Q4 2024 PPG Industries Inc Earnings Call

January 31, 2025

P P G earnings conference call.

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

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

If you would 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 withdraw your question. Please press Star then two.

Speaker Change: 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 chemical over to Alex Lopez Director of Investor Relations. Please go ahead Sir.

Speaker Change: Thank you Brito and good morning, everyone. This is Alex Lopez director of Investor Relations. We appreciate your continued interest in PPE and welcome you to our fourth quarter and full year 2024 earnings conference call.

Alex Lopez: Joining me today from PPE, our teams are <unk>, Chairman and Chief Executive Officer, and Vince Morales, Senior Vice President and Chief Financial Officer.

To allow everyone an opportunity to ask a question the company request that each analyst ask only one question. Thank you.

Alex Lopez: Our comments relate to the financial information released after U S equity market close on Thursday January 32025.

Alex Lopez: I would now like to technical over to Alex Lopez Director of Investor Relations. Please go ahead Sir.

Alex Lopez: Thank you Brito and good morning, everyone. This is Alex Lopez director of Investor Relations. We appreciate your continued interest in PPE and welcome you to our fourth quarter and full year 2024 earnings conference call.

Alex Lopez: We have posted detailed commentary and the accompanying presentation slides, which are being shown on this webcast on the Investor Center of our website <unk> Dot com.

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

Alex Lopez: Joining me today from PPE, our teams are <unk>, Chairman and Chief Executive Officer, and Vince Morales, Senior Vice President and Chief Financial Officer.

Alex Lopez: 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.

Alex Lopez: Our comments relate to the financial information released after U S equity markets closed on Thursday January 32025.

Alex Lopez: This is statements involve uncertainties and risks, which may cause actual results to differ.

Alex Lopez: We have posted detailed commentary and accompanying presentation slides.

Alex Lopez: The company is under no obligation to provide subsequent updates to these forward looking statements.

Alex Lopez: Which are being shown on this webcast on the Investor Center of our website <unk> Dot com.

Alex Lopez: 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.

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

Alex Lopez: For additional information please refer to ppg's filing with the SEC.

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

Tim: Now, let me introduce PPE, chairman and CEO, Tim <unk>.

Alex Lopez: The company is under no obligation to provide subsequent updates to these forward looking statements.

Tim: Thanks, Alex and good morning, everyone welcome to our fourth quarter and full year 2024 earnings call before I start I'd like to offer prayers and condolences to those who lost their lives in Yesterdays Turbo air collision in Washington, DC, our prayers are with their family friends loved ones terrible.

Tim: Tragedy, and I hope and pray that none of you had any loved ones affected.

Alex Lopez: For additional information please refer to ppg's filing with the SEC.

Tim: Now, let me introduce PPE, chairman and CEO, Tim <unk>.

Tim: Now I'll begin by providing a few highlights of our full year 2024 in the fourth quarter financial performance and then I'll move to our outlook.

Tim: Thanks, Alex and good morning, everyone welcome to our fourth quarter and full year 2024 earnings call before I start I'd like to offer prayers and condolences to those who lost their lives in Yesterdays Turbo air collision in Washington D. C. Our prayers are with their family friends loved ones.

Tim: And on behalf of PPG I'd also like to apologize for the volume of changes recasting of financials, the new segmentation. The guide structure, but this is a positive and critical inflection point for our company.

Tim: And we wanted to structure the reporting on a go forward basis to reflect this as.

Speaker Change: Terrible tragedy, and I hope and pray that none of you had any loved ones affected.

Tim: As a result of the architectural coatings U S and Canada divestiture, all financial information provided in the earnings material has been recast to reflect this business as a discontinued operation consistent with U S GAAP requirements.

Tim: Okay.

Tim: Now I'll begin by providing a few highlights of our full year 2024, and fourth quarter financial performance and then I'll move to our outlook.

Speaker Change: And on behalf of PPG I'd also like to apologize for the volume of changes recasting of financials, the new segmentation. The guide structure, but this is a positive and critical inflection point for our company.

Tim: Okay.

Tim: In 2024, the team has demonstrated resilience in a challenging macro are driving growth and adjusted EPS from continuing continuing operations and aggregate segment EBITDA led by sales of our technology advantage products.

Tim: We wanted to structure the reporting on a go forward basis to reflect this as.

Tim: Structural cost actions and moderating input costs, we delivered record results in several of our businesses, including aerospace coatings automotive refinish coatings and architectural coatings Latin America.

Tim: Despite strong share gains in certain businesses organic sales declined a low single digit percentage year over year, driven by overall weak macros.

Tim: Okay.

Tim: In 2024, the team has demonstrated resilience in a challenging macro by driving growth in adjusted EPS from continuing continuing operations and aggregate segment EBITDA led by sales of our technology advantage products.

Tim: However, we delivered growth in Mexico, and China, as well as growth in aerospace protective and marine packaging traffic solution businesses offset by industry declines in auto OEM industrial and our architectural EMEA coatings business.

Tim: For the full year adjusted EPS was $7 87, which grew 6% year over year and excludes 27 of EPS that has been reclassified to discontinued operations.

Tim: Despite strong share gains in certain businesses organic sales declined a low single digit percentage year over year, driven by overall weak macros.

Tim: Selected results of the divested divestiture of the U S. Canada architectural business with the exception of certain allocated costs.

Tim: Strategically during the fourth quarter, we further optimized our portfolio as we completed the divestitures of our silica products and architectural coatings U S and Canada businesses. This is a significant step forward for our company as these divestitures improve our financial profile, including higher operating.

Tim: For the full year adjusted EPS was $7 87, which grew 6% year over year and excludes 27 of EPS that has been reclassified to discontinued operations.

Tim: Margins and results in a more focused organization, which positions the company to deliver sustainable organic growth.

Tim: Selected results of the divested divestiture of the U S. Canada architectural business with the exception of certain allocated costs.

Tim: As we've said our portfolio moves this past year have strengthened the company's financial profile. When you combine the impact of these transactions.

Tim: The organic improvement in margins, we delivered on our remaining businesses you will note that we have now achieved top tier EBITDA margins.

Tim: This performance reflects the value our customers assigned to our technology advantage products and services our solutions are well trusted brands, our strong global position across the coatings verticals and the cross synergies of our business portfolio. We believe that both this margin profile and our enterprise.

Tim: Margins and results in a more focused organization, which positions the company to deliver sustainable organic growth.

Tim: As we've said our portfolio moves this past year have strengthened the company's financial profile. When you combine the impact of these transactions.

Tim: Growth actions are great catalyst for the future value creation of PPG.

Tim: The organic improvement in margins, we delivered on our remaining businesses you will note that we have now achieved top tier EBITDA margins.

Tim: Given the revised portfolio, we have expanded our segment reporting structure and will now report all of our architectural coatings businesses as a separate segment global architectural coatings.

The reporting of the remainder of the businesses within performance coatings and the industrial coatings segment will remain the same.

Tim: This expanded segmentation provides investors with enhanced visibility as we drive the company's growth and performance.

Tim: Growth actions are great catalyst for the future value creation of PPG.

Tim: Our global architectural coatings and performance coatings segments.

Tim: <unk> now have full year EBITDA margins at or above 20%.

Tim: <unk>, the differential technologies and strong brand positions of our various businesses our.

Tim: Our industrial coatings segment delivered 16% EBITDA margin, despite operating in a weak global industrial macro environment.

Tim: The reporting of the remainder of the businesses within performance coatings and the industrial coatings segment will remain the same.

Tim: This expanded segmentation provides investors with enhanced visibility as we drive the company's growth and performance.

Tim: Okay.

Tim: Each of our segments has unique characteristics that allow us to deliver exceptional value to our customers by leveraging the distinct strengths of our businesses. We are positioned to drive innovation increased demand for our technology advantage products and deliver sustainable and profitable growth, while increasing returns to our shareholders.

Tim: Our global architectural coatings and performance coatings segments.

Tim: <unk> now have full year EBITDA margins at or above 20%.

Tim: Reflecting the differential technologies and strong brand positions of our various businesses.

Tim: And our global architectural coatings segment, we have excellent and well recognized brands with World class distribution and a strong number one or number two position in more than 15 countries.

Tim: Our industrial coatings segment delivered 16% EBITDA margin, despite operating in a weak global industrial macro environment.

Tim: Our performance coatings segment is focused on various aftermarkets that traditionally are more stable and have a more fragmented customer base.

Tim: Yeah.

Tim: Within this segment, we offer a differentiated and highly specified product and digital solutions that enable our customers' productivity.

Tim: Our industrial coatings segment delivered highly technical products and services for our global <unk> customers, we operate field service teams and our customers facilities, which allows us to develop strong relationships and deep understanding of their productivity needs also we typically grow with our customers as they expand around the world.

Tim: Our performance coatings segment is focused on various aftermarkets that traditionally are more stable and have a more fragmented customer base.

Tim: Okay.

Tim: In the fourth quarter, despite the choppy environment, our adjusted EPS grew by 6% year over year, excluding the impact of unfavorable foreign currency translation.

Tim: Within this segment, we offer differentiated and highly specified product and digital solutions that enable our customers' productivity.

Tim: We delivered strong organic sales growth in aerospace coatings protective and marine coatings in traffic solutions. This was our ninth consecutive quarter of aggregates segment margin improvement and we have delivered cumulative margin improvement of approximately 400 basis points since 2022.

Tim: Also we typically grow with our customers as they expand around the world.

Tim: Yeah.

Tim: In the global architectural coatings segment fourth quarter net sales were significantly impacted by unfavorable foreign currency translation, primarily from Mexican peso.

Tim: Okay.

Tim: In the fourth quarter, despite the choppy environment, our adjusted EPS grew by 6% year over year, excluding the impact of unfavorable foreign currency translation.

Tim: Sales volumes declined due to weak consumer confidence in the European architectural coatings market. However, we benefited from our strong concessionary concessionaire network in Mexico, where demand is robust for our products and services.

Tim: For the full year segment EBITDA margin improved by 70 basis points as lower volumes were offset by our cost control actions and net price impact during the year.

Tim: Yeah.

Tim: And the global architectural coatings segment fourth quarter net sales were significantly impacted by unfavorable foreign currency translation, primarily the Mexican peso sales.

Tim: In the performance coatings segment fourth quarter organic sales grew 4% with both price and sales volume improvements.

Tim: Within this segment aerospace coatings demonstrated continued strong performance with record fourth quarter sales and double digit percentage organic sales growth.

Tim: Despite improved production capacity and other productivity gains the order backlog increased to approximately $300 million.

Tim: For the full year segment EBITDA margin improved by 70 basis points as lower volumes were offset by our cost control actions and net price impact during the year.

Tim: Demonstrating the strong demand for our technology advantaged products as well as excellent industry dynamics.

Okay.

Tim: In auto refinish sales volumes declined in the U S with benefits from share gains more than offset by lower industry.

Tim: In the performance coatings segment fourth quarter organic sales grew 4% with both price and sales volume improvements with.

Tim: Collision claims.

Tim: This segment Aerospace coatings demonstrated continued strong performance with record fourth quarter sales and double digit percentage organic sales growth.

Tim: These share gains are a product of the demand for our technology advantage products and services in 2024. The company grew the number of link services subscriptions and added more than 600 additional moonwalk installations that now total more than 2500 around the world, adding to our subscription revenue.

Tim: Despite improved production capacity and other productivity gains the order backlog increased to approximately $300 million.

Tim: Demonstrating the strong demand for our technology advantage products as well as excellent industry dynamics.

Tim: Protective and marine coatings has demonstrated strong growth in the fourth quarter supported by increasing global demand of our technologies and our recent share gains. This was the seventh consecutive quarter with positive year over year sales volume growth and we expect the positive momentum to continue.

Tim: In auto refinish sales volumes declined in the U S with benefits from share gains more than offset by lower industry.

Tim: Collision claims.

Tim: These share gains are a product of the demand for our technology advantage products and services in 2024. The company grew the number of linked services subscriptions and added more than 600 additional moonwalk installations that now total more than 2500 around the world, adding to our subscription revenue.

Tim: Segment EBITDA margin improved in both the fourth quarter and full year due to positive volume and strong net price impact.

Tim: In the industrial coatings segment demand was constrained by soft global industrial production and weak automotive OEM industry production.

Tim: As expected and forecasted by industry consultants auto OEM industry production was lower year over year in the U S and Europe.

Tim: Our results followed that lower demand trend and we were able to partially offset the decline in sales volumes with share gains in Latin America and China.

Tim: Segment EBITDA margin improved in both the fourth quarter and full year due to positive volume and strong net price impact.

Tim: Industrial production was also sluggish in Europe, and the U S, which resulted in lower year over year sales volume in the industrial coatings business.

Tim: In the industrial coatings segment demand was constrained by soft global industrial production and weak automotive OEM industry production.

Tim: Sales volume declines in those regions were partially offset by strong growth in Latin America.

Tim: Prices in the industrial coating segments declined due to lower index based selling prices as raw material cost declined in the latter part of 2020 for.

Tim: As expected and forecasted by industry consultants auto OEM industry production was lower year over year in the U S and Europe.

Tim: This impact is expected to moderate in 2025 as most have reached their anniversaries and will be reset based on recent stability in raw material pricing.

Tim: Our results followed that lower demand trend and we were able to partially offset the decline in sales volumes with share gains in Latin America and China.

Tim: Industrial production was also sluggish in Europe, and the U S, which resulted in lower year over year sales volume in the industrial coatings business.

Tim: Segment, EBITDA margin reduced 160 basis points for the quarter and was slightly lower on a full year basis as lower volumes were partially offset by strong cost control actions.

Tim: Sales volume declines in those regions were partially offset by strong growth in Latin America.

Tim: Okay.

Tim: Prices in the industrial coating segments declined due to lower index based selling prices as raw material cost declined in the latter part of 2020 for.

We ended the fourth quarter with cash of about $1 4 billion.

Tim: During the quarter, we completed $250 million in share repurchases and paid approximately $160 million in dividends on a year to date basis, we repurchased approximately $750 million of stock, which represented approximately 3% of our outstanding shares we honored our pledge to return cash to shareholders.

Tim: This impact is expected to moderate in 2025 as most have reached their anniversaries and will be reset based on recent stability in raw material pricing.

Tim: Segment, EBITDA margin reduced 160 basis points for the quarter and was slightly lower on a full year basis as lower volumes were partially offset by strong cost control actions.

Tim: And combined with our dividend we've returned $1 for $1 4 billion to our shareholders in 2024.

Tim: Our balance sheet remains strong which continues to provide us with financial flexibility and we remain committed to driving shareholder value creation.

Tim: Okay.

Tim: We ended the fourth quarter with cash of about one 4 billion.

Tim: We're deploying about 400 million towards share repurchases during the first quarter 2025.

Tim: Looking ahead, we anticipate a slow start to 2025 as demand in Europe, and a global industrial end use markets remains challenged however.

Tim: However, we expect stabilization on a full year basis, some key economic indicators like light vehicle builds in global industrial production as well as additional aircraft deliveries.

Tim: And combined with our dividend we've returned $1 for $1 4 billion to our shareholders in 2024.

Tim: Our balance sheet remains strong which continues to provide us with financial flexibility and we remain committed to driving shareholder value creation.

Tim: In the first quarter of 2025 will begin to see the impacts have already enacted tariffs, which is expected to result in low single digit percentage inflation in raw material costs, while raw material inflation was flat in the fourth quarter of 2024.

Tim: Thus, we're deploying about 400 million towards share repurchases during the first quarter 2025.

Tim: Looking ahead, we anticipate a slow start to 2025 as demand in Europe, and a global industrial end use markets remains challenged however, we.

Tim: Despite a challenging macro and economic landscape in a slow macro start for 2025 on generally optimistic about this year, we expect to deliver organic sales growth of low single digit percentage for the year.

Tim: Expect stabilization on a full year basis, some key economic indicators like light vehicle builds in global industrial production as well as additional aircraft deliveries.

Tim: With the first quarter organic growth flat to slightly down.

Tim: Stronger results in the second half of the year supported by the realization of more than $100 million in annual share gains in our industrial coatings segment.

Tim: As we enter the next chapter for PPG with a new sharper portfolio and focus we're progressing further on the execution of our enterprise growth strategy with several elements that include bill.

Tim: Despite a challenging macro and economic landscape in a slow macro start for 2025 are generally optimistic about this year, we expect to deliver organic sales growth of low single digit percentage for the year with the first quarter organic growth flat to slightly down.

Tim: Building upon our organic growth capabilities of commercial excellence with the right processes people tools and incentives.

Tim: Taking decisive self help actions to further reduce costs, including global structural costs and European manufacturing consolidations.

Tim: Stronger results in the second half of the year supported by the realization of more than $100 million in annual share gains in our industrial coatings segment.

Tim: This program program excuse me will deliver approximately $175 million once fully implemented including savings of $60 million in 2025.

Tim: Okay.

Tim: Execution of our operational excellence programs will also deliver manufacturing productivity that will more than offset general inflation.

Tim: Building upon our organic growth capabilities of commercial excellence with the right processes people tools and incentives.

Tim: We'll deploy cash in a disciplined manner investing for growth selective M&A, if appropriate and returning cash to shareholders.

Tim: Taking decisive self help actions to further reduce costs, including global structural costs and European manufacturing consolidations.

Tim: As a result of these actions we expect to deliver adjusted earnings per share for the full year 2025, and the range of $7 75 to $8 five.

Tim: This program program excuse me, we will deliver approximately $175 million once fully implemented including savings of $60 million in 2025.

Tim: Which at midpoint represents an EPS growth of 7% excluding impact of foreign currency and higher tax.

Tim: Execution of our operational excellence programs will also deliver manufacturing productivity that will more than offset general inflation.

Tim: Consistent with our sales growth EPS growth will be weighted towards the second half of 2025, and a global industrial demand weakened in the U S. Dollar strengthened in the second half of 2024.

Tim: We'll deploy cash in a disciplined manner investing for growth selective M&A, if appropriate and returning cash to shareholders.

Tim: As a result of these actions we expect to deliver adjusted earnings per share for the full year 2025, and the range of $7 75 to $8 five.

Tim: Okay.

Tim: I am excited about 2025 and beyond we have a sharper more focused future facing portfolio and a higher growth and margin profile company for our customers. We're both delivering solutions that ensure their success today and innovating tomorrow to improve both their productivity and their success we remain.

Tim: Which at midpoint represents an EPS growth of 7% excluding impact of foreign currency and higher tax.

Tim: And committed to our heritage of strong cost management and improved productivity that reinforces the ability to maintain our momentum and driving higher margins and earnings growth.

Tim: Consistent with our sales growth EPS growth will be weighted towards the second half of 2025 as a global industrial demand weakened in the U S. Dollar strengthened in the second half of 2024.

Tim: The result will be profitable organic growth for PPG and shareholder returns for our owners.

Tim: Okay.

Tim: The successful divestitures and solid performance in 2024 would not have been possible without the dedication of our employees.

Tim: We are now a much more focused organization dedicated to driving ongoing growth with strong margins and thank you to our PPG teams around the world, who make it happen and deliver on our purpose every day.

Tim: We remain committed to our heritage of strong cost management and improved productivity that reinforces the ability to maintain our momentum and driving higher margins and earnings growth. The result will be profitable organic growth for PPG and shareholder returns for our owners.

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

Tim: Thank you.

Tim: The successful divestitures and solid performance in 2024 would not have been possible without the dedication of our employees.

Tim: At this time I would like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad.

Tim: We are now a much more focused organization dedicated to driving ongoing growth with strong margins. Thank you to our PPG teams around the world, who make it happen and deliver on our purpose every day.

Tim: And just as a reminder, you may now everyone have an opportunity to ask a question.

Tim: We ask that you please each limit yourself to one question.

Tim: He will pull it pays for amendment to compile the Q&A Lee Scott.

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

Speaker Change: The first question, we have from the phone line comes from Jonathan <unk> with Mizuho.

Tim: Thank you.

Speaker Change: Please go ahead.

Speaker Change: Thank you could you talk about the $100 million new win for industrial is that related to a major competitor pulling back or is something else driving that.

Tim: At this time I would like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad.

Tim: And just as a reminder to everyone can have an opportunity to ask a question.

Speaker Change: We are now.

John: Hey, good morning, John Thanks for the question.

Tim: We ask that you please each limit yourself to one question.

Speaker Change: Certainly the.

South American exit of one of our competitors is a part of that I'd say.

Tim: He will pull it pays for amendment to compile the Q&A roster.

Speaker Change: Slightly less than half of that.

Speaker Change: The first question we have from the phone line comes from John Roberts with Mizuho. Please go ahead.

Speaker Change: We've got a number of other significant wins in auto OEM as well as our industrial coatings and our packaging coatings businesses and as you know in the industrial segment, the time lag between when and conversion is longer than our other segments. Because these are beta plc factories that need.

Sure.

John Roberts: Could you talk about the $100 million new win for industrial is that related to a major competitor pulling back or is something else driving that.

Speaker Change: We are now.

John Roberts: Hey, good morning, John Thanks for the question.

Speaker Change: Tinge over time et cetera, but the Windsor kind of spread across those three major businesses, but a big piece of it is the exit in South America.

Speaker Change: Certainly the.

Speaker Change: South American exit of one of our competitors is a part of that I'd say.

Speaker Change: Thank you.

Speaker Change: Slightly less than half of that.

Speaker Change: Across the company.

Speaker Change: To that goal.

Speaker Change: We now have.

Speaker Change: Ghansham Panjabi please.

Speaker Change: Ed.

Speaker Change: Please go ahead when you're ready.

Speaker Change: Thank you operator.

Speaker Change: Tim just.

Speaker Change: Yes, just give me a comment on the slight increase in raw material prices for 2025% tariffs and whatever else can you just give us more specifics.

Speaker Change: Over time et cetera, but the Windsor kind of spread across those three major businesses, but a big piece of it is the exit in South America.

Speaker Change: Are you adjusting pricing across the portfolio.

Speaker Change: To reduce the risk of any sort of price cost mismatches 225 unfolds in context of all this uncertainty on tariffs.

Speaker Change: Thank you.

Speaker Change: Across the company.

Speaker Change: Sure Ghansham.

Speaker Change: No.

Speaker Change: So what's in our guide for raw materials, which is basically up.

Speaker Change: We now have.

Speaker Change: Ghansham Panjabi please.

Speaker Change: Up.

Speaker Change: Please go ahead when you're ready.

Speaker Change: Low single digits inflation throughout the year is almost entirely based on the tariffs that have already been enacted in our <unk>.

Speaker Change: Thank you operator, Hey, Tim just.

Speaker Change: Just given your comments on the slight increase in raw material prices for 2025% tariffs and whatever else can you just give us more specifics on how are you adjusting pricing across the portfolio.

Speaker Change: Basket, which is pretty much <unk> and epocrates. So we've got we've got that as well as our mitigation efforts of those already baked into our guide.

Speaker Change: To reduce the risk of any sort of price cost mismatches 225 unfolds in context of all this uncertainty on tariffs.

Speaker Change: So what youll see from a pricing standpoint is.

Ghansham: Sure Ghansham.

Speaker Change: So what's in our guide for raw materials, which is basically a.

Speaker Change: I think Q1 will be flattish to slightly positive as some of our businesses are on.

Speaker Change: Up low single digits inflation throughout the year is almost entirely based on the tariffs that have already been enacted in our basket, which is pretty much tio too and epocrates. So we've got we've got that as well as our mitigation.

Speaker Change: Traditional calendars as to when they raise prices and thats scattered throughout the first few months of the year.

Speaker Change: Raw materials, I'm, sorry, raw material pricing index pricing on the industrial segment will still have a little bit of carryover for the first quarter, but then for the full year we're expecting.

Speaker Change: <unk> efforts.

Speaker Change: Are those already baked into our guide.

Speaker Change: Positive pricing low single digit positive pricing for the company across the board now, we'll remain flexible and agile and do what we need to do if there is other other tariffs are things we need to do from a competition standpoint to to remain competitive in the market, but that's what's that's what's baked into our.

Speaker Change: So what youll see from a pricing standpoint is.

Speaker Change: I think Q1 will be flattish to slightly positive.

Speaker Change: As some of our businesses are on.

Speaker Change: Traditional calendars as to when they raise prices and thats scattered throughout the first few months of the year.

Speaker Change: And Ghansham. This is Vince if you pull back to 50000 feet and look at the supply chain, it's still a loose supply chain is still a buyer's market.

Speaker Change: Raw materials, I'm, sorry, raw material pricing index pricing on the industrial segment, we will still have a little bit of carryover for the first quarter, but then for the full year we're expecting.

Speaker Change: Or.

Speaker Change: For coatings commodities beyond the tariffs.

Speaker Change: Positive pricing low single digit positive pricing for the company across the board now we will remain flexible and agile and do what we need to do if there is other other tariffs are things we need to do from a competition standpoint to to remain competitive in the market, but that's what's that's what's baked into our <unk>.

Speaker Change: Got it thank you.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: David Begleiter with Deutsche Bank.

Speaker Change: Hi, It's David <unk> here for Dave I guess, Youre expecting full year segment margins to be up 50 bps and down 150 bps in Q1.

Speaker Change: Okay.

Vince: And Ghansham. This is Vince if you pull back to 50000 feet and look at.

Vince: The supply chain, it's still a loose supply chain is still a buyer's market.

Speaker Change: How do you expect margins to trend I guess from Q2 to Q4.

Vince: Or.

Vince: Coatings commodities beyond the tariffs.

Speaker Change: Yes, Hi, this is <unk>.

Speaker Change: Vince I'll start and I'll, let Tim add some color as we noted on our in our materials in Q1 and Tim just not.

Vince: Got it thank you.

Vince: Thank you.

Vince: Okay.

Speaker Change: Also noted we have some raw material inflation around those enacted tariffs in Q1 pricing is coming in throughout the quarter.

Vince: David Begleiter with Deutsche Bank.

Vince: Hi, It's David <unk> here for Dave I guess, Youre expecting full year segment margin to be up 50 bps and down 150 bps in Q1, how do you expect margins to trend I guess from Q2 to Q4.

Tim: We also have expect flat to low single digit decline in volumes and as you progress through the year, our volume performance gets better. So that's the that's a differential between Q1 and full year in terms of the margin progression, yes, I would just add a little bit of color, particularly on the industrial coatings segment.

Vince: Yes, Hi, this is Vince I'll start and I'll, let Tim add some color.

Tim: Our most volume sensitive segment at this point from a from a margin standpoint because of the.

Speaker Change: We noted on our in our materials in Q1, and Tim just not.

Speaker Change: Also noted we have some raw material inflation around those enacted tariffs in Q1 pricing is coming in throughout the quarter.

Tim: The leverage that you get with a little uptick in margin. So as we have a very soft Q1.

Speaker Change: We also have expect flat to low single digit decline in volumes and as you progress through the year, our volume performance gets better. So that's the that's a differential between Q1 and full year in terms of the margin progression.

Tim: Youll see that look pretty.

Tim: Pretty much like Q4 with a volume kick in in an industrial segment more in the second in the second half of the year.

Tim: Yeah.

Tim: Okay.

Speaker Change: I would just add a little bit of color, particularly on the industrial coatings segment.

Tim: Thank you.

Speaker Change: Our most volume sensitive segment at this point from a.

Tim: We have Chris Parkinson with Wolfe research.

Speaker Change: Our margin standpoint because of the.

Tim: Alright. Thank you so much Tim Im guessing getting on slide five no. One was more excited to get that one out.

Speaker Change: The leverage that you get with a little uptick in margin. So as we have a very soft Q1.

Speaker Change: Youll see that look pretty.

Tim: And then you because it just represents obviously every demon working Florida.

Speaker Change: Pretty much like Q4 with a volume kicking in an industrial segment more in the second in the second half of the year.

Tim: When we take a step back and look at the three new segments can you just give kind of in one or two points on I understand the first half macro is what it is.

Speaker Change: Okay.

Speaker Change: Like can you just talk about how you and your teams are now thinking about the respective growth rates of those end markets in terms of share gain market outperformance as anything that would potentially filter into the buy side perceptions of ppg's ability to grow in the new framework would be particularly helpful. Thank you.

Speaker Change: Thank you.

Speaker Change: We have Chris.

Speaker Change: <unk> with Wolfe research.

Speaker Change: Alright. Thank you so much Tim I'm guessing getting on slide five known was more excited to get that one out.

Speaker Change: Sure sure Chris So global architectural coatings now that we have our business.

Speaker Change: Then you because it just represents obviously everything you've been working for us.

Speaker Change: When we take a step back and look at the three new segments can you just give kind of in one or two points on I understand the first half macro as what it does.

Speaker Change: Find too where we've got positions, where we've got a really good strong right to win in those countries.

Speaker Change: Like can you just talked about how you and your teams are now thinking about the respective growth rates of those end markets in terms of share gain market outperformance just anything that would potentially filter into the buy side perceptions of ppg's ability to grow in the new framework would be particularly helpful. Thank you.

Speaker Change: You could you could use housing construction GDP.

Speaker Change: As kind of.

Speaker Change: Proxies for the base growth rate of the end markets, but then because of the.

Speaker Change: Yeah sure sure Chris So global architectural coatings now that we have our business.

Speaker Change: The strength of our position you can add incremental share gain on top of that if you look at performance coatings.

Speaker Change: Now largely on aftermarket.

Speaker Change: Find too where we've got positions, where we've got a really good strong right to win in those countries.

Speaker Change: Business.

Speaker Change: And the demand there is a lot more steady on average.

Speaker Change: You could you could use housing construction GDP.

Speaker Change: And as you know from things like our refinish business and the new differentiated technology that we've launched for Marine aftermarket. For example, we feel that we've got a pretty strong advantage in the performance coatings standpoint, too to pick up additional share.

Speaker Change: As kind of.

Speaker Change: Proxies for the base growth rate.

Speaker Change: The end markets, but then because of the strength of our position you can add incremental share gain on top of that if you look at performance coatings.

Speaker Change: With industrial coatings, that's much more tied to industrial production. So the automotive that's the easiest well just follow the builds beyond that will follow industrial production as the baseline market and then share gains from our technologies on top of that so that's how I as how we think about.

Speaker Change: Now largely on aftermarket.

Speaker Change: Business.

Speaker Change: And the demand there is a lot more steady on average and as you know from things like our refinish business and.

Speaker Change: The new differentiated technology that we've launched for marine aftermarket for example, we feel that we've got a pretty strong advantage in the performance coatings standpoint, too to pick up additional share and with industrial coatings, that's much more tied to.

Speaker Change: Those three different segments.

Speaker Change: Yes, Chris if I can just add a couple bits of color here.

Speaker Change: As Tim mentioned on the industrial side, given the differential or specified technologies, we picked up share in packaging over the past two years certainly in certain industrial end markets we've grown our.

Speaker Change: <unk> industrial production. So automotive that's the ECS will just follow the builds beyond that will follow industrial production as the baseline market and then share gains from our technologies on top of that so that's how that's how we think about those three different segments.

Positioned globally, including growing our market share in powder some of that Inorganically.

Speaker Change: And then if you look at the performance coating segment, we've talked a lot about some of our.

Speaker Change: Tools in the refinish area, especially the digital tools and other digital tools, we're recognizing subscription revenue. In addition to the customer intimacy that brings so those are some of the differential items that.

Speaker Change: Yeah, Chris if I could just add a couple bits of color here.

Speaker Change: That will give us I think in.

Speaker Change: An advantage versus the market rates, yes, if I could just add one more piece of color Chris Refinish in performance coatings. Good example.

Speaker Change: Positioned globally, including growing our market share in powder some of that Inorganically.

Speaker Change: Claimed collision claims in the U S were down.

Speaker Change: And then if you look at the performance coating segment, we've talked a lot about some of our.

Speaker Change: High single digits.

Speaker Change: In 2024, and we far outperformed that and one on about 2500 net new shops. So that's how we should think about your thinking about the market drivers.

Speaker Change: Plus our differentiated advantage in each of those segments.

Speaker Change: That will give us I think in.

Speaker Change: An advantage versus the market rates, yes, if I could just add one more piece of color Chris.

Speaker Change: Thank you so much.

Speaker Change: <unk> finish in performance coatings. Good example.

Speaker Change: We now have a question from Duffy Fischer with Goldman Sachs.

Speaker Change: Claim collision claims in the U S were down.

Speaker Change: Your line is open.

Speaker Change: High single digits.

Speaker Change: Okay.

Speaker Change: Yes, good morning, guys.

Speaker Change: In 2024, and we far outperformed that in one one about 2500 net new shops. So that's how we should think about you think about the market drivers.

Speaker Change: I was hoping you can help me.

Speaker Change: If you look the published number for last year was 787, the midpoint of your guide for this year is 709 zero right. So basically on top of each other for the year.

Speaker Change: Plus our differentiated advantage in each of those segments.

Speaker Change: But when you look at the shape of how that 787.

Speaker Change: It came about last year, how does that look.

Speaker Change: Thank you so much.

Speaker Change: This year. So can you help us kind of what the shape the year over year, either EPS or EBIT whichever way you want to look at it.

Duffy Fischer: We now have a question from Duffy Fischer with Goldman Sachs.

Speaker Change: Like youre going to be beating more in the second half probably behind in the first half, but can you just help us with kind of a year over year shape of those two numbers.

Your line is open.

Speaker Change: Okay.

Speaker Change: Yes, good morning, guys.

Speaker Change: I was hoping you can help me.

Speaker Change: If you look the published number for last year was 787, the midpoint of your guide for this year is 790 zero right. So basically on top of each other for the year.

Speaker Change: Well Duffy considering how little time, we gave you to digest all of these new numbers Youre pretty darn pretty darn close will be behind last year in the first half, particularly in the first quarter and then we'll be nicely above it in the second half that's that's your last comment.

Speaker Change: But when you look at the shape of how that 787.

Speaker Change: Came about last year, how does that look.

This year. So can you help us kind of what the shape the year over year, either EPS or EBIT whichever way you want to look at it it sounds like youre going to be beating more in the second half probably behind in the first half, but can you just help us with kind of a year over year shape of those two numbers.

Speaker Change: If you look at it operationally.

Speaker Change: It's 7% operational EPS growth and then Theres a couple of big things on top of that that bring it down about the same level with the biggest one being about 33 cents of EPS of FX.

Speaker Change: And then my CFO will give you all the details below at that high level.

Speaker Change: Weaker in the first half, especially first quarter strong second half Y O Y net net 7% operational EPS gain for the full year.

Speaker Change: Your last comment.

Speaker Change: If you look at it operationally.

Duffy Fischer: Yes, Duffy we provided.

Duffy Fischer: Tim mentioned, the flurry of information last night, one of the pieces, we want to add to that is our quarterly EPS for the last two years on a recast basis. So Alex could you could you give those numbers.

Duffy Fischer: For your reference Sofie last year Q1 that you signed activity 187, adjusted EPS Q to 235 Q3, two or three Q4 $1 61 for the full year of 787 in 2023, our Q1 adjusted EPS $1 75.

Speaker Change: And then my CFO will give you all the details below at that high level.

Speaker Change: Weaker in the first half, especially first quarter strong second half Y O Y net net 7% operational EPS gain for the full year.

Speaker Change: Yes, Duffy we provided.

Duffy Fischer: Q2 to 12, Q3, 198, Q4 156 with a full year of 742.

Alex Lopez: Tim mentioned, the flurry of information last night, one of the pieces, we want to add to that is our quarterly EPS for the last two years on a recast basis. So Alex could you could you give those numbers.

Duffy Fischer: And then if you look at the shape of the year, we talked about this on an earlier question Duffy. If you look at the shape of the year again because of the slightly negative volumes in Q1 and the additional tariffs that were enacted in Q4 that will affect Q1 Q1's light.

Alex Lopez: You referenced Sofie last year Q1, as you saw in the activity 187, adjusted EPS Q to 235, Q3, two or three Q4 $1 61 for the full year of 787 in 2023.

Duffy Fischer: Interject pricing as we go through that first quarter.

Speaker Change: Q1, adjusted EPS $1 75, Q2 to 12, Q3, 198, Q4 156 with a full year of 742.

Duffy Fischer: <unk> volumes flattened and grow in the back half of the year, we'll also get some more restructuring benefit as we progress through the year and we talked about our self help self help actions and those will drive some cost benefit later in the year.

Speaker Change: And then if you look at the shape of the year, we talked about this on an earlier question Duffy. If you look at the shape of the year again because of the slightly negative volumes in Q1 and the additional tariffs that were enacted in Q4 that will affect Q1 or Q1's light.

Duffy Fischer: Great. Thank you guys.

Speaker Change: Thank you Duffy, we now have Frank Mitsch split.

Speaker Change: <unk> research. Please go ahead.

Speaker Change: Hey, good morning, Russell or Justin.

Speaker Change: Interject pricing as we go through that first quarter we'll.

Speaker Change: Okay.

Speaker Change: We will see volumes flattened and grow in the back half of the year. We'll also get some more restructuring benefit as we progress through the year, we talked about our self help self help actions and those will drive some cost benefit.

Speaker Change: Mhm.

Speaker Change: What are you putting your money on Frank and I will go the opposite.

Speaker Change: Good call.

Speaker Change: So the $400 million buyback in <unk> I think Vince on the last call you indicated that the sale of North American architectural with all your your moves to the cash et cetera would wind up being.

Speaker Change: Later in the year.

Speaker Change: Great. Thank you guys.

Yeah.

Speaker Change: Thank you Duffy, we now have Frank Mitsch with Fabienne Research. Please go ahead.

Speaker Change: Neutral or accretive on EPS Im curious if thats still the case and in terms of the $400 million buyback in <unk> that almost indicates that theres not much youre seeing right now on the M&A side of things because.

Speaker Change: Hey, good morning, Russell or Justin.

Speaker Change: Okay.

Speaker Change: Mhm.

Speaker Change: One would have thought that you might keep your powder dry as some of the coatings companies have indicated that.

Speaker Change: What are you putting your money on Frank and I will go the opposite.

Speaker Change: Good call.

Speaker Change: That they are looking at portfolio moves and divestitures and so forth. So any comment in terms of uses of cash in the.

Speaker Change: Good call.

$400 million buyback in <unk> I think Vince on the last call you indicated that the sale of North American architectural with all your your moves to the cash et cetera would wind up being.

Speaker Change: And when the final when all is said and done with respect to the divestiture of North American architectural.

Speaker Change: Accretive neutral dilutive.

Speaker Change: Neutral or accretive on EPS Im curious if thats still the case and in terms of the 400 million buyback in <unk> that almost indicates that there is not much youre seeing right now on the M&A side of things because.

Speaker Change: Thank you.

Yeah, Frank this is Vince.

I'll take the $400 million and the proceeds from the.

Speaker Change: The divestiture, we did receive those proceeds.

Speaker Change: One would have thought that you might keep your powder dry as some of the coatings companies have indicated that.

Speaker Change: In late late in the fourth quarter in 2024.

Speaker Change: Not appearing in our cash flow statement, we put out last night, because we didn't put out of this continued operations cash.

Speaker Change: That they are looking at portfolio moves and divestitures and so forth. So any comment in terms of uses of cash in the end.

Speaker Change: But there there'll be in the 10-K, when we file that certainly we're putting those proceeds to work immediately as we committed to do in Q1.

Speaker Change: And when the final when all is said and done with respect to the divestiture of North American architectural.

Speaker Change: Accretive neutral dilutive.

Tim: Which again reflects a $400 million, Tim you want to take the M&A.

Vince: Yeah, Frank this is Vince.

Speaker Change: Sure. So let me just be very clear.

Frank Mitsch: Yes, I'll take the $400 million and the proceeds from.

Vince: The divestiture, we did receive those proceeds.

Speaker Change: First of all I think part of your question on our 400 was it accretive in the answer is absolutely yes.

Vince: In late late in the fourth quarter in 2024.

Speaker Change: But on the M&A, let me very clear our strategy on M&A has not changed from what I told you. All in May of 2023, when I first came into the job that.

Vince: Theyre not appearing in our cash flow statement, we put out last night, because we didn't put out of this continued operations cash.

Vince: But there there'll be in the 10-K, when we file that certainly we're putting those proceeds to work immediately as we committed to do in Q1, which again reflects that $400 million, Tim you want to take the M&A.

Speaker Change: It's not the tip of the spear for us and we're very focused on building an organic growth machine.

Speaker Change: But we would still evaluate any targets because we believe there is still consolidation to happen in this industry and there are some good assets out there that would add shareholder value. So that has not changed and if you look.

Vince: Sure. So let me just be very clear that first of all I think part of your question on our 400 was it accretive in the answer is absolutely yes.

Vince: But on the M&A, let me very clear our strategy on M&A has not changed from what I told you. All in May of 2023, when I first came into the job that.

Speaker Change: 2023, I told everybody we pay down debt. We did that early and then we started buying back shares for the first time in a long time in Q4 of 'twenty three.

Speaker Change: 2024, I said, if there was no targeted selective M&A, we buy back shares and we bought back $750 million as we come into this year, we're starting off Q1 buying shares.

Vince: It's not the tip of the spear for us and we're very focused on building an organic growth machine.

Vince: But we would still evaluate any targets because we believe theres still as consolidation has happened in this industry and there are some good assets out there that would add shareholder value. So that has not changed and if you look.

Speaker Change: We fully expect to have another good cash generation year. So we've got good optionality, especially with where our leverage is right. Now there are also a couple of assets.

Vince: Yeah.

Vince: 2023, I told everybody we pay down debt. We did that early and then we started buying back shares for the first time in a long time in Q4 of 'twenty three.

Speaker Change: Coming to market are already on market one of them I have already said does not fit our enterprise growth strategy. So.

Speaker Change: Not interested one of them the Brazilian asset is is an attractive asset.

Vince: 2024, I said, if there was no targeted selective M&A, we buy back shares and we bought back $750 million as we come into this year, we're starting off Q1 buying shares.

Speaker Change: It's a good asset is a good fit to our strategy of either being a strong number one.

Speaker Change: Strong number too.

Speaker Change: But we have to decide we were not the only ones that would draw that conclusion. So we have to decide.

Vince: Fully expect to have another good cash generation year. So we've got good optionality, especially with where our leverage is right. Now there are also a couple of assets.

Speaker Change: Price right time, we want to make sure that whatever we do if we do anything on acquisitions that it doesn't distract from building the organic growth machine.

Vince: Coming to market are already on market one of them I've already said does not fit our enterprise growth strategy. So.

Speaker Change: But if we do it if we do want to take a look at that asset or any of the other assets that may come is there.

Vince: Not interested one of them the Brazilian asset is is an attractive asset.

Speaker Change: The best use of our shareholders' cash because right now our we believe our stock is undervalued and that we're generating cash and so we can deliver returns.

Vince: It's a good asset is a good fit to our strategy of either being a strong number one.

Vince: Strong number too.

But we have to decide we were not the only ones that would draw that conclusion. So we have to decide.

Speaker Change: By buying back shares so it all come down right asset right time, so as to not distract the organization and finally of course right price is at the best uses of cash.

Vince: Right price right time, we want to make sure that whatever we do if we do anything on acquisitions that it doesn't distract from building the organic growth machine.

Speaker Change: Terrific. Thanks, so much.

Vince: But if we do it if we do want to take a look at that asset or any of the other assets that may come is.

Speaker Change: Thank you. Your next question comes from.

Speaker Change: Stephen Byrne with Bank of America. Please go ahead.

Vince: Is it the best use of our shareholders' cash because right now our we believe our stock is undervalued than we that we're generating cash and so we can deliver returns by buying back shares. So it all come down right asset.

Stephen Byrne: Yes. Thank you.

Stephen Byrne: Tim if your end markets normalized.

Stephen Byrne: Now you have three segments with more transparency and you've divested.

Vince: Tying so as to not distract the organization and finally of course right price is at the best use of the cash.

Stephen Byrne: Lower growth businesses.

Stephen Byrne: When you focus on share gains et cetera.

What do you target.

Speaker Change: Terrific. Thanks, so much.

Stephen Byrne: As a sustainable earnings growth rate down the road here.

Speaker Change: Thank you. Your next question comes from.

Stephen Byrne: And what do you think it needs to get to to move you out of 15 multiple.

Speaker Change: Stephen Byrne with Bank of America. Please go ahead.

Speaker Change: Yes. Thank you.

Steve: Yes, Hey, Steve.

Steve: I'll be consistent with what I've been saying in my first two plus years now is that.

Speaker Change: Tim if your end markets normalized.

Speaker Change: And now you have three segments with more transparency and you've divested.

Steve: As we start to deliver on each of our commitments. This is 8% to 12%.

Speaker Change: Slower growth businesses.

Speaker Change: When you focus on share gains et cetera.

Speaker Change: EPS growth company.

Speaker Change: What do you target.

Speaker Change: And where it falls in that range is dependent.

Speaker Change: A sustainable earnings growth rate down the road here and what do you think it needs to get to to move you out of 15 multiple.

Speaker Change: On macro if you look at 2025 operationally, we're going to be a seven which.

Speaker Change: Compared to.

Speaker Change: Yes, Steve.

Speaker Change: Compared to the macros that are in front of everybody right. Now is a good I think a pretty robust number now going forward as all of the things you said in the beginning of your question exactly right more focused portfolio. We don't have the drag on the company from.

Speaker Change: I'll be consistent with what I've been saying in my first two plus years now is that.

Speaker Change: As we start to deliver on each of our commitments. This is 8% to 12% EPS growth company.

Speaker Change: A business that was underperforming we're not distracted by a high capex business that didn't fit our our ambitions.

Speaker Change: And where it falls in that range is dependent.

Speaker Change: On macro if you look at 2025 operationally, we're going to be a seven which.

Speaker Change: And we've been investing in the organic growth muscle and so were still confident that this is the 8% to 12% EPS growth company.

Speaker Change: Compared to.

Speaker Change: Steve if I could just add a couple bits of color. This is Vince.

Speaker Change: Again, if you look by segment, we've got two segments at or above 20% EBITDA margins. So obviously as they grow that will enforce our mix benefits.

Speaker Change: A business that was underperforming we're not distracted by a high capex business that didn't fit our our ambitions.

Speaker Change: The industrial segment, which has been in a we've been in a two year industrial recession globally. So we think that business in that segment by itself is.

Speaker Change: And we've been investing in the organic growth muscle and so we're still confident that this is the 8% to 12% EPS growth company.

Speaker Change: That is hopefully close to trough or a trough in terms of volumes and as Tim mentioned earlier, that's our most volume sensitive segment. So as we see any volume return there it should come out enhanced incrementals and get back to a different differential EBITDA margin on a go forward basis.

Speaker Change: Steve if I could just add a couple bits of color. This is Vince again, if you look by segment, we've got two segments at or above 20% EBITDA margins. So obviously as they grow.

Speaker Change: Enforce our mix benefits.

Speaker Change: Okay.

Speaker Change: The industrial segment, which has been in a we've been in a two year industrial recession globally. So we think that business in that segment by itself is.

Thank you.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Kevin Mccarthy with CERP.

Speaker Change: That is hopefully close to trough or a trough in terms of volumes and as Tim mentioned earlier Thats. Our most volume sensitive segment. So as we see any volume return there it should come out enhanced incrementals and get back to a different differential EBITDA margin on a go forward basis.

Speaker Change: Yes, Thank you and good morning, everyone.

Speaker Change: Tim I think you mentioned that in the first quarter, you would expect volume to be flat to down.

Speaker Change: My question would be.

Speaker Change: How do you expect volume to trend through the balance of the year and how much of the implied improvement in the progression relates to.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Kevin Mccarthy with CERP.

Potential macro uplift getting out of this two year industrial recession that we've been in.

Speaker Change: Yes, Thank you and good morning, everyone.

Speaker Change: And how much relates to.

Speaker Change: No company specific controllable such as the 100 million share pick up that John asked about in industrial maybe you can kind of parse that out and give us a sense of your level of confidence in and restoring volume growth year end.

Speaker Change: Tim I think you mentioned that in the first quarter, you would expect volume to be flat to down.

Speaker Change: My question would be.

Speaker Change: How do you expect volume to trend through the balance of the year.

Speaker Change: And how much of the implied improvement in the progression relates to potential macro uplift getting out of this two year industrial recession that we've been in.

Speaker Change: What that balance looks like thank you.

Speaker Change: Yeah, Hey, Kevin So the first quarter it will be it will be a challenge as we've said multiple times and you just you just reinforce so we're expecting negative volume.

Speaker Change: And how much relates to <unk>.

Speaker Change: Similar trend what we saw in Q4, you will then start to see it flat ish to positive.

Speaker Change: Company specific controllable such as the 100 million share pick up.

Speaker Change: John asked about in industrial maybe you can kind of parse that out and give us a sense of your level of confidence in and restoring volume growth year end.

Speaker Change: Low single digits, and we expect that then for certainly for the rest of the year.

Speaker Change: Low to mid single digits as we get into the second half.

Speaker Change: All in what we are expecting is positive volume on a full year basis on at above low single digits now as far as the breakdown of the components. We are not and none of this segments are we excluding a hockey stick kind of recovery works we're expecting.

Speaker Change: What that balance looks like thank you.

Speaker Change: Yeah, Hey, Kevin So the first quarter it will be it will be a challenge as we've said multiple times and you just you just reinforce so we're expecting negative volume.

Speaker Change: <unk> trend what we saw in Q4, you will then start to see it flat ish to positive low single digits and we expect that then for certainly for the rest of the year.

Speaker Change: Stabilization frankly stabilization in.

Speaker Change: If you look at Europe for example stabilization in European.

Speaker Change: Low to mid single digits as we get into the second half.

Speaker Change: Architectural demand stabilization in refinish, but we're not expecting recovery frankly in Europe auto builds.

Speaker Change: All in what we are expecting is positive volume on a full year basis on at about low single digits now as far as the breakdown of the components, we are not and none of the segments are we excluding a hockey stick kind of recovery works we're expecting.

Speaker Change: Jess has them essentially flat for the year. So we're not it's not like we've got this big hope and prayer build into that it's about stabilization in the end markets plus the 100 million or so share gains in the industrial segments and then the ongoing share gains that we have in some of our key.

Speaker Change: Stabilization frankly stabilization in.

Speaker Change: If you look at Europe for example stabilization in European.

Speaker Change: Performance coatings and global architectural coatings, but those are a lot of singles as opposed to triples and home runs that you get on the industrial side. So all in we're expecting the year to be positive volume in the low single digits negative in Q1, and then ramping up from there.

Speaker Change: Architectural demand stabilization in refinish, but we're not expecting recovery frankly in Europe auto builds.

Speaker Change: IHS has them essentially flat for the year. So we're not it's not like we've got this big hope and prayer build into that it's about stabilization in the end markets plus the 100 million or so share gains in the industrial segments and then the ongoing share gains that we have in some of our key.

Speaker Change: Yeah, Kevin I'll add a couple of points of color about Q1, we did have a strong very strong Q1 in 2024, especially in China high single digit growth in China. So we're comping against that.

Speaker Change: Also had double digit growth in a couple of businesses, including packaging. So some of the Q1 year over year comp is related to.

Speaker Change: Key performance coatings and global architectural coatings, but those are a lot of singles as opposed to triples and home runs that you get on the industrial side. So all in we're expecting the year to be positive volume in the low single digits negative in Q1, and then ramping up from there.

Speaker Change: Just just hard Comparables and again as Tim mentioned the trend line in our industrial business really just continuing the second half of 2024, we saw activity globally declined in the second half so as we anniversary that in the first half of 2025.

Speaker Change: Yes, Kevin this is Vince I'll add a couple of points of color about Q1, we did have a strong very strong Q1 in 2024, especially in China high single digit growth in China. So we're comping against that we also had double digit growth in a couple of businesses, including packaging. So some of the Q1 year over year comp is related to.

Speaker Change: Again, we're not expecting significant hockey stick in the back half.

Speaker Change: Yeah.

Speaker Change: Thank you both.

Speaker Change: Thank you.

Speaker Change: You May now have the next question from Michael Kim.

Just just hard comparable and again as Tim mentioned the trend line in our industrial business really just continuing the second half of 2024, we saw activity globally declined in the second half so as we anniversary that in the first half of 2025.

Speaker Change: Wells Fargo. Please go ahead, when you're ready.

Michael Kim: Hey, guys. Thanks.

Speaker Change: Yes.

Speaker Change: <unk>.

Speaker Change: Mechanic in industrial coating when you look at the business units within that.

Speaker Change: Are they all.

Speaker Change: Again, we're not expecting significant hockey stick in the back half.

Speaker Change: Are there businesses in there the ones that you want to run similar to the U S. Architectural you likely to that of their business with you on an exit.

Speaker Change: Thank you both.

Speaker Change: Yeah.

Speaker Change: Maybe give us your thoughts on why what's left or what's in performance and industrial coatings can support.

Speaker Change: Thank you.

Speaker Change: We now have the next question from Michael Kim.

Speaker Change: Wells Fargo. Please go ahead, when you're ready.

Speaker Change: Goal of growing I think you said, 8% to 12% longer term for PPG.

Speaker Change: Okay.

Speaker Change: Hey, guys. Thanks.

Mike: Yeah, Hey, Mike.

Speaker Change: Okay.

Speaker Change: Jim.

Speaker Change: We don't have any additional divestitures in our recipe right now.

Speaker Change: Pharmacy, chronic and industrial cutting when you look at the business units within that.

Speaker Change: Every business has to offer.

Speaker Change: Are they all.

Speaker Change: If rate to stay in the portfolio on a longer term basis, but as we sit here today. There is no other divestiture announcements coming out we like our portfolio. We believe we've got a strong position strong right to win in all of the businesses that we have performance coatings.

Speaker Change: Are there businesses and they're the ones that you want to run similar to the U S architecture, you're likely to that of their business with you on an exit.

Speaker Change: Just maybe give us your thoughts on why flat or what's in performance and industrial coatings can support.

Speaker Change: All are growing I think you said, 8% to 12% longer term for PPG.

Speaker Change: Frankly, it's crushed it.

Speaker Change: We've got a really strong position in all of those businesses aerospace you've heard about refinish, you've heard about PMC seven straight quarters of growth. We've now got our traffic business pruned to where we've got a really strong position in North America and it's it's performing.

Speaker Change: Yeah, Hey, Mike It's Tim.

Speaker Change: We don't have any additional divestitures in our recipe right now.

Speaker Change: Every business has to earn its right to stay in our portfolio on a longer term basis, but as we sit here today. There is no other divestiture announcements coming out we like our portfolio. We believe we've got strong positions strong right to win in all of the businesses that we have performance coatings.

Speaker Change: So.

Speaker Change: This business or that segment is almost all aftermarket. So we're really happy with that portfolio. If you look at industrial those businesses, our high technology business businesses, which is right in our wheelhouse and you might look at the margin.

Speaker Change: <unk>.

Speaker Change: Frankly, it's crushed it.

Speaker Change: We've got a really strong position in all of those businesses aerospace you've heard about refinish, you've heard about PMC seven straight quarters of growth. We've now got our traffic business prune to where we've got a really strong position in North America and it's.

Speaker Change: Today, and say Oh, well, it's not up to snuff with the other two segments, but as Vince mentioned, yes.

We're delivering 16 plus percent EBITDA at frankly the trough.

Speaker Change: With a lot of volume leverage to come as things recover and a lot of our self help is directed at that segment as well.

Speaker Change: It's performing.

So.

So as we start to anniversary that index pricing that stabilizes and we will have opportunistic.

Speaker Change: Opportunities there.

Mike: All in Mike If your slide I think it's slide for.

Mike: The actions, we took moved us up to 120 bps.

Speaker Change: <unk>.

Speaker Change: We're delivering 16 plus percent EBITDA at frankly the trough.

Mike: Top tier now in an EBITDA margin. So we really like the blend of businesses, we have with upside given where we are from a macro standpoint.

Speaker Change: With a lot of volume leverage to come as things recover and a lot of our self help is directed at that segment as well.

Okay. Thank you.

Speaker Change: Also as we start to anniversary that index pricing that stabilizes and we have opportunistic.

Patrick Cunningham: Thank you. Your next question comes from Patrick Cunningham with Citigroup.

Speaker Change: Opportunities there.

Mike: All in Mike If your slide I think it's slide for the.

Patrick Cunningham: Hi, good morning.

Mike: The actions, we took moved us up to 120 bps.

Patrick Cunningham: Architectural coatings EMEA business demand seems to be weak on consumer confidence you experienced demand declines in all regions, but said you had some growth in eastern and Central Europe is that mostly a price impact or are you, making some share gains here and what do you see as some of the catalysts to get.

Mike: Top tier now in an EBITDA margin. So we really like the blend of businesses, we have with upside given where we are from a macro standpoint.

Patrick Cunningham: Consumer confidence off the bottom here I know, you're not calling for a hockey stick recovery, but just wondering what gives you some confidence that we can be stable here.

Okay. Thank you.

Patrick Cunningham: Thank you. Your next question comes from Patrick Cunningham with Citigroup.

Patrick Cunningham: Yes.

So performance of our business Youre right.

Patrick Cunningham: In Q4, most east to west North to South was a pretty weak quarter.

Patrick Cunningham: Hi, good morning.

Patrick Cunningham: But if you look at the full year basis, we performed really well in Poland.

Patrick Cunningham: We performed really well frankly in the UK and Ireland. So we had pockets of strength, France was very weak for us in the Nordics, where very weak for us. So so that's kind of.

Patrick Cunningham: But just wondering what gives you some confidence that we can be stable here.

Patrick Cunningham: Breakdown of the performance by by country by sub region.

Patrick Cunningham: Yes.

Patrick Cunningham: We from your statement about.

Patrick Cunningham: So performance of our business Youre right.

Patrick Cunningham: How is the outperformance being driven share price it's both.

Patrick Cunningham: In Q4, most east to west North to South was a pretty weak quarter.

Patrick Cunningham: This team has done an outstanding job.

Patrick Cunningham: But if you look at the full year basis, we performed really well in Poland.

Patrick Cunningham: For the last decade of <unk>.

Patrick Cunningham: Pricing appropriately to.

Patrick Cunningham: To offset input costs pricing appropriately on our differentiated products and in pricing at the street fighting level, when we need to win shelf space. So the team does a great job of.

Patrick Cunningham: Breakdown of the performance by by country by Subregion.

Patrick Cunningham: Price volume management, and we have gained some share in those countries, where we are performing as far as Europe more broadly again, we are not expecting what I would call a recovery.

Patrick Cunningham: We from your statement about.

Patrick Cunningham: How is the outperformance being driven share price it's both.

Patrick Cunningham: This team has done an outstanding job.

Patrick Cunningham: But more of stabilization as inflation stabilizes as well.

Patrick Cunningham: For the last decade of pricing appropriately to offset input costs pricing appropriately on our differentiated products and in pricing at the street fighting level, when we need to win shelf space. So the team does a great job of price volume.

Patrick Cunningham: Whenever central banks.

Patrick Cunningham: I'll begin the journey in the other direction some increases in consumer confidence.

Patrick Cunningham: We are not baking in and of the Ukraine, more or anything like that but that would certainly help. We just believe that there is enough factors out there and we've come down so far over the last.

Patrick Cunningham: Management and we have gained some share in those countries, where we are performing as far as Europe more broadly again, we are not expecting what I would call a recovery.

Patrick Cunningham: Five years from Covid and then the war and then high interest rates and high inflation, we believe that theres enough easing there to stabilize but not hockey stick.

Patrick Cunningham: But more of stabilization as inflation stabilizes as whenever central banks.

Patrick Cunningham: Begin the journey in the other direction some increases in consumer confidence.

Patrick Vincent: Yes, Patrick Vincent here.

Patrick Cunningham: Some confidence from.

Patrick Cunningham: We're not baking in and of the Ukraine war or anything like that but that would certainly help we just believe that there is enough factors out there and we've come down so far over the last.

Patrick Cunningham: Taste perspective is if you look at 2023 and as business architectural Europe, we were down let's say roughly mid single digits.

Patrick Cunningham: We were down mid to low in the first half of 2024.

Patrick Cunningham: We're flat in the back half of 2024.

Patrick Cunningham: Five years from Covid and then the war and then high interest rates and high inflation. We believe that there is enough easing there to stabilize but not hockey stick.

Patrick Cunningham: So again that stabilization and we know that.

Patrick Cunningham: The Covid, we did when we had COVID-19, we had a pull forward of activity.

Patrick Cunningham: Let's call it 21, and even early 'twenty two.

Patrick Vincent: Yes, Patrick Vincent here.

Patrick Cunningham: This is Ana this is a maintenance cycle type business. So we pulled forward some of that maintenance, which was reflected in our 'twenty three 'twenty four volume numbers and as that stabilizes and we start seeing some of that maintenance come back.

Patrick Cunningham: Some confidence from.

Patrick Cunningham: Taste perspective is if you look at 2023 and as business architectural Europe.

Patrick Cunningham: Let's say roughly mid single digits.

Patrick Cunningham: We're down mid to low in the first half of 2024.

Patrick Cunningham: We will benefit from that in terms of volume as well as we will be able to price accordingly.

Patrick Cunningham: We were flat in the back half of 2024.

Patrick Cunningham: So again that stabilization and we know.

Patrick Cunningham: <unk>, we did when we had COVID-19, we had a pull forward of activity.

Patrick Cunningham: Thank you.

Patrick Cunningham: We now have Mike Harrison with Seaport lease.

Patrick Cunningham: Let's call it 21, and even early 'twenty two.

Speaker Change: <unk> partners on the line.

Patrick Cunningham: This is this is a maintenance cycle type business. So we pulled forward some of that maintenance, which was reflected in our 'twenty three 'twenty four volume numbers and as that stabilizes and we start to see some of that maintenance come back.

Patrick Cunningham: Yeah.

Hi, good morning.

Speaker Change: I wanted to go into a little more detail about three different regions or countries that you've mentioned so far first is Latin America.

Patrick Cunningham: We will benefit from that in terms of volume as well as we will be able to price accordingly.

Patrick Cunningham: Where it sounds like architectural and industrial are pretty solid.

Patrick Cunningham: Second you mentioned, India I think in your prepared remarks that the growth opportunity maybe give us an update on how you position your key businesses there.

Patrick Cunningham: Thank you.

Patrick Cunningham: And then finally, China was just hoping you could give us some thoughts.

Speaker Change: We now have Mike Harrison with Seaport Research partners on the line.

Patrick Cunningham: How you're thinking about demand trends going forward.

Patrick Cunningham: Yes.

Patrick Cunningham: Maybe with or without some some trade policy shifts.

Speaker Change: Hi, good morning.

Speaker Change: I wanted to go into a little more detail about three different regions or countries that you've mentioned so far first is Latin America.

Patrick Cunningham: Yeah sure. So Latam is has been and continues to be.

Patrick Cunningham: A rock star performer for us.

Speaker Change: Where it sounds like architectural and industrial are pretty solid.

Patrick Cunningham: Some of the stronger GDP in the world and we're outperforming the GDP.

Speaker Change: Second you mentioned, India I think in your prepared remarks that the growth opportunity maybe give us an update on how you position your key businesses there.

Patrick Cunningham: I just came back from our concessionaire meeting, which the owners of our 5200 stores across Mexico and their sell out is just fantastic.

Speaker Change: And then finally, China was just hoping you could give us some thoughts on how you're thinking about demand trends going forward.

Speaker Change: Maybe with or without.

Patrick Cunningham: And they are bullish going forward.

Speaker Change: Some trade policy shifts.

Patrick Cunningham: Near shoring helps them.

Speaker Change: Yeah sure. So Latam is has been and continues to be.

Patrick Cunningham: But also just the strong consumer confidence and GDP are businesses.

Speaker Change: A rock star performer for us.

Patrick Cunningham: In South America.

Speaker Change: Some of the stronger GDP in the world and we are outperforming the gdp's.

Patrick Cunningham: Our automotive business outperformed last year, our industrial business, so not as big as Mexico of course, but.

Speaker Change: I just came back from our concessionaire meeting, which the owners of our 5200 stores across Mexico and their sell out is just fantastic.

Patrick Cunningham: Good fundamentals down there and then we'll pick up some additional share as we mentioned earlier on this call. So Latin America performance will continue, particularly as we take to the next chapter of our Comex business, where we start to use that network to distribute other business unit products.

Speaker Change: And they are bullish going forward.

Speaker Change: Near shoring helps them.

Speaker Change: But also just the strong consumer confidence and GDP are businesses.

Patrick Cunningham: India, India.

Speaker Change: In South America.

Patrick Cunningham: A very unique situation, there, where we have a joint venture with the number one deco players number one overall paint company in India, and that's Asian paints, obviously, they run the Deco side, but we've got a joint venture that covers essentially all of the industrial and performance.

Speaker Change: Our automotive business outperformed last year, our industrial business, so not as big as Mexico of course, but good.

Speaker Change: <unk> down there and then we'll pick up some additional share as we mentioned earlier on this call. So Latin America performance will continue, particularly as we take to the next chapter of our Comex business, where we start to use that network to distribute other business unit products.

Patrick Cunningham: Businesses, where we bring we bring more to the game from a technology standpoint global products specifications.

Patrick Cunningham: Application expertise all of those things and so we leverage the strength of Asian paints and their footprint and their brand in there.

Speaker Change: India, India, we are.

Speaker Change: Have a very unique situation, there, where we have a joint venture with the number one Deco player number one overall paint company in India, and Thats Asian paints, obviously, they run the Deco side, but we've got a joint venture that covers essentially all of the industrial and performance.

Patrick Cunningham: Reputation in the country in complement with our.

Patrick Cunningham: Technologies, and our people and we've been outgrowing, what's been a very nice growth market for us.

Patrick Cunningham: And the $1 million of $1 billion or many billion dollar question is China and our business in China. Unlike many other industrials, where China for China.

Speaker Change: <unk> businesses, where we bring we bring more to the game from a technology standpoint global products specifications.

Patrick Cunningham: We don't make and ship product, we make in paint product locally.

Speaker Change: Application expertise all of those things and so we leverage the strength of Asian paints and their footprint and their brand in there.

Patrick Cunningham: So and even within that we are in the right segments. We're in the right segments like auto Aero PMC in industrial not anything really associated with real estate or real estate construction. So.

Speaker Change: Reputation in the country and complement that with our technologies and our people and we've been outgrowing, what's been a very nice growth market for us.

Patrick Cunningham: Local for local we're in the right segments and throughout 2004 disparate. Despite some of the really challenging macros that you've heard about from us and others. We grew every quarter.

Speaker Change: And then the $1 million 1 billion or many billion dollar question is China and our business in China. Unlike many other industrials, we our China for China.

Patrick Cunningham: Somewhere between low single digits and mid single digits and so it's not it's definitely not the China of of a decade ago, where you had high single digits low double digits kind of growth, but we're very pleased with the progression of China. Once we had to re.

Speaker Change: We don't make and ship product, we make in paint product locally so and even within that we are in the right segments. We're in the right segments like auto Aero PMC in industrial not anything really associated with real estate or real estate construction so low.

Patrick Cunningham: Ram ourselves to think of.

Speaker Change: <unk> for local we're in the right segments and throughout 'twenty four disparate. Despite some of the really challenging macros that you've heard about from us and others. We grew every quarter.

Patrick Cunningham: Elongated.

Patrick Cunningham: Recovery.

Patrick Cunningham: As opposed to a hockey stick recovery, but that elongated recovery has another benefit for us and that it really helps.

Speaker Change: Somewhere between low single digits and mid single digits and so it's not it's definitely not the China of of a decade ago, where you had high single digits low double digits kind of growth, but we're very pleased with the progression of China. Once we had to reprogram are.

Patrick Cunningham: It helps to drive the supply demand equation on raw materials in our favor because it's elongated it keeps that supply situation in favorable or unfavorable side for buyers. So we're not we're not having big celebration parties about a hockey stick recovery in China, but we're pleased with our results.

Speaker Change: Shelves to think of.

Speaker Change: Elongated.

Patrick Cunningham: <unk> of 24, and we're looking forward to a good a good 25%.

Speaker Change: Recovery.

As opposed to a hockey stick recovery, but that elongated recovery has another benefit for us and that it really <unk>.

Patrick Cunningham: Okay.

Patrick Cunningham: Yeah.

Patrick Cunningham: Very helpful. Thanks.

Patrick Cunningham: Thank you. Your next question comes from.

Speaker Change: Helps to drive the supply demand equation on raw materials in our favor because it's elongated it keeps that supply situation in favorable or unfavorable side for buyers. So.

Patrick Cunningham: Yes.

Patrick Cunningham: With key <unk> co. Please go ahead.

Ryan: Thanks. Good morning, guys. This is Ryan on for Alexia.

Speaker Change: Not.

Ryan: Wanted to pull the curtain back a little bit on China, Auto's, Obviously, you mentioned improvement in <unk> and discuss the increase in exports overall during 'twenty four.

Speaker Change: We're not having big celebration parties about a hockey stick recovery in China, but we're pleased with the results of <unk> 24, and we're looking forward to a good a good 25%.

Ryan: I'm wondering what you are hearing from customers at this stage and kind of what your expectation is here in 2025.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Very helpful. Thanks.

Speaker Change: Okay.

Speaker Change: Yeah, Hey, Ryan.

Speaker Change: Thank you. Your next question comes from.

Thank you for joining us this morning.

Speaker Change: Here's the most one of the more exciting data points for us in our China Auto business is that China first of all remember China produces approximately one out of every three cars manufactured in the world.

Speaker Change: Yes.

Speaker Change: Key <unk> co. Please go ahead.

Speaker Change: Thanks. Good morning, guys. This is Ryan on for Alexia just wanted to pull the curtain back a little bit on China Auto's, Obviously, you mentioned improvement in <unk> and discuss the increase in exports overall during 'twenty four.

Speaker Change: And yes, there is an export portion of that but most of that is for domestic consumption. Great data point is the China Q4 retail sales were up 19% on autos. So.

Speaker Change: Wondering what youre hearing from customers at this stage and kind of what your expectation is here in 2025.

Speaker Change: This is an industry in China, certainly has its the growth economic problems as we all know, but this is an industry that is very critical to the overall, China economy in China and employment and so it's one that gets help from the government stimulus activity I'm confident that.

Speaker Change: Yeah, Hey, Ryan.

Speaker Change: For joining us this morning.

Speaker Change: And yes, there is an export portion of that but most of that is for domestic consumption. Great data point is the China Q4 retail sales were up 19%.

Speaker Change: Going forward I believe there will be additional help in China from the government as we move toward through 25% 26. So on the ground. Our teams are telling us the China domestic market is doing well, we are gaining share with the domestic players. So.

Speaker Change: On autos, so and you know.

Speaker Change: Prickly, we've had a nice mix of the <unk>.

Speaker Change: <unk> of Western companies, and China, Domestics and over this last couple of years, we've really really had a nice share gain with the Chinese domestics, including the one that everybody talks about.

Speaker Change: Going forward I believe there will be additional help in China from the government.

Speaker Change: And so you've got this combined effect of.

Speaker Change: As we move toward through 25% 26, so on the ground. Our teams are telling us the China domestic market is doing well we are gaining share with the domestic players. So historically, we've had a nice mix of the.

Speaker Change: Local consumption being being pretty good and share gain of us with with the winners on the ground in China auto.

Speaker Change: Yeah, and just one last piece to that Ryan is.

Speaker Change: The Shine has certainly come off of the EV story globally.

Speaker Change: But evs in China are.

Speaker Change: Now as you know at the end of 2024, 37% of every car build in China.

Speaker Change: And so yes, we won't see as many EV sales here in the U S and Europe and other parts of the World is what everybody thought two years ago, but within China, It's still a big growth market and.

Speaker Change: Local consumption being being pretty good and share gain of us with with the winners on the ground in China auto.

Speaker Change: Yeah, and just one last piece to that Ryan is the.

Speaker Change: That's that's more content for companies like PPG.

Speaker Change: <unk>.

Speaker Change: The Shine has certainly come off of the EV story globally.

Speaker Change: But evs in China.

Speaker Change: Now as you know at the end of 2024, 37% of every car build in China.

Speaker Change: Thank you.

Speaker Change: We now have John Mcnulty with BMO capital market.

Speaker Change: Okay.

Speaker Change: Yes. Good morning, just a quick question on Comex.

Speaker Change: Just given how you broadened it out in terms of in terms of the platform can you help us to think about how much.

Speaker Change: That's that's more content for companies like PPG.

Speaker Change: The product that they're selling is tied to Mexico for Mexico versus export.

Speaker Change: Just to give us a little bit of color on potential tariff risk around that potential platform.

Speaker Change: Thank you.

Speaker Change: Yes within within.

Speaker Change: We now have John Mcnulty with BMO capital market.

Speaker Change: Maybe a couple of decimal points way to the right, it's 100% domestic use from what we what we.

Speaker Change: Okay.

Speaker Change: Yes. Good morning, just a quick question on Comex.

Speaker Change: Distribute through Comex, I mean, I may be missing some.

Speaker Change: Just given how you broadened it out in terms of in terms of the platform can you help us to think about how much of.

Speaker Change: Some small piece of metal that gets painted and it comes across the border, but it is really immaterial.

Speaker Change: Of the product that they're selling is tied to Mexico for Mexico versus export.

Speaker Change: Even even the PMC parts of our business that we're now distributing into Mexico are for Mexico construction for near shoring for.

Speaker Change: Just to give us a little bit of color on potential tariff risk around that potential platform.

Speaker Change: Yes within within May.

Speaker Change: Maybe a couple of decimal points way to the right, it's 100% domestic use from what we what we.

Speaker Change: Data centers automotive plants industrial plants, our traffic business that we're now running through those Concessionaires is obviously for for roads in.

Speaker Change: Distribute through Comex, I mean, I may be missing some some small piece of metal that gets painted and it comes across the border, but it is really immaterial.

Speaker Change: In Mexico, our refinish that we've started to run through the networks are four collisions in Mexico of Mexican cars. So nothing that I can think of that comex concessionaires distribute for us would end up being shift back the U S. But I may be again, I may be missing a fraction of a decimal somewhere but I can't.

Speaker Change: EBIT, even the PMC parts of our business that we're now distributing into Mexico are for Mexico construction for near shoring for.

Speaker Change: Data centers.

Speaker Change: Think of it and John I, just wanted to pick up on those last three things Tim mentioned, we started an active program in the concessionaires or pulling through product.

Speaker Change: Automotive plants industrial plants, our traffic business that we're now running through those Concessionaires is obviously for for roads.

Speaker Change: And middle of 'twenty, four and it will grow from one of our growth engine in the 25.

In.

Speaker Change: In Mexico, our refinish that we've started to run through the networks are four collisions in Mexico of Mexican cars. So nothing that I can think of that comex concessionaire distribute for us would end up being shift back to the U S. But I may be again, I may be missing a fraction of a decimal somewhere but.

Speaker Change: Is more through that World class distribution network I think we talked about it in the third quarter call and that includes again protective coatings really around the amount of capital infrastructure being built in Mexico due to near shoring.

Speaker Change: Traffic solutions products are world class.

Speaker Change: I can't think of it.

Speaker Change: John I, just want to pick up on those last three things Tim mentioned.

Speaker Change: We're now pushing those are the concessionaire network.

Speaker Change: We started an active program in the concession areas are pulling through product.

Speaker Change: With refinish, we have 5200 distribution points. So that refinished products. These are all growth platforms for us in 'twenty, five and frankly beyond.

Speaker Change: In middle of 'twenty, four and it will grow from one of our growth engine in the 25 is more through that World class distribution network I think we talked about it in the third quarter call and that includes again protective coatings really around the amount of capital infrastructure being built in Mexico due to near shoring.

Speaker Change: Got it I appreciate the color.

Speaker Change: Thank you.

Speaker Change: We have the next question from Steven Haynes with Morgan Stanley.

Speaker Change: Our traffic solutions products are world class and we're now pushing those are the concessionaire network.

Steven Haynes: Hey, good morning, Thanks for squeezing me in here.

Steven Haynes: Just a quick one on the Capex 750 at the midpoint.

Speaker Change: Same with refinish, we have 5200 distribution points.

Steven Haynes: Yes bit higher I guess than historically, what you would.

Speaker Change: That refinished products. These are all growth platforms for us in 'twenty, five and frankly beyond.

Steven Haynes: Hey, guiding to and I think there is some you know.

Steven Haynes: Some catch up in there, but how would we be thinking about that capex number kind of evolving over the next couple of years.

Speaker Change: Got it appreciate the color.

Speaker Change: Thank you.

Steven Haynes: This is kind of the right range or would you expect it to step down or step up to help kind of on growth initiatives from here. Thank you.

Speaker Change: We have the next question from Steven Haynes with Morgan Stanley.

Steven Haynes: Thanks, Steve and I'm glad you asked it it is not.

Steven Haynes: Hey, good morning, Thanks for squeezing me in here.

Steven Haynes: Our aspiration to be spending capex at this level going forward and it won't be.

Speaker Change: A quick one on the Capex 750 at the midpoint.

Steven Haynes: Yes bit higher I guess than historically, what you would.

Steven Haynes: We will we will get back to our normal you should think about 3% of sales as a normal run rate capex for us which is what we did for a very long time, and then we stop spending frankly, and some COVID-19 times for obvious reasons.

Speaker Change: Hey, guiding to and I think there is some you know.

Speaker Change: Some catch up in there, but how would we be thinking about that capex number kind of evolving over the next couple of years.

Speaker Change: Is this kind of the right range or would you expect it to step down or step up to help kind of on growth initiatives from here. Thank you.

Steven Haynes: So we do some of what Youre seeing in there and that elevated capex honestly, both for 'twenty four 'twenty five.

Speaker Change: Thanks, Steve and I'm glad you asked it it is not.

Our aspiration to be spending capex at this level going forward and it won't be.

Steven Haynes: Is let's call it catch up for the Covid era, but that we do have some.

Speaker Change: We will we will get back to our normal you should think about 3% of sales as a normal run rate capex for us which is what we did for a very long time, and then we stop spending frankly, and some COVID-19 times for obvious reasons.

Steven Haynes: Transitory incremental spend on a couple of key growth organic growth areas.

Steven Haynes: Mexico.

Steven Haynes: Building, a new resin capacity down there because we need it because we've grown so much.

We've got some incremental cap ex in Aero.

Speaker Change: So we do some of what Youre seeing in there and that elevated capex honestly, both for 'twenty four and 'twenty five.

Steven Haynes: We've got more orders than we can fill and youll see some some capex there refinish a growing business for us we've spent.

Speaker Change: Is let's call it catch up for the Covid era, but that we do have some kind of transitory incremental spend on a couple of key growth organic growth areas.

We've spent more capex or even in our U S. Refinished factory, we expect Capex there we've been investing in our digital capabilities and we're now over one $3 billion of digitally enabled sales. So we've had some incremental there and then last one as far as this wasn't didn't impact us in 'twenty four but.

Speaker Change: Mexico.

Speaker Change: Building, a new resin capacity down there because we need it because we've grown so much.

Speaker Change: We've got some incremental cap ex in Aero.

Steven Haynes: It will in 'twenty five.

Steven Haynes: As part of our self help program, we're exiting some surplus.

Speaker Change: We have got more orders than we can fill and youll see some some capex there refinish a growing business for US we've spent we've.

Steven Haynes: Capacity that we have in some higher cost regions, particularly Europe and as you go from say three factories down to one in a particular sub region. We've got to spend some capex at the one to get it ready to receive.

Speaker Change: We've spent more capex for even in our U S. Refinished factory, we expect Capex there we've been investing in our digital capabilities and we're now over $1 3 billion of digitally enabled sales. So we've had some incremental there and then last one as far as this wasn't didn't impact us in 'twenty four but.

Steven Haynes: The volume coming from the other two so.

Steven Haynes: Thank you for the question because it's not a number it's a red number for us, but we believe its good use of shareholder money wants to catch up for what we didn't spend for a couple of years and two to drive drive organic growth and margin as we move forward.

Speaker Change: It will in 'twenty five.

Speaker Change: As part of our self help program, we're exiting some surplus capacity that we have in some higher cost regions, particularly Europe and as you go from say three factories down to one in a particular sub region. We've got to spend some capex at the one to get it ready to receive.

Steven Haynes: Great. Thank you.

Steven Haynes: Thank you.

Steven Haynes: Your next question comes from.

Steven Haynes: <unk> with BNP.

Speaker Change: The volume coming from the other two so thank.

Steven Haynes: Sure.

Steven Haynes: Yes.

Speaker Change: Thank you for the question because it's not a number it's a red number for us, but we believe its good use of shareholder money wants to catch up for what we didn't spend for a couple of years and two to drive drive organic growth and margin as we move forward.

Speaker Change: I'm sorry, my questions have been answered so thanks and have a great day.

Speaker Change: Thank you.

Speaker Change: We now have Laurence Alexander with Jefferies.

Speaker Change: Hi, This is Dan Rizzo on for Laurence Thanks for fitting me in.

Speaker Change: Great. Thank you.

Speaker Change: If we think about the new newly formed architectural segment, how should we think about incremental margins in a recovery and how it compares to industrial and performance.

Speaker Change: Thank you.

Speaker Change: Your next question comes from.

Speaker Change: <unk> with BNP.

Speaker Change: Yeah.

Speaker Change: Sure.

Speaker Change: As a as a recovery will get.

Speaker Change: Yes.

Speaker Change: I'm sorry, my questions have been answered so thanks and have a great day.

Speaker Change: We will get some good leverage and maybe Vince can try to estimate the quantity the quantification of it but we will get some good leverage, particularly in Europe right because.

Speaker Change: Thank you.

Speaker Change: We now have Laurence Alexander with Jefferies.

Speaker Change: Our Mexico, our business global architectural is almost all Mexico and Europe now right. We have a small presence in very small presence in China, almost negligible and a decent decent number two position in Australia, but relative to the other two is quite small so let's talk Europe.

Speaker Change: Hi, This is Dan Rizzo on for Laurence Thanks for fitting me in.

Speaker Change: If we think about the new newly formed architectural segment, how should we think about incremental margins in a recovery and how it compares to industrial and performance.

Speaker Change: Yes.

Speaker Change: As a as a recovery will get.

Speaker Change: We will get fairly significant incremental leverage was and not not volume uptick just volume stabilization because of self help and pricing that we've done over the last couple of years, just a stabilization of volume would we would view as a win and then of course any uptick.

Patrick Vincent: We will get some good leverage and maybe Vince can try to estimate or quantify the quantification of it but we will get some good leverage, particularly in Europe right because.

Patrick Vincent: Our Mexico, our business global architectural is almost all Mexico and Europe now right. We have a small presence in very small presence in China, almost negligible and a decent decent number two position in Australia, but relative to the other two is quite small so let's talk Europe.

Speaker Change: We would get.

Speaker Change: Great leverage on on the Mexico side really it would just be the.

Speaker Change: Approximation of the gross margin dropping to the bottom line, because we're pretty we're pretty well utilized down there.

Patrick Vincent: We will get fairly significant incremental leverage was and not volume uptick just volume stabilization because of the self help and pricing that we've done over the last couple of years, just a stabilization of volume we would view as a win and then of course any uptick.

So there's not a tremendous amount of fixed cost leverage it's mostly just the variable margin dropping to the bottom line.

Patrick Vincent: Dan This is Vince if you put some numbers to it and you look at our portfolio.

Patrick Vincent: Tim's point the architectural businesses. They typically have a higher gross margin and they have a higher SG&A to support in feet on the street sales teams et cetera.

Patrick Vincent: We would get.

Patrick Vincent: Great leverage on on the Mexico side really it would just be the.

Patrick Vincent: Approximation of the gross margin dropping to the bottom line, because we're pretty we're pretty well utilize down there.

Patrick Vincent: We are underutilized certainly in Europe, we don't need to add any SG&A for any of our any of our businesses any of our countries. So that will come through at close to gross margin, which is depending on the country.

Patrick Vincent: So there's not a tremendous amount of fixed cost leverage it's mostly just the variable margin dropping to the bottom line.

Patrick Vincent: Mid mid Forty's the mid fifties.

Patrick Vincent: Dan This is Vince if you put some numbers to it and you look at our portfolio.

In Mexico as Tim said, we are sold out so we do have to add some commensurate cost, but most of the cost is borne by the concessionaires on their on their time and they get the growth for that so again, we're talking high incrementals relative to the company average.

Speaker Change: To Tim's point, the architectural businesses. They typically have a higher gross margin and they have a higher SG&A to support.

Patrick Vincent: Feet on the street sales teams et cetera.

Speaker Change: We are underutilized certainly in Europe, we don't need to add any SG&A for any of our any of our businesses any of our countries. So that will come through at close to gross margin, which is depending on the country.

Patrick Vincent: Okay.

Speaker Change: Great. Thank you very much that was helpful.

Patrick Vincent: Yeah.

Patrick Vincent: Thank you.

Patrick Vincent: Your next question comes from Josh Spector with UBS.

Patrick Vincent: Mid mid Forty's the mid fifties.

Speaker Change: In Mexico as Tim said, we are sold out so we do have to add some commensurate cost, but most of the cost is borne by the concessionaires on their on their <unk>.

Patrick Vincent: Hi, Good morning. This is Lucas Beaumont answer Josh I, just wanted to ask about pricing so looking at the new segment structure.

Speaker Change: And they get the growth for that so again, we're talking high incrementals relative to the company average.

Patrick Vincent: Legacy performance pricing was up about 7% of last two years.

Speaker Change: Yes.

Speaker Change: Alright. Thank you very much that was helpful.

5% and 23, 2% and 24 could you give us the splits on the contribution there in 'twenty three 'twenty four from the new architecture on the new performance segments started sham performance would be Bob architectural but correct me if I'm wrong.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Josh Spector with UBS.

Speaker Change: And then just kind of what are you assuming there for <unk> and 'twenty five.

Speaker Change: Hi, Good morning. This is Lucas Beaumont answer Josh I, just wanted to ask about pricing.

Speaker Change: And lastly, like I mean, we have the history and industrial but just what are you assuming in industrial for 'twenty.

Speaker Change: At the new segment structure.

Speaker Change: Up spot or Dan Thanks.

Speaker Change: <unk> performance pricing was up about 7% of last two years.

Vincent: Yeah. This is Vince we're not going to give specifics by business.

Speaker Change: 5% and 23, 2% and 24 could you give us the splits on the contribution there in 'twenty three 'twenty four from the new architecture on the new performance segments start to Sham performance would be an fob architectural but correct me if I'm wrong.

Vincent: So just when you look at the segments as we've said in the past the industrial segment, we get some we will certainly get some pricing if theres raw material inflation. That's typically comes on a lag and then we get pricing above that for differential technology.

Speaker Change: And then just kind of what are you assuming there for <unk> and 'twenty five.

Vincent: The performance segment, Tim said this in his opening remarks.

Speaker Change: And lastly, like I mean, we have the history and industrial but just what are you assuming in industrial for 'twenty.

Tim: It's a business, where we heavily impact our customers' productivity, we get paid for that they get paid for that we typically see one of our better pricing.

Speaker Change: Upside or down.

Speaker Change: Yeah.

Patrick Vincent: Yeah. This is Vince we're not going to give specifics by business.

Speaker Change: Just when you look at the segments.

Tim: Segments, there on a recurring basis some of that is perennial pricing.

Speaker Change: We've said in the past the industrial segment, we get some we will certainly get some pricing. If there is raw material inflation. That's typically comes on a lag.

Tim: I mean global architectural it's really market by market and depends whats happening competitively.

Tim: We typically have the capability to more real time, offset inflation and where we have differential products.

Speaker Change: And then we get pricing above that for differential technology.

Speaker Change: The performance segment, Tim said this in his opening remarks, it's a business, where we heavily impact our customers' productivity.

Tim: Where we have differential distribution and service capabilities, we price above that so if we if we rack and stack them performance is typically the best pricing architectural.

Speaker Change: We get paid for that they get paid for that we typically see one of our better pricing.

Tim: Architectural steady, but good pricing in industrial it depends on the environment.

Speaker Change: Segments, there on a recurring basis some of that is perennial pricing I mean global.

Speaker Change: Textural, it's really market by market and depends whats happening competitively.

Tim: Yeah.

Thank you.

Speaker Change: We typically have the capability to more real time, offset inflation and where we have differential products.

Tim: The final question on the line.

Tim: RASK lifestyle one scan.

Speaker Change: Where we have differential distribution and service capabilities, we price above that so if we if we rack and stack them performance is typically the best pricing architectural.

Tim: Iran.

Tim: These Oakland Atkins with RBC.

Tim: Thanks for taking my question.

Speaker Change: Architectural steady, but good pricing in industrial it depends on the environment.

Tim: And I guess I got a couple of questions. So if you go back over the last couple of years, you know I think we've often thought that maybe low single digit organic growth was in the cards, but then we have seen a lot of volatility in the form of inflation and interest rates in many of the things you mentioned so as you look into 'twenty five I know you're guiding to.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: The final question on the line.

Speaker Change: BOSC lifestyle one.

Tim: To a softer first half and a lot of that is.

Speaker Change: Iran.

Tim: As reflected in your in your outlook.

Speaker Change: These Oakland Atkins with RBC.

Tim: What would you say are some risks that you do see in front of you. It doesn't look like SG&A would be one of those it looks like you still have the $100 million or so of share gains across industrial, but and then the recovery there as well but.

Speaker Change: Thanks for taking my question.

Speaker Change: And I guess I got a couple of questions. So if you go back over the last couple of years.

Speaker Change: You know I think we've often thought that maybe low single digit organic growth was in the cards, but then we have seen a lot of volatility in the form of inflation and interest rates in many of the things you mentioned so as you look into 'twenty five I know youre guiding to a softer first half and a lot of that is reflected in your in your outlook.

Speaker Change: What were some what are some of the risks that you guys are keeping an eye on that would kind of prevent you from achieving that growth rate of organic Atlas visits and.

Speaker Change: As a follow up if you look into 'twenty six do you see any any impediments to achieving that 8% to 12% EPS growth.

Speaker Change: What would you say are some risks that you do see in front of you. It doesn't look like SG&A would be one of those it looks like you still have the $100 million or so of share gains across industrial, but and then the recovery there as well but.

Speaker Change: So let me start Arun.

Speaker Change: We are you mentioned history and we.

Speaker Change: No we didn't hit the low single digit organic growth. This year I think we hit we hit 3% if I remember correctly in 2023.

Speaker Change: What were some what are some of the risks that you guys are keeping an eye on that would kind of prevent you from achieving that.

Speaker Change: And this year organic.

Speaker Change: Growth rate of organic down low single digits.

Speaker Change: Is about minus one.

Speaker Change: As a follow up if you look into 'twenty six do you see any any impediments to achieving that 8% to 12% EPS growth.

Speaker Change: Minus two if all in all in but all in includes FX and things like that so the organic side of that was minus one.

Speaker Change: This year as we project to low single digits organic growth.

Speaker Change: So let me start Arun.

Speaker Change: We are you mentioned history and we.

That 100 million that we've talked about earlier that those that's not a hope and a prayer of those those are deals that we've won now there could be some variability in timing of execution of our customers' launches and things like that but we feel confident about that.

Speaker Change: No we didn't hit the low single digit organic growth. This year I think we hit that we had 3% if I remember correctly in 2023.

Speaker Change: And this year organic.

Speaker Change: Is about minus one.

Speaker Change: Minus two all in all in but all in includes FX and things like that so the organic side of that was minus one.

Speaker Change: We have done a tremendous amount of work over the last two years of building our organic growth muscle across all of the businesses and that is starting to deliver results. So I feel good about the full year.

Speaker Change: This year as we project to low single digits organic growth.

Speaker Change: That 100 million that we've talked about earlier that those that's not a hope and a prayer. Those those are deals that we've won now there could be some variability in timing of execution of our customers' launches and things like that but we feel confident about that.

Speaker Change: Died for everything that's within our control I just can't tell you. What this is a strange geopolitical environment with post elections in many countries.

Speaker Change: We have really good plans and contingency plans for what we can do in the event of various scenarios, but at the end of the day that those would be the risks.

Speaker Change: To achieving both 'twenty five and 'twenty six.

Speaker Change: What's going to happen with all of the potential.

Died for everything that's within our control I just can't tell you whether this is a strange geopolitical environment with post elections in many countries.

Speaker Change: Stressors between United States and other countries other countries in Europe, but.

Speaker Change: With everything we know today, we are committed to our full year guide and we feel good about what we have in our commercial and launch pipeline.

Speaker Change: We have really good plans and contingency plans for what we can do in the event of various scenarios, but at the end of the day that those would be the risks.

Speaker Change: Thanks.

Speaker Change: To achieving both 'twenty five and 'twenty six.

Speaker Change: Thank you.

Speaker Change: Whats going to happen.

Speaker Change: That does conclude the question answer session and I will now turn it back over to Alex go ahead Patrick.

Speaker Change: With all of the potential.

Speaker Change: Stressors between United States and other countries other countries in Europe, but.

Patrick: Thank you Rick and thank you everyone for joining us. This morning, we appreciate your interest and confidence in PPE. This concludes our fourth quarter earnings call.

Speaker Change: With everything we know today, we are committed to our full year guide and we feel good about what we have in our commercial and launch pipeline.

Speaker Change: Thank you. This does conclude today's call you may now disconnect.

Speaker Change: Thanks.

Speaker Change: Thank you.

Speaker Change: That does conclude the question answer session and I will now turn it back over to Alex <unk> Patrick.

Speaker Change: Thank you break out and thank you everyone for joining us. This morning, we appreciate your interest and confidence in PPE. This concludes our fourth quarter earnings call.

Speaker Change: Thank you. This does conclude today's call you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [noise].

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