think about those things.

John Patrick McNulty: Just as we talked, a strong balance sheet in our full year guide. We don't have any further cash deployment baked in at this point. As we alluded to in our press release, we did purchase about 150 million shares in the first quarter. But our full year guide does not assume any Additional Cash Deployment at this point in the remainder of the year. We'll make those decisions on a real-time basis. Thank you. The next question comes from the line of John McNulty with Dano. Your line is: Yeah, good morning.

John Patrick McNulty: Yes, let me just do the math this is Vince John Let me do the math on the pricing again, we had in Q1 on a year over year basis.

Vincent Stephen Andrews: European Energy surcharge is really reflecting the high cost of natural gas.

Vincent Stephen Andrews: In Europe last year that was that was about $15 million on a year over year basis as you alluded to John that was completely offset.

Vincent Stephen Andrews: And exact pass through.

Vincent Stephen Andrews: On our cost of goods sold but if youre looking myopically at the price line now thats about $15 million.

John Patrick McNulty: Thanks for taking my question. So maybe on the price versus raw materials dynamic, can you speak to whether you expect to see your raw material basket down from one Q to two Q? And then on the pricing side, if we take out the indexing, which really should be kind of net neutral, what portion of your business do you expect to see real pricing as we're pushing forward? Because it does sound like you've got a number of initiatives to push prices further. So can you help us to think about those? Yeah, let me just do the math.

Vincent Stephen Andrews: And we have about half of that carryover in Q2.

Vincent Stephen Andrews: $67 million in Q2, we still have an energy surcharge impact excluding that I would exclude that as well it would be our structural pricing and Tim can answer the RASK question, Hey, John Thanks for the question as far as progression from Q1 to Q2.

Timothy M. Knavish: Q1, we did say they were down high single digits, which was better than our forecast of mid single digits Q2, where we believe down the mid single digits and we are confident enough now to issue full year guide on raws being down in that low single digits to mid single digits.

Vincent J. Morales: This is Vince, John. Let me do the math on the pricing. Again, we had a Q1 on a year over year basis. The European energy surcharge is really reflecting the high cost of natural gas in Europe last year.

Timothy M. Knavish: For full year 2004, so we've got better visibility now into what we believe that price raws will look like for the rest of the year.

Vincent J. Morales: That was about $15 million on a year-over-year basis. As you alluded to, John, that was completely offset by an exact pass-through in our cost of goods sold. But if you're looking myopically at the price line, that's about $15 million.

Speaker Change: Thank you Nick.

Question comes from the line of Michael.

Michael: With Wells Fargo.

Vincent J. Morales: And we have about half of that carryover in Q2. So $6, $7 million in Q2. We still have an energy surcharge impact. Excluding that, I would exclude that as what would be our structural pricing. And Tim's going to answer the Ross question.

Michael: Your line is now open.

Michael: Hey, guys nice start to the year.

Okay.

Michael: Yes.

Michael: You talked about being confident in.

Michael: Turning the corner and volume growth from QQ.

Michael: Maybe you can give us a little bit of color on how much market growth do you need or macro health and how much. It really just comes from your execution and maybe just some areas of growth that youre seeing in your end markets.

Timothy M. Knavish: Yeah, hey, John, thanks for the question. You know, as far as progression from Q1 to Q2, we did say they were down high single digits, which was better than our forecast of mid-single digits. Q2, we believe, down the mid-single digits, and we're confident enough now to issue a full-year guide on ROS being down in that low-single digits to mid-single digits for full-year 24. So we've got better visibility now into what we believe that price ROS will look like for the rest of the year. The next question comes from the line of Michael Sison with Wells Fargo. Your line is now open.

Speaker Change: Yes, Mike.

Mike: First of all it's based on a number of factors. One is the overall trend of the company, particularly when you adjust for you guys take the Walmart loading out.

Mike: And when you adjust for that we've been we've been ramping.

So thats one part of it second is we are.

Mike: We are seeing a number of the share gain wins across some of our businesses from last year starting to launch in Q2.

In industrial in refinish and in packaging primarily.

Michael Joseph Sison: Hey guys, nice start to the year. We've talked about being confident in turning the corner in volume growth in QQ. Maybe give us a little bit of color on that.

Mike: We've also were only 16 or whatever days into the month here and while that's us.

Mike: One sixth of the quarter, we're comfortable with what we're seeing on orders and shipments thus far in the quarter.

Timothy M. Knavish: Unknown Speaker How much market growth you need or macro help and how much really just comes from your execution and maybe just some areas, Yeah, Mike, you know, first of all, it's based on a number of factors. One is the overall trend of the company, particularly when you adjust for you got to take the Walmart load in out, and when you adjust for that we've been we've been ramping so that's one part of it second is we are you know we are seeing a number of the share gain wins across some of our businesses from last year starting to launch in Q2 you know in in industrial in refinish and in packaging primarily um you know and we've also you know we're only 16 or whatever days into the month here and while that's a you know what one-sixth of the quarter we're comfortable with what we're seeing on orders and shipments thus far in the quarter so so we're we're comfortable in saying that we'll be positive volume for Q2. The next question comes from the line of Duffy Fisher with Goldman Sachs, your line is open. Yeah, good morning.

Mike: We are comfortable in saying that will be positive volume for Q2.

Mike: Okay.

Speaker Change: Thank you the next.

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

Yes, good morning too.

Patrick Duffy Fischer: Two questions on share buyback when I just wanted to clarify so Vince in the.

Annual guide, you're saying that there's no more buybacks, if youre not even <unk>.

Patrick Duffy Fischer: Rolling through the 150 per quarter into that annual guidance number.

Patrick Duffy Fischer: And maybe for Tim.

Speaker Change: If you look at the 150 run rate that would take you over five years to eat through the program that you've now got available how should we think about that buyback ramping going forward what level should we put into our models.

Vincent Stephen Andrews: Duffy this is Vince.

Patrick Duffy Fischer: You stated it properly and we obviously purchased $150 million in the first quarter that will obviously be impactful to the financials. We have nothing further assumed in our full year guide.

Vincent Stephen Andrews: For the balance of the year.

Patrick Duffy Fischer: Two questions on the buyback. One, I just want to clarify. So Vince, in the Annual Guide, you're saying that there are no more buybacks, you're not even rolling through the $150 per quarter into that Annual Guide, and, And then maybe for Tim, if you look at the $150 run rate, that'd take you over five years to eat through the program that you've now got available. How should we think about that buyback ramping going forward? What level should we put into our model? Duffy, this is Vince.

Vincent Stephen Andrews: The way to the way that I'm thinking about the additional authorization that we got.

Vincent Stephen Andrews: From our board yesterday is really consistent with what we've done and said.

Vincent Stephen Andrews: Over the last the last number of years and quarters.

Vincent Stephen Andrews: We said that.

Vincent Stephen Andrews: Obviously, we're going to pay our dividend obviously, we're going to do we need to do with the capex to grow our businesses organically, we paid down all of our high cost debt last year, and we've consistently said that in the absence of shareholder value, creating acquisitions, we're not going to let the <unk>.

Vincent J. Morales: You stated it properly. We obviously purchased $150 million in the first quarter. That will obviously be impactful to the financials. We have nothing further assumed in our full-year guide for the balance of the year.

Vincent Stephen Andrews: Sit on our balance sheet.

Vincent Stephen Andrews: And we did that in Q4, we did it in Q1, so really sticking with that mantra the way to think about magnitude going forward will depend on all of those factors.

Vincent J. Morales: The way that I'm thinking about the additional authorization that we got from our board yesterday is really consistent with what we've done and said over the last number of years and quarters. We said that, obviously, we're going to pay our dividend. Obviously, we're going to do what we need to do with CapEx to grow our businesses organically. We paid down all of our high-cost debt last year, and we've consistently said that in the absence of shareholder value-creating acquisitions, we're not going to let the cash sit on our balance sheet. We did that in Q4. We did it in Q1.

Vincent Stephen Andrews: Yes.

Vincent Stephen Andrews: What's our actual leverage sitting at versus what we see in our acquisition pipeline.

Vincent Stephen Andrews: After we've done those kind of organic things of dividend and Capex.

Vincent Stephen Andrews: Thank you. The next question comes from the line of David Begleiter from Deutsche Bank. Your line is open.

David L. Begleiter: Thank you good morning.

David L. Begleiter: Tim events in U S. Architectural have you seen any disruptions since your announcement in late February.

David L. Begleiter: What's the level of interest in these assets.

Vincent J. Morales: We're really sticking with that mantra. The way to think about magnitude going forward will depend on all of those factors, what our actual leverage is sitting at versus what we see in our acquisition pipeline after we've done those organic things of dividend and CapEx. The next question comes from the line of David Begleiter from Deutsche Bank. Your line is open. Thank you. Good morning.

David L. Begleiter: I think the most likely outcome of this.

Speaker Change: And process. Thank you.

Speaker Change: Yes.

David It's Tim.

Timothy M. Knavish: We had a very.

Timothy M. Knavish: It's a very detailed and thoughtful communications plan.

Timothy M. Knavish: Ahead of making the announcement on February 26 that we executed very shortly after that press release went out and have continued to execute and we've seen very minimal if any disruption there.

David L. Begleiter: Tim and Vince, in U.S. architecture, have you seen any disruptions since your announcement in late February? What's the level of interest? Assets and what they think the most. Good morning, David. It's Tim. We had a very, very detailed and thoughtful communications plan ahead of making the announcement on February 26, that we executed very shortly after that press release went out, and have continued to execute. And we've seen very minimal, if any, disruption, you know; there's chatter.

Timothy M. Knavish: Chatter, but we've got really good talk plans out there we're engaging our key customers. We're engaging our key obviously are our employees.

Timothy M. Knavish: We're engaged in our owners as you know so very minimal disruption to the business and the second question.

Timothy M. Knavish: We expected strong interest because of the strength of the brands and the strength of the assets in our architectural U S. Canada business I'm pleased to say the interest is even higher than what we expected.

Timothy M. Knavish: But you know, we've got really good talk plans out there, we're engaging our key customers, we're engaging our key, you know, obviously, our employees, we're engaging our owners, as you know, so very minimal disruption to the business. On the second question, we expected strong interest because of the strength of the brands and the strength of the assets in our architectural US and Canada business. I'm pleased to say the interest is even higher than we expected. So that's, you know; we feel good right now about where we are.

Timothy M. Knavish: So thats.

Timothy M. Knavish: We feel good right now about where we are.

Timothy M. Knavish: <unk> has the which likely outcome David.

Timothy M. Knavish: Until numbers start coming across the desk and we can start looking at what's best for long term shareholder value creation, it's a bit early but we want to be definitive on our path forward.

Timothy M. Knavish: In Q3, so we will have a much better view of what this structure might look like.

Timothy M. Knavish: And another in another quarter or so David.

Timothy M. Knavish: Okay.

Timothy M. Knavish: Thank you. The next question comes from the line of Chris Parkinson with Wolfe Research. Your line is open.

Timothy M. Knavish: As far as the likely outcome, David, you know, until numbers start coming across the desk, and we can start looking at what's best for long-term shareholder value creation, it's a bit early. But we want to be definitive on our path forward, and Q3. So we'll have a much better view of what this structure might look like, you know, in another quarter or so, David. Thank you. The next question comes from the line of Chris Parkinson with Wolf Research. Your line is open. Great! Thank you so much.

Christopher S. Parkinson: Great. Thank you so much.

Christopher S. Parkinson: Tim you've obviously been at the company a long time and that you are making some pretty dramatic moves in the first.

Christopher S. Parkinson: Six quarters, when you take a step back away from the North American architectural in the specialty reviews.

And you look at your remaining businesses across performance and industrial just how confident are you versus even let's say a couple of quarters ago last year. However, you want to characterize it how confident are you that those remaining businesses are the best in class R&D innovators and will ultimately render above <unk>.

Christopher S. Parkinson: Growth in their respective end markets over the next year or two I mean.

Christopher S. Parkinson: You know, Tim, you've obviously been at the company a long time, and you're making some pretty dramatic moves in the first, you know, six quarters. When you take a step back away from the North American architectural and the specialty, you know, reviews, and you look at your remaining businesses across performance and industrial, just how confident are you, versus even, you know, let's say a couple quarters ago last year, however you want to characterize it, how confident are you that those remaining businesses are the best in class R&D innovators, and will ultimately render above market growth in the respective end markets, you know, over the next year or two?

Perhaps even longer just has your confidence changed in that portfolio positively or negatively. Thank you.

Christopher S. Parkinson: Hey, Chris Thanks for your very polite way of saying that I am old at the beginning there.

Speaker Change: I feel I feel more comfortable now than ever that we are building a portfolio here at PPG that we will have a higher growth profile and a higher margin profile.

Speaker Change: As you alluded to we did what I would call just pruning last year of some smaller parts of our portfolio.

Speaker Change: We really did not did not see being consistent with our enterprise growth strategy and our performance.

Christopher S. Parkinson: I mean, or perhaps even longer, just, you know, has your confidence changed in the portfolio, positively or negatively? Thank you. Hey, Chris, thanks for your very polite way of saying that I'm old at the beginning there.

Speaker Change: Performance targets, we did that last year, obviously Q1, this year I announced two pretty sizable ones.

Speaker Change: Going forward at least today, you shouldn't count on us coming out tomorrow or anytime soon with another very sizable divestiture, so I am comfortable with whats in the portfolio.

Timothy M. Knavish: I feel more comfortable now than ever that we are building a portfolio here at PPG that will have a higher growth profile and a higher margin profile. As you alluded to, we did what I would call just pruning last year of some smaller parts of our portfolio. You know that we really did not, did not see it being consistent with our enterprise growth strategy and our performance, and performance targets. We did that last year.

Speaker Change: At a high level, we will continue however to prove.

Speaker Change: Sorry to prune on a smaller scale and we are one of our mantra is going forward is that every business has to earn the right to stay in the portfolio that means one from our performance outlook standpoint, the two consistent with our very focused enterprise growth strategy.

I also want to add that when we talk about portfolio, Chris it's not just about the pruning and divestitures, but we are also in <unk>.

Timothy M. Knavish: Obviously, in Q1 this year, I announced two pretty sizable ones. Going forward, you know, at least today, you shouldn't count on us coming out tomorrow or anytime soon with another very sizable divestiture. So I'm comfortable with what's in the portfolio at a high level. We will continue, however, to prove or, I'm sorry to prune on a smaller scale.

Speaker Change: Ending to be continued acquirers going forward just on a very focused basis for those things that meet both our performance outlook and our enterprise growth strategy.

Speaker Change: Yes, Chris This is Vince if you think about the remaining portfolio and the businesses.

Vincent Stephen Andrews: We have the right to win.

And the businesses, whether it be on a regional basis or on a global basis as you alluded to in your and your question. Most of these businesses have strong technology associated with them.

Timothy M. Knavish: And one of our mantras going forward is that every business has to earn the right to stay in the portfolio. That means one from a performance outlook standpoint, but two consistent with our very focused enterprise growth strategy. I also want to add that when we talk about the portfolio, Chris, it's not just about the pruning and divestitures. But you know, we are also intending to be continued acquirers going forward, just on a very focused basis for those things that meet both our performance outlook and our enterprise growth strategy. Yeah, Chris, this is Vince.

Vincent Stephen Andrews: We talked earlier in our comments about the margin profile.

Absent these businesses that we're doing strategic review on which again would be higher on a pro forma basis. So again the right to win good margins good customer pull those are the.

Vincent Stephen Andrews: Things that we're focused on with respect to the portfolio.

Vincent Stephen Andrews: Thank you. The next question comes from the line of John Roberts with Mizuho. Your line is open.

Vincent J. Morales: If you think about the remaining portfolio in the businesses, we have the right to win in the businesses, whether it be on a regional basis or on a global basis. As you alluded to in your question, most of these businesses have strong technology associated with them. We talked earlier in our comments about the margin profile, if absent these businesses that we're doing a strategic review on, which would again be higher on a pro forma basis.

Thank you. Another coatings firm has suggested that you might separate north American architectural into pro versus DIY and deal with them separately could you comment on that.

Speaker Change: Hey, John there's a lot of theories out there from a lot of different parties.

Speaker Change: As I mentioned the interest level that we've seen coming in is very high higher than we expected and not all of those parties have the same view of what we should do and what this might look like at the end.

Vincent J. Morales: So again, the right to win, good margins, and good customer pull. Those are the things that we're focused on with respect to the portfolio. The next question comes from the line of John Roberts with Mizuho. Your line is open. Unknown Speaker Thank you.

Speaker Change: So my only comment would be.

Speaker Change: Everyone should be confident that we we said we're casting a wide net intentionally.

John Ezekiel E. Roberts: Another coding firm has suggested that you might separate North American architecture into pro versus DIY and deal with them separately. Could you comment on that? Hey, John, there are a lot of theories out there from a lot of different parties. As I mentioned, the interest level that we've seen coming in is very high, higher than we expected. And not all of those parties have the same view of what we should do and what this might look like in the end.

Speaker Change: Everybody should be confident that we will look at every option that comes in.

Speaker Change: And weigh them and do what's best for shareholder value period, It's a little early to go beyond that again, because nothing no numbers have hit our desk yet.

Thank you. The next question comes from the line of Patrick Cunningham with Citigroup. Your line is open.

Timothy M. Knavish: So my only comment would be, everyone should be confident that we said we were casting a wide net intentionally. Everybody should be confident that we will look at every option that comes in and weigh them and do what's best for shareholder value, period. It's a little early to go beyond that, again, because nothing, no numbers have hit our desk yet. The next question comes from the line of Patrick Cunningham with Citigroup. Your line is open. Hi, good morning.

Patrick David Cunningham: Hi, Good morning, Thanks for taking my question on the higher Capex range for the year and what are the areas Youre contemplating additional growth investment and should we expect it to be a reasonable capex space for the next few years.

Patrick David Cunningham: Yes, Patrick this is Vince.

Vincent Stephen Andrews: A couple of things one we did have some some capital spending spillover from last year into this year just things we didn't get to at the tail end of last year, So our tier one capital.

Speaker Change: Little higher.

Speaker Change: Also looking at additional.

Patrick David Cunningham: Thanks for taking my question. On the higher CapEx range for the year, what are the areas you're contemplating additional growth investment in? And should we expect this to be a reasonable CapEx space for the next few years? Yeah, Patrick, this is Vince.

Speaker Change: Growth related capital spending in Mexico.

Speaker Change: And also in India.

Speaker Change: But if you look and we said this on our Q1 call.

Speaker Change: Our year end call as well and we're going to be somewhere in that two 5% to 3%.

Speaker Change: Over the mid term, we still have some additional capital last year. This year and we're catching up from Covid. So again, we're a little bit higher we certainly recognize that.

Vincent J. Morales: You know, a couple things. One, we did have some capital spending spillover from last year into this year, just things we didn't get to at the tail end of last year. So our Q1 capital is a little higher. We're also looking at additional growth-related capital spending in Mexico and also in India. But if you look, we said this on our Q1 call or our year-end call as well. We're going to be somewhere in that two and a half to 3% over the midterm.

Speaker Change: In our January call, but again over the mid term you should expect us to return to our normal range.

Speaker Change: Range.

Speaker Change: Thank you the next.

Speaker Change: Next question comes from the line of Frank Mitsch with Simon Research LLC. Your line is open.

Speaker Change: Okay.

Frank Joseph Mitsch: The LLC portion is very important so I appreciate that.

Frank Joseph Mitsch: Listen I know that some of the growth youre expecting in the next three quarters for 24 are tied to higher operating rates volume improvement productivity gains, but as you also indicated you were also spending more money on on growth initiatives and so forth. How do we think about the interplay between those two.

Vincent J. Morales: We still have some additional capital, you know, last year, this year, that we're catching up on COVID. So again, we're a little bit higher. We recognized that in our January call. But again, over the midterm, you should expect us to return to our normal range. The next question comes from the line of Frank Mitsch with Sermon Research LLC. Your line is open.

Frank Joseph Mitsch: In terms of millions of dollars or EPS et cetera, any way that you can kind of frame the interplay between those two.

Frank Joseph Mitsch: Yes, well Mr. Mitch This is Tim.

Frank Joseph Mitsch: The LLC portion is very important, so I appreciate that. Uh, listen, I know that some of the growth you're expecting in the next three quarters for 24 is tied to higher operating rates, volume improvement, productivity gains, but as you also indicated, you're also spending more money on growth initiatives and so forth. How do we think about the interplay between those two in terms of millions of dollars or EPS, etc.? Any way that you can kind of frame the interplay between those two? Yeah, well, Mr. Mitch, this is Tim.

Timothy M. Knavish: And net net of.

Timothy M. Knavish: The growth that we're expecting.

Timothy M. Knavish: Versus the investments in growth that we're making net net we're expecting that to deliver the at midpoint, 10% EPS growth.

Timothy M. Knavish: For the year.

Timothy M. Knavish: Those investments that we didn't just start making those in Q1, we started making those last year and a number of those will start to to actually hit the P&L now coming here in Q2, Q3, and Q4 beyond that Vince if you want to add a details no. These are these investments.

Timothy M. Knavish: Are things such as digital as Tim alluded to with respect to our our consumer facing businesses.

Timothy M. Knavish: The net-net of the growth that we're expecting versus the investments in growth that we're making, net-net, we're expecting that to deliver, at midpoint, 10% EPS growth for the year. Those investments that we, you know, we didn't just start making those in Q1. We started making those last year, and a number of those will start to actually hit the P&L now coming here in Q2, Q3, and Q4. Beyond that, Vince, I don't know if you want to add any details.

Vincent Stephen Andrews: Also with respect to refinish, we're building at <unk>.

Vincent Stephen Andrews: Digital tools that increase our customer liaisons.

Vincent Stephen Andrews: Other investments in Comex, where we're delivering we've had multiple quarters of record earnings.

Vincent Stephen Andrews: Our protective business, we're adding some capacity.

Vincent Stephen Andrews: Strong protective business, we still have some infrastructure spending that has not yet hit the books, but we're building in anticipation of that and even in aerospace where we have a.

Vincent Stephen Andrews: Backlog continues to grow.

Vincent J. Morales: No, these are, these investments are things such as digital, as Tim alluded to, with respect to our consumer-facing businesses. Also, with respect to refinish, we're building out, you know, digital tools that increase our customer liaisons. We have other investments in COMEX, where we're delivering, we've had multiple quarters of record earnings. So, those are examples.

We're adding some capacity there to try to work at that backlog and get to it in a much.

Vincent Stephen Andrews: More expedient manner. So those are examples if you look at our overheads up.

Vincent Stephen Andrews: That's something.

Vincent Stephen Andrews: Some of the growth spending.

Vincent Stephen Andrews: That overhead as a result of that growth spending.

Vincent Stephen Andrews: Okay.

Vincent Stephen Andrews: Thank you. The next question comes from the line of Vincent Andrews with Morgan Stanley. Your line is open.

Vincent Stephen Andrews: Okay.

Vincent Stephen Andrews: Thanks, and good morning, everyone can we talk a bit about refinish.

Vincent J. Morales: If you look at our overheads, that's something where some of the growth spending is a result of that overheads going up is a result of that growth spending. Thank you. The next question comes from the line of Vincent Andrews with Morgan Semi. Your line is open.

Vincent Stephen Andrews: Be helpful. If you just could level set us in terms of where volumes are now versus pre COVID-19 levels and I'm, just what I'm trying to understand on a go forward basis, you are talking about.

Vincent Stephen Andrews: Volume declines for <unk>, and <unk> against very difficult comps in the year ago period.

Vincent Stephen Andrews: Thanks and good morning, everyone. Can we talk a bit about refinishing? And it would be helpful if you just could level the playing field in terms of where volumes are now versus pre-COVID levels. And I'm just, what I'm trying to understand on a go forward basis, you know, you're talking about volume declines for 1Q and 2Q against very difficult comps in the year ago period. So is the assessment that we've normalized volumetrically post-COVID? And if that's the case, you know, what should the algorithm for refinish be in terms of volume and price on a go forward basis from here? Yeah, hey Vincent, Tim here.

Vincent Stephen Andrews: Is the assessment that we've normalized volumetric Lee.

Vincent Stephen Andrews: Host Covid and if Thats the case, what should the algorithm for refinish fee in terms of volume and price on a go forward basis from here.

Timothy M. Knavish: Yes, Vincent Tim here. Thanks for the question, let me kill the second part first the easy part price you should expect us to continue to execute on price. The way, we always have in refinish, because the value proposition of that.

Vincent J. Morales: The pain inside the can plus all the tools and service outside the can.

Vincent J. Morales: It continues to improve.

Vincent J. Morales: And as such is such a important part of the repair, but a fairly low cost part of the repair. So we will continue to execute on price and volume.

Speaker Change: Q1 was lower than we expected and if you saw the claims data for March that just came out for the U S. In particular, where we're quite a bit lower than really the industry expected.

Timothy M. Knavish: Thanks for the question. You know, let me kill the second part off. First, the easy part price: you should expect us to continue to execute on price the way we always have in refinish because the value proposition of, you know, the pain inside the can, plus all the tools and service outside the can continues to improve. And it's such a such an important part of the repair, but a fairly low cost part of the repair.

Speaker Change: The whole refinish industry loves.

Speaker Change: An ice storm down in the southeast U S or southwest U S, where they are not quite ready to to handle with an ice storm and it was a pretty mild winter, particularly down south and so the claims in March were down significantly that affected Q1, and frankly will also carry in and affect Q2, which is.

Timothy M. Knavish: So we'll continue to execute on price and volume. You know, Q1 was lower than we expected. And if you saw the claims data for March that just came out for the U.S., in particular, we're quite a bit lower than the industry expected. You know, the whole refinish industry loves an ice storm down in the southeast U.S. or southwest U.S. where they're not quite ready to handle an ice storm. And it was a pretty mild winter, particularly down south.

Speaker Change: <unk>.

Why were part partly why we're saying mid down mid single digits on sales for Q2.

Speaker Change: The other factor in Q2 as we did have a very strong Q2 last year that said I've spoken in chancey, who runs that business for us has spoken to.

Key end users here in the last the last weeks.

Speaker Change: They're all saying the same thing about Q1, but we are all expecting I would say a return to more normal growth.

Speaker Change: In the second half of 2024, so we just got to get through Q2 to your question on industry versus 2019 set March aside from a claims standpoint, because it is a bit unique.

Timothy M. Knavish: And so the claims in March were down significantly, and that affected Q1. And frankly, it'll also carry over and affect Q2, which is, you know, why we're part partly why we're saying mid down, mid single digits on sales for Q2. The other factor in Q2 is that we did have a very strong Q2 last year. That said, you know, I've spoken, and Chancey, who runs that business for us, has spoken to our key end users here in the last few weeks, and they're all saying the same thing about Q1. But we are all expecting, I would say, a return to more normal growth in the second half of 2024. So we just have to get through Q2.

Speaker Change: Other than March were down low single digits mid single digits versus pre COVID-19 as an industry.

Speaker Change: But we are seeing things like miles driven ticking up.

Speaker Change: We are seeing more and more.

Speaker Change: <unk> returned to downtown areas, if you want to call it that so long and short of it.

Speaker Change: Down a bit in Q1 down a bit in Q2 because of.

Speaker Change: One timers here from a weather standpoint in our claims standpoint confident in the second half of the year and confident for the long term health of this business.

Speaker Change: And thats it we don't gain share, but we are continuing to gain share through our digital tools as I mentioned in my opening remarks, yes.

Timothy M. Knavish: To your question on the industry versus 2019, set March aside from a claim standpoint because it's a bit unique. Other than March, you know, we're down, you know, low single digits, mid single digits versus pre-COVID as an industry. But we are seeing things like miles driven ticking up, and we are seeing more and more return to downtown areas, if you want to call it that. So, long and short of it, down a bit in Q1, down a bit in Q2, because of, you know, one-timer customers here from a weather standpoint and a claim standpoint, confident in the second half of the year and confident in the long-term health of this business.

Speaker Change: And Vincent this is Vince just a point of clarification. The claims data Tim referred to these are industry claims, which are down again in the low double digits.

Current reading was down low double digits for the month of March. So these are industry collision claims that affect the entire industry. Prior to March they were down low single digits.

Speaker Change: Thank you. The next question comes from the line of Stephen Byrne with Bank of America Merrill Lynch. Your line is open.

Stephen V. Byrne: Yes, Thank you Tim I'm trying to get my head around.

Stephen V. Byrne: Why the U S. Architectural business has been just barely profitable on average for five years has that trend been improving.

Timothy M. Knavish: And that's if we don't gain share, but we are continuing to gain share through our digital tools, as I mentioned in my opening remarks. Yeah, and Vincent, this is Vince. Just a point of clarification, the claims data Tim referred to, these are industry claims, which are down again, low, low double digits. The current reading was down low double digits for the month of March.

Stephen V. Byrne: Is there has there been any benefit from the home depot partnership.

Stephen V. Byrne: I ask because I had one of your store managers tell me you have to match the pricing in home depot, which clearly would not be good for margins.

Stephen V. Byrne: But.

Stephen V. Byrne: Underlying all of that is the number of stores or is it do you need to move to more of a concessionary model in this business like Comex and like Ben Moore.

Vincent J. Morales: So these are industry collision claims that affect the entire industry. Yeah, prior to March, they were down low single digits. Thank you. The next question comes from the line of Stephen Byrne with Bank of America Merrill Lynch.

Speaker Change: Thanks, Steve.

Steve: So as far as what it has done over last couple a couple of years, it's been a little ups and downs, but.

Steve: It has been below company average and we have been investing particularly in the home depot model, but why has it been at the low level of profitability over the last several years a number of things the macros aren't great.

Stephen V. Byrne: Tim, I'm trying to get my head around why the US architectural business has been just barely profitable on average for five years, and has that trend been improving? Unknown Speaker Has there been any benefits from the Home Depot partnership? I ask because I had one of your store managers tell me you have to match the pricing in Home Depot, which clearly would not be good for his margin. Underneath all that, is it the number of stores? Or is it not?

Steve: You've got this post COVID-19 hangover across the whole industry as I mentioned, we have been investing.

Steve: And you mentioned our own stores through our own stores Thats, a high fixed cost model and unique velocity through those stores and with all of the factors.

The macro and in a post COVID-19 that velocity has been has decreased.

Timothy M. Knavish: Is it do you need to move to more of a concessionaire model in this business, like Comex and Ben Moore? Thanks, Steve. So, you know, as far as what it's done over the last couple of years, there have been some ups and downs, but, you know, it has been below the company average. And we have been investing, particularly in the Home Depot model. But why has it been at a low level of profitability over the last several years? A number of things, you know; the macros aren't great. You've got this post-COVID hangover across the whole industry.

Steve: Now the home depot.

Steve: <unk> initiative is certainly working and gaining momentum and is positively contributing.

Steve: But at this point its not far enough in that ramp up curve to offset those macros, particularly what's happening on the DIY side.

Steve: So what were the reason we're doing this now as we do have momentum in this kind of Omnichannel model with the combination of the home depot, our stores and our independent dealers.

Timothy M. Knavish: As I mentioned, we have been investing. And through what you mentioned, our own stores. Through our own stores, that's a high fixed cost model, and you need velocity through those stores.

Steve: But we need a partner to make that go faster to get this.

Timothy M. Knavish: And with all the factors in the macro and in the post COVID, that velocity has been decreased. Now, the Home Depot PRO initiative is certainly working and gaining momentum, and is positively contributing. But at this point, it's not far enough along that ramp-up curve to offset those macros, particularly what's happening on the DIY side. So the reason we're doing this now is we do have momentum in this kind of omni-channel model with the combination of The Home Depot, our stores, and our independent dealers.

Steve: To company average profitability and so that's why we're open to a number of different scenarios for for this business.

Speaker Change: Thank you. The next question comes from the line of.

Speaker Change: Jack.

Jack: So cosco with Jpmorgan your line is open.

Jack: Okay.

Jack: Thanks very much.

Jack: I think in Europe performance Division.

Jack: In the first quarter of the six categories that you look at aerospace refinish and architectural.

All of them came in lower than you expected on a sales basis.

Timothy M. Knavish: And, but we need a partner to make that go faster to get this, you know, two company average profitability. And so that's why we're open to a number of different scenarios for this business. Thank you. The next question comes from the line of Jeff. [inaudible] Thanks very much. I think your performance in the first quarter of the categories that you look at aerospace. All of them came in lower than you expected, and my impression is that things weakened in March globally. So if we forget the second half.

Jack: And my impression.

Jack: Is that.

Jack: Things weaken.

Jack: In March globally.

Jack: If we forget the second half for a moment.

Jack: Is your expectation now.

Jack: At <unk>.

Jack: Second quarter.

Speaker Change: It's a little bit weaker than you thought it would be before as Hugh.

Speaker Change: We began the year.

And then secondly is Rs.

Speaker Change: <unk> share repurchase.

Speaker Change: I think over the past five years your average purchase price is about 130.

Jeffrey John Zekauskas: Unknown Speaker Your expectation now that the second quarter is a little bit weaker than you thought it would be, for as you began. And then secondly... I think over the past five, the average purchase is about, and so, you know, how do you how do you evaluate the success or what are you trying? 3.4 billion. Unknown Speaker, how will you gauge the success?

Speaker Change: And so.

Speaker Change: How do you how do you evaluate the success or what are you trying to achieve and tanking.

$3 4 billion and repurchasing your shares.

Speaker Change: How would you gauge the success of that allocation of capital.

Speaker Change: Okay, Hey, Jeff. Thanks for the question I'll take the kind of momentum question that you asked and events.

Timothy M. Knavish: Okay, Jeff, thanks for the question. I'll take the kind of momentum question that you asked and Vince can take the the repo one but, So, I mean, full transparency, there were a couple of things that were weaker in Q1 than what, what we expected. We expected the Walmart, lack of a walmart load in right so that's just that's just straight math we expected some uh negative easter timing impact uh i would say that was higher than what we expected and we are actually again it's only halfway through the first month but we're seeing a bit of post-easter snapback, Okay, so that was worse in the first quarter, but that'll be just shifting to the second quarter.

Speaker Change: Take the the repo one but.

Speaker Change: So full transparency there were a couple of things that were weaker in Q1 then.

Speaker Change: What we expected.

Speaker Change: Spec did the Walmart.

Speaker Change: Lack of a Walmart loading right. So that's just that's just straight math.

Speaker Change: <unk> did some negative Easter timing impact.

Speaker Change: I would say that was higher than what.

Speaker Change: We expected.

Speaker Change: And we are actually again, it's only halfway through the first month, but we're seeing a bit of post Easter snapback. Okay. So that was worse in the first quarter, but that will be just shifting to the second quarter. Two other things Europe was softer than we expected.

Timothy M. Knavish: Two other things, Europe was softer than we expected, and industrial production, combined with the launch of some of our share wins, was weaker than we expected. So if you think about all of those and roll forward to Q2, obviously, the Walmart load in comp isn't there. I mentioned we're getting an Easter snapback in Europe, early days, but we're comfortable with what we're seeing in April. So I'm not saying it's going to have a snapback, but we don't see it getting worse.

Speaker Change: And industrial production combined with the launching of some of our share wins was weaker than we expected. So if you think about all of those.

Speaker Change: And roll forward to Q2.

Speaker Change: Obviously, the Walmart load in comp isn't there I've mentioned, we're getting an Easter snapback on Europe early days, but we're comfortable with what we're seeing in April so I'm, not saying, it's going to have a snapback, but it's we don't see it getting getting worse and on the industrial side.

Vincent J. Morales: And on the industrial side, we are seeing that we are launching a number of those share gains that we executed throughout the second half of last year in Q2. And then finally, the refinish factor that I just mentioned, refinish, particularly in March, was a bit slower than we expected, but we're expecting a strong second half for refinish. Yeah, Jeff, this is Vince.

Speaker Change: We are seeing we are launching.

Speaker Change: A number of those share gains that we executed throughout the second half of last year.

Speaker Change: In Q2, and then finally, the refinished factor that I just mentioned.

Speaker Change: Refinish, particularly in March was.

Speaker Change: Was a bit slower than we expected, but we're expecting a strong second half for refinish.

Vincent J. Morales: In terms of share repo, obviously, your numbers are accurate in terms of the last several years. Again, we've gone, if you look over a longer time horizon, you know, there have been times where we've done minimal share repurchases for a consecutive number of years. Typically, when we're more active in M&A, there are times where we do, you know, a large portion of share repurchases over a couple, you know, series of years when the M&A market is not as robust, and we have excess cash or excess balance sheet capacity. When you look, we do calculate what we think is our intrinsic value of our stock price.

Speaker Change: Yes, Jeff this is Vince in terms of share repo, obviously your numbers are accurate.

Vincent Stephen Andrews: Terms of the last several years.

Vincent Stephen Andrews: Again, we've gone if you look over a longer time horizon.

Been times, where we've done.

Speaker Change: Minimal share repurchases for.

Speaker Change: Consecutive number of years typically when we were more active in M&A.

Speaker Change: Theres been times, where we've done.

Speaker Change: A large portion of the share repurchases over a couple of deals on a series of years when the M&A market is not as robust and we have excess cash or excess balance sheet capacity.

Speaker Change: When you look we do calculate what we think is our intrinsic value of our stock price we.

Vincent J. Morales: We do feel that with the 10% growth rate we have going forward, in our estimates, there are times where it's imperative for us to look at share repo as an option. As Tim said, we have a prioritized list of cash deployment and, again, dividends, keeping the businesses healthy with CapEx. We look at M&A, and then we look at the intrinsic value of the stock based on our assessment, and that's how we... effectuate the cash deployment.

Speaker Change: We do feel that with 10% growth rate, we have going forward.

Speaker Change: In our in our estimates.

Speaker Change: There are times, where it is.

Speaker Change: It's a.

Speaker Change: Fair enough for us to look at share repo as an option.

Speaker Change: As Tim said, we have a prioritized list of.

Speaker Change: Cash deployment and again does.

Speaker Change: Dividend keeping the business is healthy with with Capex, we look at M&A and then we look at the intrinsic value of the stock.

Speaker Change: Based on our assessment.

Speaker Change: How we effectuate that.

Speaker Change: Cash deployment.

Vincent J. Morales: Thank you. The next question comes from the line of Kelsen McCarthy with BRT. Your line is open. Thank you and good morning.

Kevin William McCarthy: Thank you. The next question comes from the line of Thompson Mccarthy with DRP. Your line is open.

Kevin William McCarthy: Thank you and good morning.

Kevin William McCarthy: Tim, I have a few questions for you on the subject of Europe. I think EMEA. 31% of your mix last year. If you do wind up divesting some or all of U.S. Architectural, maybe that number will rise a little bit. Moving forward, and it sounds like, you know, in contrast to China and India, which came in very strong, Europe did come in weaker than you expected. So a few questions would be, you know, A, what is driving the variance versus your prior expectation in Europe exactly? B, maybe you can provide some color on it.

Kevin William McCarthy: A few questions for you on the subjective of Europe, I think EMEA was.

Kevin William McCarthy: It was 31% of your mix last year, if you do wind up divesting some or all of U S and Canada architectural maybe that number will rise a little bit moving.

Kevin William McCarthy: Moving forward and it sounds like you know in contrast to China, and India, which came in very strong Europe did come in weaker than you expected. So a few questions would be.

Kevin William McCarthy: What is driving the variance versus your prior expectation in Europe exactly.

Kevin William McCarthy: Maybe you can provide some color on the consumer facing businesses that you have there versus industrial and I'm curious too.

Timothy M. Knavish: Transcripts provided by Transcription Outsourcing, LLC. Yep, thanks, Kevin. I'll take the last one first, just to check it off here.

Kevin William McCarthy: Understand whether rationalization of your customers' capacity as is.

Timothy M. Knavish: We have not seen any significant, I can't frankly think of any of our customers that have rationalized their capacity to the point that it's affecting our numbers in Europe. In Europe, I'd say that there were two businesses that probably affected us the most in Q1. One was consumer facing, and that was DECO.

Kevin William McCarthy: Is playing a role at all we're hearing more and more about that from various chemical companies anyway. So just a little bit more color on the region, there and kind of what glide path of volume you need macro wise to to achieve that positive volume growth overall for the company that you alluded to.

Speaker Change: Yes, Thanks, Kevin I'll take the last one first because the ticket off here, we have not seen any significant I cant frankly think of any of our customers that have rationalized their capacity to the point that it's affecting our numbers in Europe.

Timothy M. Knavish: That was slower than we expected, mostly in France and in the Nordics. But we did see green shoots in the east, where we're also quite strong. So that's given us a little, a little optimism looking forward. The second business on the industrial segment, automotive, was weaker, weaker than we expected for the quarter.

In Europe.

Speaker Change: I'd say that.

Speaker Change: Two businesses that.

Speaker Change: That probably affected us the most in Q1.

Speaker Change: One was consumer facing and that was deca that was that was slower than we expected.

Speaker Change: Mostly in France and in the Nordics, we did see.

Speaker Change: Green shoots in the East where were also quite strong so that's given us a little a little optimism looking forward. The second business on the industrial segment automotive automotive was was weaker weaker than we expected for the quarter. So that gives some insight.

Timothy M. Knavish: So that gives some insights there. But as we look forward, you know, we do again early in April, we're seeing a better order book and better shipments. We do see, we do believe that, as we talk to our customers, that the deco businesses in those hard-hit countries are bouncing back; they're not expecting it to get worse. And we do see recoveries beginning to happen in the East. And again, each individually, maybe not the largest DECO markets, but when you add them together, you know, they're an important part of our portfolio, places like Poland, Romania, where we have strong number-one positions and growing, places like Hungary and Czech Republic. So we do see some green shoots there. So we are not expecting DECO to get worse.

Speaker Change: <unk>, there, but as we look forward.

Speaker Change: We do again early days in April we're seeing a better order book and better shipments.

Speaker Change: We do see we do believe that as we talk to our customers.

Speaker Change: The Deco business is in those hard hit countries is bouncing off the bottom they are not expecting it to get worse.

Speaker Change: And we do see recovery beginning to happen and in the east and again, each individually maybe not the largest deco markets, but when you add them together.

Speaker Change: They are important part of our portfolio places like Poland.

Speaker Change: Places like Romania, where we have strong strong number one positions in growing places like Hungary, and Czech So we do see.

Speaker Change: Some some green shoots there so.

Speaker Change: We are not expecting deco to get worse.

Timothy M. Knavish: But we're also not naive enough to say there's going to be a huge V-shaped growth, but we are expecting incremental improvements. And if you think about all the cost actions that we've taken on that continent, a little bit of incremental volume delivers really good leverage. Automotive, you know, we're taking a bit of a wait and see approach.

Speaker Change: But we're also not naive enough to say theres going to be a huge V shape, but we are expecting incremental improvements and if you think about all the cost actions that we've taken on that continent, a little bit of incremental volume delivers really good really good leverage.

Speaker Change: Automotive, we're taking a bit of a wait and see also we're not expecting it to get worse, but marginally. It's a similar story all were very different end customer base.

Timothy M. Knavish: Also, we're not expecting it to get worse, but marginally, it's a similar story, very different and customer-based. We are expecting modest recovery, but we're watching it closely. And at the end of the day, with Europe... This has been a benign macroeconomic environment for a decade. Maybe more.

Speaker Change: We are expecting modest recovery, but we're watching it closely and at the end of the day with Europe.

Speaker Change: This has been a benign macro.

Speaker Change: Environment for a decade.

Speaker Change: Maybe more but our teams have shown the ability to do what they need to do from a positive mix a positive price and importantly, structural cost standpoint to deliver earnings and cash even in that very benign environment. So sum. It all up Q1 was worse than we expected in those.

Timothy M. Knavish: But and importantly, a structural cost standpoint to deliver earnings and cash, even in that very benign environment. So to sum it all up, Q1 was worse than we expected in those couple of businesses. We are expecting sequentially incremental improvements, which will give us good leverage, and we are watching it closely. And if we don't see what we need to see, we will take further structural cost action. Yeah, Kevin. This is Vince.

Speaker Change: Couple of businesses.

Speaker Change: We're expecting sequentially incremental improvements, which will give us good leverage.

But we are watching it closely and if we don't see what we need to see we will take further structural cost actions.

Speaker Change: Yes, Kevin this is Vince I'll, just add a point.

Vincent J. Morales: I'll just add a point on architecture, as Tim mentioned, lower than our expectations in Q1, largely due to March. But if you look at our performance through the first two months of the year, so Jan-Feb, that business was on our targets. We do feel there was a bigger Easter impact, and we're seeing again, a snapback, at least early in April, in that business. Thank you. The next question comes from the line of Aleksey Yefremov with Kinkar.

Vincent Stephen Andrews: <unk> architectural as Tim mentioned lower than our expectations in Q1.

Vincent Stephen Andrews: Largely attributed to March if you look at our performance through the first two months of the year, So Jan fab.

Vincent Stephen Andrews: Business was on our targets and we do feel there was a bigger Easter impact and we're seeing again, a snapback at least early in April in that business.

Vincent Stephen Andrews: Thank you. The next question comes from the line of Alex.

Yes, three months with key car.

Aleksey V. Yefremov: Your line is open. Thank you and good morning. This is Ryan on.

Alex: Your line is open.

Alex: Thank you and good morning. This is Ryan on for Alexia just wanted to talk a little bit more about the targeted pricing youre doing in performance coatings wondering if you can discuss a little bit from some of the areas other than refinish and then just wondering if you guys are like having some more success in recent weeks following this uptick in oil.

Unknown Attendee: I just wanted to talk a little bit more about Targeted Bob. Unknown Attendee, Unknown Shareholder, Unknown Attendee, Unknown Attendee, Unknown Attendee. Yeah, so Ryan, the question on pricing, again, we'll continue to execute as we always have in refinish, as I described, you know, but all across performance. We deliver a value proposition that's far beyond the tin of paint. And that's what enables us to continue to offset things like wage inflation, which is higher than we expected.

Alex: Yeah.

Speaker Change: Yes so.

Speaker Change: Ryan This is a question on pricing again.

Speaker Change: We will continue to execute as we always have in refinish as I described.

Speaker Change: But all across performance.

Speaker Change: Yeah.

We deliver a value proposition that's far beyond the 10 of paint.

Speaker Change: And that's what enables us to continue to offset things like wage inflation, which are higher than we expected things.

Unknown Attendee: These offset things like logistics expenses, which are higher than we expected. And that's because we typically supply very advanced technologies in our own products, but then additional services and tools to help the customer beyond what's inside the can of paint.

Speaker Change: Ops offset things like logistics expenses, which are higher than we expected and thats, because we typically supply very advanced technologies.

Speaker Change: Our own products, but then additional.

Speaker Change: Services and tools to help the customer beyond what's inside of a can of paint. So we expect to get price in refinish youll see incremental price in aerospace.

Timothy M. Knavish: So we expect to get price and refinish. You'll see incremental price in aerospace. We expect it in parts of PMC, where we have some really good, sustainable solutions for our customers that they're very interested in. And so we really expect it to happen almost across the whole portfolio of performance coatings. The next question comes from the line of Michael Leithead with Boston. Your line is:

Speaker Change: We expect it in parts of PMC, where we have some really good sustainable solutions for our customers that.

Speaker Change: But they are very interested in and so we really expect it to see almost across the whole portfolio performance coatings.

Speaker Change: Thank you.

Speaker Change: The next question comes from the line of.

Speaker Change: Mike.

Mike: With Barclays. Your line is now open.

Michael James Leithead: Great, thanks. Good morning, guys. Question for Vince on raw materials and inventory. Talk about where you guys are relative to more normalized raw material buying patterns. It looks like you maybe still have a few extra days of inventory.

Mike: Great. Thanks, Good morning, guys.

Mike: <unk> for Vince on Raws and inventory can you just talk about where you guys are relative to more normalized raw material buying patterns. It looks like you're maybe still have a few extra days of inventory and then I. Appreciate you don't give free cash flow guidance, but just given your full year assumptions.

Vincent J. Morales: And then I appreciate you don't give free cash flow guidance but just give your full year assumptions. Raw is down, low to mid singles volume up for the full year. I guess broadly, should we still expect working capital to be a source of cash? Yeah, I'll take the end of that, Michael, because our assumption is we're going to continue to work down. We have excess inventory relative to our history, and we're going to continue to work that down, especially as we're in this peak production season that Tim alluded to earlier. We're probably carrying four to five days of excess inventory versus history, and all of that is in raw materials. And we've made progress. We were at 10 days at one point last year.

Mike: <unk> downloaded mid singles volume up for the full year I guess broadly should we still expect working capital to be a source of cash this year.

Vincent Stephen Andrews: Yes, I'll take the end of that Michael because our assumption is we're going to continue to work down.

Vincent Stephen Andrews: We have excess inventory relative to our history.

Michael: Going to continue to work that down, especially if we're in this peak production season that Tim alluded to earlier.

Speaker Change: We're probably carry in four to five days of excess inventory versus history all of that's in raw materials.

Speaker Change: And we've made progress we were 10 days at one point last year. So we're about halfway through our journey.

Vincent J. Morales: So we're about halfway through our journey. We hope to take another bite out of that in Q2, a sizable bite in Q2. And then for the balance of the year, continue to be prudent in our purchases, and that should generate a positive working capital on a year over year basis, and the working capital impact on the year over year basis on free cash flow. In terms of our purchases, as I said, the opening remarks, or as Tim said, the opening remarks. Most of our suppliers have an excess supply.

Speaker Change: We hope to take another bite out of that in Q2 sizable bite in Q2, and then for the balance of the year continue to be.

Speaker Change: Prudent in our purchases.

Speaker Change: And that should generate a.

Speaker Change: Positive.

Speaker Change: Working capital on a year over year basis, working capital impact on the year over year basis on free cash flow.

Speaker Change: In terms of our purchases as I said, the opening or as Tim said in the opening remarks, most of our suppliers of excess supply.

Vincent J. Morales: This is a market that is an advantage for us, and we'll continue to push that. But again, our intention is to work down raw materials in concert with the peak season. Thank you. The next question comes from the line of Laurence Favre, from BNP Paribas. Your line is: Good morning.

Speaker Change: This is.

A market that is advantage for us and we will continue to push that.

But again, our intention is to work down raw materials in concert with the peak season.

Speaker Change: Thank you. The next question comes from the line of Lauren.

Lauren: From BNP Paribas Your line is open.

Lauren: Thanks, Good morning, I had a question on China, I think you talked about growth in Q1, presumably this was <unk> impacted by Covid.

Laurent Guy Favre: I had a question about China, about growth in Q1, but presumably the, Hey, Laurent, thanks. Sure, there was an impact, some impact on COVID. But, you know, automotive was a big driver. We expect that to continue. We're expecting double digits, high single digit kind of growth again in Q2 from automotive. Industrial coatings grew in China for us, and we expect that to continue.

Lauren: When you look into Q2, what kind of momentum.

Lauren: <unk>.

Speaker Change: They are on the ground. Thank you.

Speaker Change: Thanks sure.

Speaker Change: <unk>.

Speaker Change: Some impact on on Covid, but.

Speaker Change: Automotive was a big driver.

Speaker Change: We expect that to continue or expecting double digit high single digit kind of growth again in Q2 from automotive.

Speaker Change: Industrial coatings grew in China for Us and we expect expect that that to continue refinish grew in China, and we expect that to continue so it's really.

Timothy M. Knavish: Refinish grew in China, and we expect that to continue. So it's really, you know, we've been maybe more confident than others on China for the last several quarters, and that is actually playing out as we expected. So, you know, I don't I don't think you're going to see, you know, overnight, growth rates of, you know, five, 10 years ago, but we remain confident in continuous growth in China.

Speaker Change: We've been maybe more confident than others on China for the last several quarters and that is actually playing out as we expected so.

Speaker Change: I don't I don't think youre going to see overnight going back to the growth rates of Av.

Speaker Change: Five years 10 years ago, but we remain confident and continuous growth in China.

Timothy M. Knavish: Yeah, and just a couple other data points. Our aerospace business is doing well there, the Chinese New Year brought about record travel in the country, and again, industrial activity there for our set of products and our set of businesses, which we expect to remain strong. Thank you. The next question comes from the line of Aaron Viswanathan with RPC. Great, thanks for taking my question. I just want to go back to the volume outlook.

Yes, just a couple other data points.

Speaker Change: Our aerospace business is doing well there.

Speaker Change: The Chinese new year brought about record travel.

Speaker Change: In the country and again industrial activity there for our set of products in our set of businesses, we expect to remain strong.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of Aaron.

Aaron: Please RBC your line is open.

Aaron: Great. Thanks for taking my question I, just wanted to go back to the volume outlook.

Arun Shankar Viswanathan: So it looks like you're guiding organic sales to be up low single digits in the second quarter and for the full year as well. So if you look at that second quarter number, it looks like low single digits. You can have some targeted price initiatives. Assumed flat volumes for Q2.

Aaron: It looks like you.

Aaron: You're guiding organic sales to be up low single digits in the second quarter and for the full year as well.

Aaron: So if you look at that second quarter number looks like.

Aaron: Single digits.

Speaker Change: Can I have some targeted price initiatives.

Should we assume kind of flat volumes for Q2.

Arun Shankar Viswanathan: And similarly for the full year, how are you thinking about consolidated volume growth? I know you've given out some guidance.,,,,,,,,,,,,,,, Unknown Speaker In the back half, am I reading that correctly?

Speaker Change: And then similarly for the full year, how are you thinking about kind of consolidated volume growth.

Speaker Change: I know you've given out some guidance and.

Speaker Change: By segment as well on the slides, but.

Speaker Change: It would look like.

Speaker Change: Need.

Speaker Change: Kind of a ramp to about the low to mid single digit from volumes.

Arun Shankar Viswanathan: Or, yeah, maybe you can just clarify how you're thinking about volumes, how they should evolve. Yeah, thanks, Arun. It's Tim.

Speaker Change: In the back half or am I reading that correctly or maybe you can just clarify how you're thinking about volumes.

Speaker Change: Should evolve through the year.

Timothy M. Knavish: You're reading the second half, I think, correctly. But Q2, one adjustment: you said price up, volume flat. We're actually expecting more price flatness, and volume up. Some of that because of what Vince talked about earlier; we still have a little bit of carryover of price negativity from that European energy cost pricing from last year. So Q2, price flat, volume up, and the rest of the year, I think you described it well, is that we'll see volume growth momentum moving through Q3 and Q4. Thank you. The next question comes from the line of Josh Spector with UBS. Yeah, hey, good morning.

Speaker Change: Yeah, Thanks, Arun it's Tim.

Timothy M. Knavish: Youre reading the second half I think correctly.

Speaker Change: But Q2 <unk>.

Timothy M. Knavish: One adjustment.

Timothy M. Knavish: That price up volume flat, we're actually expecting more price flat volume up.

Timothy M. Knavish: Some of that because of what Vince talked about earlier, we still have a little bit of carryover of price negativity from that <unk>.

Timothy M. Knavish: European energy cost pricing from from last year, So Q2 price flat volume up and the rest of the year. I think you described it well is that we'll see.

Timothy M. Knavish: <unk> growth momentum.

Timothy M. Knavish: Moving through Q3 and Q4.

Timothy M. Knavish: Thank you. The next question comes from the line of Josh Josh Spector with UBS. Your line is open.

Joshua David Spector: I wonder if you could just talk about America's architecture a little bit more. So, you know, excluding the load and impact, it seems like your volumes are up slightly. Curious just how much of that is Comex continuing to grow versus what you're seeing in the US? And if you could help us kind of delineate in the US, what's going on with Pro and DIY from a volume standpoint, first. Yeah, Josh, actually, it's a little bit, a little bit flip-flopped.

Joshua David Spector: Yeah, Hey, good morning.

Joshua David Spector: Now if you could just talk about America's architectural a little bit more so excluding the loan and impact. It seems like your volumes are up slightly curious how much of that is comex continuing to grow versus what youre seeing in the U S and if you could help us kind of delineate in the U S. What's going on with pro and DIY from a volume.

Joshua David Spector: In the first half.

Speaker Change: Yes, Josh actually it's a little bit little bit flipped a lot because of Mexico, while it had a.

Joshua David Spector: Because Mexico, while it had another great quarter from a kind of sales and earnings standpoint, as well as cash, the Easter impact in Mexico was more of an impact than it was up here. It's a really important holiday for our friends in Mexico.

Speaker Change: Another great quarter from a sales and earnings standpoint, as well as cash.

Speaker Change: The Easter impact in Mexico was was more of an impact than it was then it was up here. It is a really important holiday for our friends in Mexico, and so we actually we actually had.

Timothy M. Knavish: And so we actually had, you know, decent performance in our architectural US business versus versus, you know, last year and versus the kind of market we're confident that we would gain share in 2023. And we saw that momentum continuing into Q1. All on the pro side though, Josh, DIY remains soft, but we did see a good performance.

Speaker Change: Decent performance in our architectural U S business.

Speaker Change: Versus versus last year and versus the kind of market. We're confident that we gained share in 2023, and we saw that momentum continuing into Q1.

Speaker Change: All on the pro side, though Josh DIY remains soft.

Speaker Change: We did see good performance the way, we look at our pro business now with what we're doing between our own network or partner home depot and our many good partners across the private dealer channel, we look at it in totality and despite all the negative macros all the negative news recently is.

Timothy M. Knavish: The way we look at our pro business now with what we're doing between our own network, our partner, Home Depot, and our many good partners across the private dealer channel, we look at it in totality. And despite all the negative macros, all the negative news as recently as this week on housing, we were up, we were up low single digits for the architectural U.S. business. On the pro side, I'm sorry, that's on the pro side. The next question comes from the line of Mike Harrison with Seaport Research Park. You're lying to yourself.

Speaker Change: This week on housing.

Speaker Change: We were up we were up low single digits.

Speaker Change: For for the architectural U S business.

Speaker Change: On a pro I'm sorry, that's on the process.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of Mike Harrison with Seaport Research partners.

Michael Joseph Harrison: Your line is open.

Michael Joseph Harrison: Hi, good morning. I was wondering if you could give a little more color on, Unknown Speaker. Obviously, you gave us some comments on what you're seeing in China, but what are some of the key markets that you're serving in India? What's your current position? And I guess maybe what stage or inning are we in? Yeah, Mike, I was just there. I just got back a couple of weeks ago.

Michael Joseph Harrison: Hi, Good morning was wondering if you could.

Give a little more color on what Youre seeing in India.

Michael Joseph Harrison: Obviously, you gave us some comments on what Youre seeing in China.

Michael Joseph Harrison: What are some of the key markets that you're serving.

Michael Joseph Harrison: What's your current position.

Michael Joseph Harrison: I guess, maybe what what stage or inning are we in in terms of the growth potential that you see in India.

Speaker Change: Yes, Mike I was just there I just got back a couple of weeks ago and it was fascinating.

Timothy M. Knavish: And it was fascinating. You know, I've been going to India for 25 years. And there was always, always a lot of talk of improvements in infrastructure and public investment and growth. It's happening now; it is actually happening, and it is very noticeable. If you go regularly, you will see a big difference there. A lot more, a lot more cranes, a lot more highways being constructed, trains, and airports. We've got a very good position there, mostly in the automotive, industrial, and refinish sectors. And all of those businesses are growing. And we feel really good about the growth trajectory going forward. But it is not one of our top five countries today.

Speaker Change: <unk> go into India for 25 years, and there was always.

Speaker Change: Always a lot of talk of improvements in infrastructure and public investment and growth.

Speaker Change: It's happening now it is actually happening is very noticeable if you go.

Speaker Change: Regularly you will see a big difference there a lot more a lot more cranes a lot more highway is being constructed trains airports.

Speaker Change: We've got a very good position there, mostly on automotive industrial and refinish and all of those businesses are growing and we feel really good about the growth trajectory going forward now it is not in.

In our top five countries today, but the reason that we've started to highlight it is one we do have a very good position there.

Timothy M. Knavish: But the reason that we've started to highlight it is one, we do have a very good position there. And, you know, for the first time in a long time, we see real, tangible industrial production and infrastructure growth on the ground. And what's fostering that is we are seeing a significant amount of reshoring in Asia to India. The economy there is growing as robustly as Mexico.

Speaker Change: And for the first time in a long time, we see real tangible industrial production and infrastructure growth on the ground.

Speaker Change: And Mike what's what's fostering that is we are seeing a significant amount of re shoring and Asia to India.

Speaker Change: The economy, there is growing as robustly as Mexico.

Vincent J. Morales: And again, that's driving that industrial activity. Thank you. The next question comes from the line of Lawrence Alexander with Jeffreys. Your line is open. Good morning, just one quick one.

Speaker Change: And that gain that's driving that industrial that industrial activity.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of Laurence Alexander with Jefferies. Your line is open.

Laurence Alexander: Good morning, just one quick one.

Laurence Alexander: On the proposed <unk>.

Laurence Alexander: On the proposed as the impossible exit of the silicas and north and the restructuring of the North America coating, how much would that have changed your volatility? Transcripts provided by Transcription Outsourcing, LLC. To what degree does the volatility of the businesses you're acquiring factor in, or just how are you thinking about that, managing that going forward? Sure, sure. Thanks, Lawrence.

Laurence Alexander: <unk> exit of the silicon the north and the restructuring of the North America coatings how.

Laurence Alexander: How much would that have changed your volatility.

Laurence Alexander: Across your business.

Laurence Alexander: Yes, just going forward I mean, you talked about M&A sort of leading to move through focusing on higher growth higher margin.

Laurence Alexander: To what degree does the volatility of the businesses you are acquiring factor in or just how are you thinking about managing that going forward.

Sure sure. Thanks Laurence.

Timothy M. Knavish: You know, the volatility, the cyclicality, the seasonality are factors, of course. But I would say the number one and two factors are, does it improve our overall organic growth profile on a long-term basis for the company, and does it improve our overall margin profile? So those are our first two factors. And then, if we can do it without adding cyclicality and seasonality, even better. To the first part of your question, clearly, Architectural US Canada is one of our more highly seasonal businesses.

Sure.

Laurence Alexander: The volatility the cyclicality, the seasonality or factors of course.

Speaker Change: But I would say.

Speaker Change: The number one and two factors or does it improve our overall organic growth profile on a on a long term basis for the company and does it improve our overall margin profile. So those are our first two factors and then if we can if we can do it without adding the cyclicality and seasonality.

Speaker Change: <unk>, even better due to the first part of your question clearly.

Speaker Change: Architectural U S. Canada is one of our more highly seasonal businesses. So if we do separate entirely from that business.

Timothy M. Knavish: So if we do separate entirely from that business, you can visualize the outcome there. And I would say the silica business does have some cyclicality to it because part of that business is tied to, you know, auto OEM production and tires, but only a portion of that business; other parts of it are tied to the automotive aftermarket and tires, other parts are tied to battery separators, and consumer electronics.

Speaker Change: Can you can visualize the outcome there.

Speaker Change: And I would say the silicones business does have some cyclicality to it because part of that business is tied to auto OEM production in tires.

Speaker Change: But only a portion of that business other parts of it are tied to automotive aftermarket and tires. Other parts are tied to battery separators are consumer electronics. So I would say it will have some impact but not enough that it's going to I think affect your modeling of how you might model the company in its entirety from a cyclic.

Timothy M. Knavish: So I would say it will have some impact, but not enough that it's going to, I think, affect your modeling of how you might model the company in its entirety from a cyclicality standpoint. Yeah, Lawrence, Vince, just a reminder, as we said in February, this has a multiple hundred basis point impact on sales volume improvement if you do it on a pro forma basis. But again, looking at that over a period of time, it's not significant in terms of cyclicality.

Speaker Change: <unk> standpoint.

Speaker Change: Lawrence Vince just a reminder, as we said in February this has a multiple 100 basis point impact on sales volume improvement. If you do a pro forma basis, but again looking at that for a period of time, it's not significant in terms of cyclicality.

Vincent J. Morales: Thank you. There are no further questions at this time. I will now turn the call back over to Jonathan Edwards.

Speaker Change: Thank you.

Speaker Change: There are no further questions at this time I will now turn the call back over to you Jonathan.

Jonathan Edwards: Thank you for your continued confidence in PPG. We want to thank you as well for your good operation. It is so much appreciated. This concludes our prepared remarks, and now, or sorry, we appreciate your interest and confidence in PPG. This concludes our first quarter earnings. Thank you everyone. This concludes today's conference call. You may now disconnect.

Jonathan Edwards: Okay. Thank you for your continued confidence in TPG do want to thank you as well for a good operating so much appreciate it. This concludes our prepared remarks and now.

Speaker Change: We appreciate your interest in confidence PBT. This concludes our first quarter earnings call.

Speaker Change: Okay.

Speaker Change: Thank you everyone. This concludes today's conference call you may now disconnect.

Speaker Change: Okay.