Q2 2025 PPG Industries Inc Earnings Call
Carly: Good morning, everyone. My name is Carly, and I'll be the conference operator today. At this time, I would like to welcome everyone to the second quarter PPG Addings Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by one on your telephone keypad, and to withdraw your question, please star followed by two. To allow everyone an opportunity to ask a question, the company requests that each analyst ask only one question. I'd like to turn the conference call over to Alex Lopez, Director of Investor Relations. Please go ahead, sir.
Good morning, everyone. My name is Kylie and I'll be the conference operator. Today at this time, I would like to welcome everyone to the second quarter, PPG, adding this conference call
All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by 1 on your telephone keypad, and press star followed by 2 to allow everyone an opportunity to ask a question. The company requests that each analyst ask only one question. I'd like to turn the conference call over to Alex Lopez, Director of Investor Relations. Please go ahead, sir.
Alex Lopez: Thank you, Carly, and good morning, everyone. This is Alex Lopez. We appreciate your continued interest in PPG and welcome you to our second quarter 2025 earnings conference call. Joining me today from PPG are Timothy Knavish, Chairman and Chief Executive Officer, and Vince Morales, Senior Vice President and Chief Financial Officer. Our comments relate to the financial information released after US equity markets closed on Tuesday, July 29, 2025. We have posted detailed commentary and the accompanying presentation slides, which are being shown on this webcast on the Investor Center of our website, ppg.com. Following management's perspective on the company's results, we will move to a Q&A session. Both the prepared commentary and discussion during this call may contain forward-looking statements reflecting the company's current view of future events and their potential effect on PPG's operating and financial performance.
Thank you, kindly and good morning everyone. This is Alex Lopez. We appreciate your continued interest in PPD and welcome you to our second quarter 2025 earnings conference call.
Joining me today from PPG are Timothy Knavish, Chairman and Chief Executive Officer, and Vince Morales, Senior Vice President and Chief Financial Officer.
Our comments relate to the financial information. Released after us Equity markets, closed on Tuesday, July 29th, 2025,
we have posted detailed commentary and the accompanying presentation slides which are being shown on these web tests.
On the investor center of our website, ppd.com.
Following management's perspective on the company's results, we will move to a Q&A session.
Alex Lopez: These statements involve uncertainties and risks, which may cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements. The presentation also contains certain non-GAAP financial measures the company has provided in the appendix of the presentation materials, which are available on our website, because reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information, please refer to PPG's filing with the SEC. Now, let me introduce PPG Chairman and CEO, Timothy Knavish.
Both the prepare commentary and discussion during this call may contain forward-looking statements reflecting the company's correct view of future events and their potential effect on 50 years operating and financial performance.
Forward-looking statements.
Timothy Knavish: Thank you, Alex, and welcome, everyone. I'll start by providing a few highlights from our second quarter 2025 financial performance, and then I'll move to our outlook. Our results demonstrate the strength of PPG's global business portfolio in an increasingly dynamic macro environment. We delivered net sales of 4.2 billion, with an increase in organic sales of 2.2%. Our momentum in organic sales growth was led by our aerospace coatings, protective and marine coatings, and packaging coatings businesses. In addition, sales volumes in our industrial coating segment outpaced the industry, reflecting the initial benefits from share gains in our packaging, industrial, and automotive OEM businesses. We expect the benefits from these share gains to accelerate in the second half of 2025. Regionally, we delivered organic growth in both the United States and Latin America, with tepid demand in Europe and some softening in Asia.
The presentation also contains certain non-GAAP financial measures. The company has provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in the appendix of the presentation materials, which are available on our website. For additional information, please refer to PPG's filings with the SEC. Now, let me introduce PPE, Chairman and CEO, in Cannes.
Thank you, Alex. And welcome, everyone. I'll start by providing a few highlights from our second quarter, 2025 financial performance and then I'll move to our Outlook.
Our results, demonstrate the strength of ppg's, global business portfolio in an increasingly Dynamic macro environment.
We delivered net sales of 4.2 billion with an increase in organic sales of 2 2%.
Our momentum and organic sales growth was led by our Aerospace Coatings protective and Marine Coatings and packaging, Coatings businesses.
In addition sales volumes in our Industrial. Coatings outpace the industry reflecting the initial benefits from share gains in our packaging industrial and Automotive OEM businesses.
We expect the benefits from these share gains to accelerate in the second half of 2025.
Timothy Knavish: We delivered a quarterly segment EBITDA margin of 20.3%, and our adjusted earnings per diluted share was $2.22. Our balance sheet remains strong, and we are committed to using this balance sheet for shareholder value creation. During the quarter, the company repurchased approximately $150 million of stock, bringing our year-to-date total to $540 million. Additionally, in July, we raised our quarterly dividend per share by 4%, demonstrating our confidence in the resiliency of our business and the strength in future growth of our company. Looking at each of our segments, in the global architectural coating segment, positive selling prices in both regions were offset by lower volumes and the impact of a divestiture. Architectural coatings in Maya, organic sales growth in the Nordic region and in the United Kingdom were offset by lower demand in Eastern Europe.
Regionally, we delivered organic growth in both the United States and Latin America, with tepid demand in Europe and some softening in Asia.
We delivered a quarterly segment, ebita margin of 20.3%.
And our adjusted earnings per diluted share was 2.22.
Our balance sheet remains strong, and we are committed to using this balance sheet for shareholder value creation.
During the quarter, the company, repurchased approximately 150 million dollars of stock.
Bringing our year-to-date total to $540 million.
Additionally, in July, we raised our quarterly dividend per share by 4%, demonstrating our confidence in the resiliency of our business and the strength in future growth of our company.
Looking at each of our segments in the global Arch architectural coding segment, positive selling prices in both regions were offset by lower volumes and the impact of a divestiture.
Timothy Knavish: While volumes remained lower in the quarter, we saw evidence of improvement in certain countries, albeit inconsistent. In architectural coatings in Latin America and Asia Pacific, we delivered organic sales growth in Mexico, aided by solid retail sales, while results were impacted by the pause in project-related spending that we discussed in April. It is important to note that while project-related spending was down year over year, we did recognize improvement versus the first quarter of 2025, and we expect continued improvement of project-related spending to progress during the second half of 2025. Segment EBITDA margin decreased, driven by the business divestiture, lower sales volumes, and unfavorable currency translation, partially offset by strong cost control actions. The performance coating segment delivered record net sales and earnings, with a 6% increase in organic sales, driven by both higher selling prices and sales volumes.
The architectural Coatings of Mia, organic sales growth in the Nordic region and in the United Kingdom were offset by lower demand in Eastern Europe.
While volumes remained lower in the quarter, we saw evidence of improvement in certain countries. Albeit inconsistent.
In architectural, Coatings Latin, America and Asia Pacific. We delivered organic sales growth in Mexico.
By solid retail sales while results were impacted by the pause and project related spending that we discussed in April.
It is important to note that while project related spending was down year-over-year. We did recognize Improvement versus the first quarter of 2025 and we expect continued Improvement of project related spending to progress during the second half of 2025.
Segments epita margin decreased driven, by the business, domestic lower sales volumes and unfavorable currency translation, partially offset by strong cost control actions.
Timothy Knavish: Within the segment, aerospace delivered high single-digit percentage organic sales growth, with record quarterly sales and earnings. Customer order backlogs were stable at about $300 million, even with growth-related investments that improved our manufacturing output in the quarter. Our unique technology position remains a strong growth engine for PPG. We are investing both OPEX and CAPEX in aerospace to deliver continued solid growth well into the future. In automotive refinish, organic sales decreased by a low single-digit percentage versus the prior year. In the US, organic sales were flat despite lower industry collision claims, as we benefited from both share gains and customer order patterns. Organic sales outside the US were down, with modest sales volumes declined in Asia and Europe.
The performance coding segment, delivered record, net sales, and earnings with a 6% increase in organic sales driven by both higher selling prices and sales volumes.
Within the segment Aerospace, deliberate high single-digit percentage organic sales growth with record quarterly sales and earnings.
Customer order backlogs are stable at about $100 million even with growth-related investments. That improved our manufacturing output in the quarter.
Our unique technology position remains a strong growth engine for PPG.
We are investing both Opex and capex in Aerospace to deliver continued solid growth, well, into the future.
In automotive refinish organic sales decreased by a low single digit percentage versus the prior year.
In the US, organic sales were flat despite lower industry Collision claims. As we benefited from both share gains and customer order patterns.
Organic sales outside the US were down with modest sales, volumes declined in Asia and Europe.
Timothy Knavish: In the second quarter, the company grew the number of PPG Link subscriptions, as well as Moonwalk installations, and I'm proud to say that in July, we're installing our 3,000th Moonwalk, further supporting customer productivity and customer partnerships. We do anticipate lower volumes in the third quarter in refinish due to normalization of customer order patterns. Protective and marine coatings delivered double-digit percentage organic sales growth, supported by increasing global demand for our technologies and our recent share gains. This was the ninth consecutive quarter with positive year-over-year sales volume growth in this business, and we are continuing to increase our growth-related investments to support the demand for our leading products. Traffic Solutions delivered mid-single-digit percentage organic growth in the quarter, driven by share gains and strong demand outpacing industry growth rates.
Installations and I'm proud to say that in July, we're installing our 3000, moonwalk further supporting customer productivity and customer Partnerships.
We do anticipate lower volumes in the third quarter and refinish due to normalization of the customer order patterns.
Protective and Marine Coatings delivered double-digit percentage, organic sales growth supported by increasing Global demand for our Technologies and our recent share gains. This was the 9th consecutive quarter with positive year, year-over-year sales, volume growth in this business and we are continuing our in to increase our growth related Investments to support the demand for our leading products.
Timothy Knavish: Segment EBITDA was up 8% year over year, reflecting the organic sales growth, as our various growth investments in this segment are yielding initial benefits. In the industrial coating segment, second quarter sales volumes for the segment were flat, which is an improvement versus recent quarters and demonstrates the initial benefits of our share gains. Selling prices declined 1% due to carryover of certain index-based customer contracts. From a business unit standpoint, our automotive OEM business delivered volume growth in Asia and Latin America, which was offset by lower volumes in the US and Europe, reflecting industry production declines in those regions. In the third quarter, we expect to grow above industry levels, driven by the conversion of already awarded customer share gains. Our industrial coatings business unit sales volumes were flat, as share gains were offset by lower demand in Asia Pacific and the United States.
Traffic Solutions, delivered mid single digit, percentage or organic growth. In the quarter driven by share gains and strong demand outpacing industry. Growth rates.
Segment. Ebit da was up, 8% year-over-year reflecting, the organic sales growth as our various growth investments in this segment are yielding initial benefits.
In the industrial coding segment. Second quarter sales volumes for the segments were flat, which is an improvement versus recent quarters and demonstrates, the initial benefits of our share gains.
Selling prices declined, 1% due to carryover of certain index-based customer contracts.
From a business unit standpoint, our Automotive OEM business delivered volume growth in Asia and Latin America, which was offset by lower volumes in the U.S. and Europe, reflecting industry production declines in those regions.
In the third quarter, we expect to grow above industry levels driven by the conversion of already awarded customer shares.
Timothy Knavish: Selling prices declined in industrial coatings due to lower index-based pricing. Packaging coatings' organic sales increased by a high single-digit percentage year over year, driven by share gains growing significantly above industry rates. We expect additional benefits from customers converting to our technologies due to expanding BPA regulations in Europe. Segment EBITDA margin declined year over year due to the silica divestiture, as well as lower selling prices, which were partially offset by strong cost control and productivity actions. Looking ahead for the segment, growing benefits from share gains are expected to drive low single-digit per sales volume growth in the third and fourth quarter, and this, combined with improved manufacturing performance, will drive earnings and margin expansion. Now, let me talk about our balance sheet in cash. During the quarter, we completed about $150 million in share repurchases and paid approximately $150 million in dividends.
Our Industrial Coatings business units, sales volumes were flat, a share gains were offset by lower demand in asia-pacific in the United States.
Selling prices declined in industrial coatings due to lower indexed-based pricing.
Packaging coatings organic sales increased by a high single-digit percentage year-over-year, driven by shared gains growing significantly above industry rates.
We expect additional benefits from customers converting to our Technologies, due to expanding BPA regulations in Europe.
Segment, ebita margin declined, year-over-year due to the silica's divestiture as well as lower selling prices, which were partially offset by strong cost control and productivity actions.
Looking ahead for the segment, growing benefits from share, gains are expected to drive low single digit per sales, volume growth in the third and fourth quarter. And this this combined with improved manufacturing, uh, performance will drive earnings and margin expansion.
Now, let me talk about our balance sheet and cash.
Timothy Knavish: Year to date, we have purchased $540 million in stock and paid approximately $310 million in dividends. We retired €300 million of debt during the quarter, and we have another €600 million of debt maturing in the fourth quarter. Our balance sheet remains strong, which continues to provide us with financial flexibility, and we remain committed to driving shareholder value. Looking ahead, I am genuinely excited about our sales and earnings growth momentum for the second half of the year and beyond. Even though the current macro environment remains highly dynamic, we've proven that our well-positioned portfolio navigates well and performs during periods of uncertainty. Of course, we're monitoring the tariff situation, and we'll react accordingly with pricing actions and/or further self-help actions in order to mitigate any financial impacts.
During the quarter, we completed about 150 million in share repurchases and paid approximately 150 million in dividends year to date. We have purchased 540 million in stock and paid approximately 310 million in dividends.
We retired €300 million of debt during the quarter, and we have another €600 million of debt maturing in the fourth quarter.
our balance sheet remains strong which continues to provide us with financial flexibility and we remain committed to driving shareholder value.
Looking ahead. I am genuinely excited about our sales and earnings growth momentum for the second half of the year and Beyond
Even though the current macro environment remains highly dynamic, we've proven that our well-positioned portfolio navigates well and performs during periods of uncertainty.
Timothy Knavish: We have not experienced any significant change to our raw material pricing, and we expect low single-digit inflation for the year as our suppliers continue to favor volume over pricing. We expect growing benefits from our aggressive self-help and discretionary cost management programs as we move forward through 2025 and beyond. We see structural strength in our performance coating segment, driven by our technology-advantaged products in aerospace and protective and marine, which will be partially offset by lower automotive refinish sales volumes in the third quarter, driven by customer order patterns. We expect European architectural coating volume trends to remain tepid and anticipate project-related spending in Mexico to improve as we move through the second half of the year. We expect increased momentum in the coming quarters for our industrial coating segment.
Of course, we're monitoring the Tariff situation and we'll react accordingly with pricing actions. Andor further self-help actions in order to mitigate any Financial impacts.
we have not experienced any significant change to our raw material pricing and we expect low single digit inflation for the year as our suppliers continue to favor volume overpricing
We expect growing benefits from our aggressive self-help and discretionary cost Management Programs as we move forward, through 2025 and Beyond.
We see structural strength in our performance coding segment driven by our technology Advantage, products and Aerospace and protective and Marine, which we partially offset. By lower, automate Automotive, refinish sales volumes in the third quarter driven by customer order patterns.
Volumes Trends to remain tepid and anticipate project related spending in Mexico to improve as we move through the second half of the year.
Timothy Knavish: While second-half automotive OEM industry demand forecasts are below prior year, our share gains are beginning to yield benefits, and we expect to outperform the market. We sized our annual share gains in the industrial segment at $100 million, and we are tracking to that annualized figure. Finally, with the acceleration in volume growth, we anticipate driving high single-digit percentage year-over-year earnings growth for the company in the second half of the year. This will accelerate through both quarters, resulting in a mid-single-digit percentage increase in EPS for the third quarter and a low double-digit percentage increase for the fourth quarter. We are reiterating our full-year guidance per share range of $7.75 to $8.05, and we have a clear path to achieve it. In closing, we're benefiting from our sharpened portfolio with technology-differentiated products and services that will deliver growth above industry levels.
We expect increased momentum in the coming, quarters for our industrial coding segment.
While second half Automotive OEM Automotive, OEM industry demand, forecasts or below. Prior year our share gains are beginning to yield benefits and we expect to outperform the markets we sized our annual share gains in the industrial segment at 100 million dollars and we were we are tracking to that annualized figure.
Finally with the acceleration and volume growth. We anticipate driving high single-digit percentage year-over-year, earnings growth for the company in the second half of the year.
This will accelerate through both quarters, resulting in a mid single digit percentage, increase in EPS for the third quarter and a low double digit percentage increase for the fourth quarter.
We are reiterating our full year guidance per share range of $7.75 to $8.05 and we have a clear path to achieve it.
Timothy Knavish: Additionally, we are aggressively managing the bottom line, including decisive self-help that, combined with our disciplined capital allocation and strong balance sheet, will enable us to deliver sustainable top-line and bottom-line growth and shareholder value creation. Thank you to our PPG team around the world who make it happen and deliver on our purpose every day, and we appreciate your continued confidence in PPG. This concludes our prepared remarks, and now, would you please open the line for questions?
In closing, we're benefiting from our sharpened portfolio with technology, differentiated products and services that will deliver growth above industry levels.
Additionally, we are aggressively managing the bottom line, including decisive self-help and combined with our discipline Capital, allocation and strong balance sheet.
Will enable us to deliver sustainable Top Line and bottom line growth and shareholder value creation.
Thank you to our PPG team, around the world who make it happen and deliver on our purpose every day and we appreciate your continued confidence in. PPG, this concludes our prepared marks and now, would you please open the line for questions?
Carly: Thank you very much. We now have to open the lines for Q&A. As a reminder, if you would like to raise a question, please press star followed by one on your telephone keypad, and if you'd like to remove yourself from the line of questioning, please star followed by two. To allow everyone an opportunity to ask a question, the company requests that each analyst ask only one question. As a reminder to raise a question, please star followed by one. Our first question comes from John McNulty from BMO. John, your line is now open. John, just confirming you can hear us.
Thank you very much. We not have to open the lines for Q&A.
As a reminder, if you would like to raise a question, please press star. Followed by 1 on your telephone keypad, and if you'd like to remove yourself from the line of questioning, we start followed by 2 to allow everyone an opportunity to ask a question. The company requests that each analyst ask only 1 question.
As a reminder, to raise a question B Star, followed by 1. Our first question comes from John, mcnaughty from BMI John, your line is now open
John just confirming. You can hear us.
John Mcnulty: Sorry about that. I was unmuted. So, global architectural, if we can start with that, you know the volumes were a bit on the soft side. The margins obviously came in a bit worse than that. I guess you gave a little bit of color on that around Europe maybe not being quite as recovering as maybe you'd hoped earlier, and Mexico projects still a little bit of a drag. I guess as you look through the rest of the year, it sounds like Mexico is going to get at least marginally better. What are your thoughts on Europe? Where were things maybe a little bit less robust or recovering than what you thought? And then I guess how should we think about the margin impact there? It seems like the sales were light, but the volume impact really was maybe bigger than what we would have thought.
John Mcnulty: So I guess how should we be thinking about that?
Sorry about that. Um, was on was muted. Um, so Global architectural if we can start with that, um, you know, the volumes were a bit on the soft side, the margins obviously came in a bit worse than that. I, I guess you gave a little bit of color on that around Europe. Maybe not being quite as as recovering as maybe you'd hoped um earlier and Mexico projects still a little bit of a drag I guess, as you look through the rest of the year, it sounds like Mexico is going to get at least marginally better. Um, what are your thoughts on Europe? Where where were things? Maybe a little bit less robust, or recovering, than what you thought and then, I guess, how should we think about the margin impact there? It seems like, you know, the sales were light but the the volume impact really was was maybe bigger than what we would have thought. So, I guess how should we be thinking about that?
Timothy Knavish: Yeah, thanks for the question, John. Yeah, so I'll start with Europe. So, you know we saw what we thought was the start of momentum at the end of Q1, and we expected that to continue to improve in Q2. And frankly, it didn't, largely driven by Eastern Europe. We did see that positive momentum from late Q1 continue into the Nordics, which of course is our legacy Tikkurila business, and that's doing well now. We saw positive momentum in the UK and Ireland. We saw positive momentum in the Benelux. France, I would say, was okay, but the negative that we weren't expecting at the end of Q1 was Eastern Europe. So with architectural Europe, we're really expecting combined more of the same, but as that happens, John, we continue to take more and more cost out, and we're positioned well.
Yeah, thanks for the question, John. Um, yeah, so I'll start with Europe. So, you know, we saw, we saw what we thought was the start of momentum and at the end of q1 and, uh, we expected that to continue to improve in Q2 and frankly, it it didn't largely driven by Eastern Europe. We did see that positive momentum from Lake. Q1 continue into the nordics, which of course, is our our Legacy ticker rilla business. And that's doing well. Now we, we saw positive, momentum, in, in UK and Ireland, we saw positive.
Momentum in the Benelux.
Uh, France, I would say it was. Okay. But the, uh, the, the negative that we weren't expecting at the end of q1 was, was, was Eastern Europe. So, with with, with architectural Europe, we're really expecting combined more of the same but
Timothy Knavish: We track the share very closely, and we're confident in our share position and that we're gaining share in our larger markets. So any little stimulus of any kind will bode very well for us in margin and leverage. Moving on to Mexico, you know we did see retail recover, which was promising. I'll remind you that we were in Mexico for architectural. We were actually down in sales in Q1, minus low single digits. We're up in Q2, positive low single digits. So we're starting to see that led by retail. Project work is sequentially improving, and we expect that to play out through the rest of the year. Now, on the margin side, of course, there's some effect by what I just described on volume. A couple other things that impacted our margin for the architectural coating segment for Q2.
As we as that happens, John we continue to take more and more cost out um, and you know we're positioned. Well we we track the share very closely and we're confident in our share position and we're gaining share in in our larger markets,
Architectural. We were actually down in sales in Q1, minus low single digits. We're up in Q2, positive low single digits. So we're starting to see that, led by Retail Pro. Project work is sequentially improving, and we expect that to play out through the rest of the year. Now, on the margin side, of course, there's some effect by what I just described on volume, a couple of other...
Timothy Knavish: First of all, the FX, the imbalance in FX improvement in Europe versus Mexico led to a net negative for us in margin. The Mexico B2B volume still being down, that's very good margin business for us. We had a, you may have seen in the slide, we talked about a supply chain disruption that was an internal disruption in Australia that hit us for the quarter. That's transitory and behind us. And then finally, that divestiture was above segment margin. So it's a combination of all those things that led to a lower than expected margin for the quarter across architectural, John.
Things that impacted our margin uh for for the architectural coating segment for Q2, first of all the the FX The imbalance in FX Improvement in Europe versus Mexico led to a net negative for us in in um in margin the Mexico. B2B volume still being down that's very good margin business for us.
Uh, we had a, we had a, you may have seen in this slide. We, we talked about a supply chain disruption. Uh, that was an internal disruption in Australia that hit us for the quarter that's transitory and behind us. And then finally, that that divestiture was uh, was above uh, segment margin. So it's a combination of all those things that led to a lower than lower than expected margin for the quarter across architectural John
John Mcnulty: Got it. Thanks very much for the call.
Carly: Thank you very much. Next question comes from David Bouletta from Deutsche Bank. David, your line is now open.
Got it. Thanks very much for the call. Thank you very much.
Uh, next question, constant, David betta from Deutsche Bank David, your line is now open.
David Bouletta: Thank you. Good morning. Tim, on the volume growth, nice job in Q2. Should we think about volumes being up maybe 1.5% to 2% in Q3 and 2% in Q4? Is that a good cadence for volume growth that you're looking at in the back half of the year?
Thank you. Good morning. I'm Tim on the volume growth. Nice job in Q2. Should we think about volume as being up, maybe 1 and a half to 2% in Q3 and 2% in Q4. Is that a good Cadence for Vine growth you're looking at in the back half of the year?
Timothy Knavish: Hey, David. Yeah, we're proud of what we did in volume for the first half of this year, particularly as we see a bunch of other reports coming out. And we expect that to accelerate in the second half of the year. Let's call it low single digits and moving up that low single digit ladder. How's that as we move through the second half of the year? And we feel quite confident on that, and that's why you may hear a little kick in our step this morning is because we finally reached, if you remember back, you know I think we started this at the end of Q3 of last year talking about share wins that we had, and we were expecting the second half of '25 to be much better for us. And you know it's here.
Hey, David. Um, yeah, we're proud, we're proud of what we did in volume for the first half of this year particularly as as you know, as we see a bunch of other uh reports coming out. And we expect that to accelerate in the in the second half of the year. Um, let's call it low single digits and moving up that low single digit ladder house that as we move through the second half of the year and we feel quite confident on that and that's uh,
That's why you may hear a little little kick in our step this morning is because we finally reached if you remember back.
Timothy Knavish: So we feel really good about both volume and frankly EPS growth as we move through the second half of the year.
You know, I think we started this at the end of Q3 of last year talking about share wins that we had and we were expecting the second half of 25 uh, to be much better for us. And, you know, it's here. So we feel really good about both both volume and frankly, EPS growth as we move through the second half of the year.
Carly: Our next question comes from Michael Sissons from Wells Fargo. Michael, your line is now open.
Our next question comes from Michael Susan from Wells Fargo. Michael, the line is now open.
David Bouletta: Hey, guys. Nice quarter. For performance coating, you know the only blemish looks like refinish is down. You know all the other segments had a really nice year-over-year improvement. Just curious on you know the outlook for refinish for the next couple of quarters for volume as well into 2026. And then you know how sustainable is the double-digit growth you saw in protective marine? That seems to be pretty impressive.
Hey guys, nice quarter. Um, for for performance cutting. You know, the only blemish looks like refinishes down, you know, all the other segments, had a really nice year-over-year Improvement. Um, just curious on, you know, the outlook for refinish for the next couple quarters for volumes um as well into 2026 and then
You know how sustainable is the double digit growth? You saw on protected Marine that that seemed to be uh pretty impressive.
Timothy Knavish: Yeah, thanks, Mike. Refinish, you know yeah, it was down low single digits, but you know I think we're flat for the year through the first half of the year. And everybody on the call knows that you know collision claims have been down high single digits for you know for the first half of the year. So we're pretty proud of being flat at the midway point. Now, as we move forward, I did say that we're expecting Q3 to be soft because our strength in the first half of the year was driven by share gain and some distributor order patterns. And we expect the share gains to continue, but we do expect you know swinging of that distributor order pattern for Q3. So I would expect Q3 to be a bit soft, Q4 to be more normalized.
Thanks Mike, um, refinish. You know. Yeah, it was down. It was down low single digits but you know, I think we're flat for the year through the first half of the year and and everybody on the call knows that, you know, Collision claims have been down high single digits for for you know, for the first half of the year. So we're pretty proud of being flat at the Midway point. Now, as we move forward, I did say that we, we're expecting, uh, Q3 to be soft.
Timothy Knavish: But really, we're not expecting industry recovery of claim rates and body shop work likely until 2026. There's a bunch of factors here on affordability of insurance, people not submitting claims, a number of other factors that we expect to play out through the remainder of '25. And we'll get in like a more normalized, like down low single digits on on volume and claims up a couple of points on price as the normalized model. And we expect that to return in 2026.
Because our strength in the first half of the year was driven by share gain and some distributor order patterns, we expect the share gains to continue. However, we do expect some swinging of that distributor order pattern for Q3. Therefore, I would expect Q3 to be a bit soft and Q4 to be more normalized. But really, we're not expecting an industry recovery of claim rates and body shop work like in 2026. There are a bunch of factors here, including affordability of insurance and people not submitting claims, among a number of other factors that we expect to play out through the remainder of 2025.
Volume and claims.
Alex Lopez: Yeah, Mike, this is Vince. In addition to the core paint volumes Tim's talking about, just a reminder, we do have a subscription model with our out-of-the-can Moonwalk Link ecosystem. So that's helping us buffer versus the industry claims. So that subscription model certainly continues to grow, as Tim alluded to in the prepared remarks. So that's a unique item for PPG that benefits us.
Timothy Knavish: Yeah, look, at the end of the day, this is a world-class marquee business for PPG for the midterm, long term, and even today in this challenged claims and body shop activity environment, it's still a marquee and outstanding business for us. And we'll continue to grow in it even more so as things normalize next year. Now, a PMC business, you know, nine straight quarters of solid growth, super strong in Maya and Asia Pacific in particular, not weak in the United States, doing okay here too. But we see that continuing to do well into the rest of this year and at least through '26. We've got some really advantageous technologies in that business that have really taken hold in the areas of marine aftermarket and the dry dock space, some fire protection, and other technologies that we've been launching over the last couple of years.
Up a couple of points on price as the normalized model and we expect that to return in 2026. Yeah. And Mike, this is Vince in addition to the core paint volumes Tim's, talking about. Just a reminder, we do have a subscription model with, with our out of the can moonwalk link ecosystem. So that's helping us, uh, buffer versus the industry claim. So that subscription model certainly continues to grow as Tim alluded to and the prepared remarks. So that's a, a unique item for PPG, that benefits us. Yeah. Look at the end of the day. This is a world class, Marquee business for PPG, for the midterm long term. And, and even today in this challenge, uh, claims and body shop activity environment. It's still a marquee and outstanding business for us, and, and we'll continue to grow in it even more. So as things normalize next year, now a PMC business, you know, 9 straight quarters of
Of solid growth super strong in uh Amaya and Asia Pacific. In particular, not weak in the United States. Do do it. Okay here too. But uh, we see, we see that continuing to do well into the rest of this year and at least through 26. We've got some really Advanced Technologies in that business that have really taken hold uh, in the areas of of marine aftermarket and the dry dock space.
Timothy Knavish: So we're bullish on that business certainly for the foreseeable future when it comes to PMC.
Uh, some fire protection and other other technologies that we've been launching over the last couple of years. So we're bullish on that business uh certainly for for the foreseeable future when it comes to PMC.
Carly: Thank you very much. As a reminder, to raise a question, please star followed by one on your telephone keypad. Our next question comes from Derek Fisher from Goldman Sachs. Duffy, your line is now open.
Thank you very much, as a reminder, to raise a question. We start off by 1 on your telephone keypad. Our, next question, comes from dairy Fisher from Goldman Sachs, Duffy your line is now open.
John Mcnulty: Yeah, good morning, guys. When you comp you versus the others that have released already, you look really good across most everything. One area that seems like others are doing a little bit better is on raw materials, where you guys are still seeing inflation and others are kind of calling it flat to down in some instances. So can you walk through, is that just a different footprint of what you buy? Is it a different footprint geographically? Why is it that your raw materials seem to be a little bit more inflationary than peers?
Timothy Knavish: Yeah, thanks, Duffy. Happy to take that question. I would point to two things. Number one is because of the size of our business in Mexico, we buy a lot more there than any of our peers. And the FX impact affects the raw material inflation because a lot of that is purchased in dollars. Okay, so that's one. The second piece, depending on who you're talking about, if you're largely an architectural coatings company, you don't buy a whole bunch of epoxy. And epoxy is one piece of the basket that's actually gone up. And this was pre-April 2nd. You know, there were some tariffs already put in on epoxy that affected pricing, and we had that built into our guides from the beginning of the year. So I would say, depending on who you're comparing us to, those would be the two big differentiators.
Yeah, good morning, guys. Um, when you come you versus the others that have released already, you look really good. Across most everything 1 area, that seems like, um, others are doing a little bit better, as on raw materials, where you guys are still seeing inflation and others are kind of calling up flat to down in some instances. So can you walk through? Is that just a different footprint of what you buy? Is it a different footprint geographically? Um, why is it that you're raw materials seem to be a little bit more inflationary than peers.
Yep. Thanks Duffy happy to take that question. Uh I I would point to 2 things. Uh, number 1 is because of the size of our business in Mexico. We buy a lot more there than any of our peers and the FX impact affects the raw material inflation because a lot of that is purchased in dollars, okay? So that's 1. The second piece depending on who you're talking about. Uh, if you're largely an architectural coding,
Company, you don't buy a whole bunch of epoxy.
Alex Lopez: Yeah, and Duffy, on the Mexico situation, similar to other businesses in Latin America, our business is able to price through that inflation. So it's not as impactful on the bottom line. So again, if you're comparing us price and raw materials, we feel we're certainly holding our own.
And epoxy is 1 piece of the basket. It's actually gone up and this was pre pre April 2nd, you know, there were some some tariffs already put in on epoxy. Uh, that affected pricing and we had that built into our guide from from the beginning of the year. So I would say depending on who you're comparing us to. Those would be the 2, big differentiators, it ends up being on the Mexico situation, similar to other businesses in Latin America. The the our business is able to price through that, uh, inflation. So, it's not as impactful on the bottom line. So again, if you're comparing us price and raw materials, we feel we're certainly holding our own
Carly: Thank you very much. Our next question comes from John Roberts of Mizuho. John, your line is now open.
Thank you very much. Our next question comes from John Roberts of Mizo John. The line is not open.
Alex Lopez: Thank you. Your buyback activity moderated a bit in the June quarter. What should we be thinking about for the second half, and do you see any M&A competing with buyback?
Um, thank you. You're uh, buyback activity moderated. A bit in the June quarter. Uh, what, what should we be thinking about for the second half, and do you see any m&a competing with buyback?
Timothy Knavish: So, hey, John, on the buybacks, you know, I've been pretty consistent since I took the job, and I hope I've gotten some credibility there that, you know, we're not going to let cash build on the balance sheet. I said that when I took over. We repaid some debt, and now for seven straight quarters, we've been doing buybacks. You know, there was a bit of a step down in Q1 only because, I'm sorry, in Q2, only because Q1 we had to divestiture cash. So that changed the calculus a bit as far as how much we would buy in that quarter. So that's what drove the step down. We assess it at the end of every month, frankly.
Hey John, um, on on the BuyBacks. Um, you know, I've been pretty consistent uh, since since I took the job, um, and I hope I've gotten some credibility there that, you know, we're not going to let cash build on the balance sheet. Um, I said that when I took over, we repaid some debt and now for 7 straight quarters, we've been doing doing BuyBacks, you know, there was a bit of a step down in q1. Only be, I'm sorry in Q2 only because q1 we had to divest at your cash.
Timothy Knavish: And to the extent I don't have a better use of cash to drive shareholder value, you should expect me to continue to behave as I have over the last seven quarters. Now, M&A, you know, the only super hot one out there is the one we all know about coming out of Germany. You know, and we're only interested in one piece of that, and that's not consistent with their playbook on how they want to move forward with a transaction. Beyond that, we're looking at very small things as they come along, but nothing material that would affect our cash playbook here on the foreseeable, at least short-term horizon, John. You should expect to see the same behavior out of me that you've seen since I took the job.
Assess it, at the end of end of every month. Frankly, and to the extent, I don't have a better use of cash to drive shareholder value. You should expect me to continue to behave as I have over the last 7 quarters. Now m&a.
you know, the only
the only super hot 1 out there is the 1 we all know about coming out of Germany. Um, you know, and we're only interested in in 1 piece of that, and that's not consistent with their, uh, Playbook. And how they want to move forward with it with a transaction beyond that. We're, we're looking at very small things as they come along, but nothing material, that would affect our cash Playbook here on the foreseeable. At least short-term Horizon John. You should expect to see the same behavior out of me that you've seen since I took the job.
Alex Lopez: Thank you.
Thank you.
Carly: Thank you very much. Our next question comes from Kevin McCarthy from Vertical Research Partners. Kevin, your line is now open.
Thank you very much. Our next question comes from Kevin McCarthy from first school research Partners Kevin, your line is now open,
John Mcnulty: Yes, thank you, and good morning. Tim, nice to see greater volume traction building here throughout the year. And listening to your comments, you know, I think share gains are a meaningful part of that. So I was wondering if you could talk through the performance segment and maybe help us conceptualize the gains that you've had in packaging and perhaps also protective and marine. I think on the industrial side, you quantified the gains as 100 million, and just trying to level set or benchmark against that figure on the performance side of the house.
Yes, thank you and good morning. Uh, Tim Tim nice to see, uh, greater volume traction building here, throughout the year, uh, and listening to your comments, you know, I think share gains are a meaningful part of that. So I was wondering if you could talk through the performance segment, um, and maybe help us conceptualize the gains that you've had in,
In packaging and perhaps also protective and Marine uh, I think on the industrial side you Quantified, the gains as 100 million and just just trying to level set or Benchmark uh against that figure on the performance side of the house.
Timothy Knavish: Sure. Well, the 100 million, I said most of it is automotive OEM. Second place would be industrial coatings, and as you know, packaging is in industrial, so packaging would be third place. Packaging specifically, you know, there was some share shift that we knew coming into the year in the US would be in the opposite direction for us because we picked up some temporary business over last year. So we had that built in that was known, but we've more than offset that with share gains in Europe and some share gains here with some of our new BPA NI technology. So the net net is we've been, you know, we've been net winning despite that known share shift that would happen here in the US. On the protective and marine, I mentioned a little bit about it.
Sure. Well, um, the $100 million I said, most of it is Automotive OEM.
Second place would be Industrial Coatings and as you know, packaging is in industrial. So, packaging would be third place, packaging specifically. Um, you know, there was some share shift that we knew coming into the year in the US would be in the opposite direction for us because we, we picked up some temporary business for the over last year. So we had that built in that was known, but we've more than offset that with share gains in Europe.
Timothy Knavish: That is really being driven by a couple of new technologies that we've launched in the last few quarters. You probably saw one of them at the Investor Day in Sigma Glide. Another one, another marine dry dock product called Sail Advance, which is copper-free, is starting to take off. We've got some really great fire protection products that we've launched in the last year or so, Kevin. So that is much more technology-driven, and those things are really starting to get some momentum. So hopefully, that's given you enough insight there.
And Sh some share gains here with some of our, our new BPA ni technology. So, the net Nets is, uh, is what we've been, you know, we've been net winning, despite despite that known share shift that would happen here in the in the US on the protective and Marine. Um, I mentioned a little bit about of it about it. That is really being driven by, um, you know, a couple of new technologies that we've launched in the last few quarters. You probably saw 1 of them at uh at the investor day in Sigma.
Slide, um, another 1. Another Marine Dry Dock product called sale Advance, which is copper free, uh, is starting to take off. Uh, we've got some really great fire protection products that we've launched in the last year, or so Kevin. So that is much more me, much more technology driven, and those things are really starting to get, get some momentum. So hopefully that's given you.
Alex Lopez: Yeah, and I'll pick up the rest of the performance side, Kevin. This is Vince. We're well above traffic, you know, US, Canada industry volumes, where we're probably 2X overseeing the industry, and it's a very strong industry right now as infrastructure continues to take place. No question in aerospace, we're continuing to serve a very hot market, but our performance there, including some of our debottlenecking, is allowing us to outperform that market. And as Tim alluded to earlier, we've outperformed in refinish very clearly. So we talked about that. So if you look at our performance segment in Q2, all four of our businesses outgrew their market. And as we said in the prepared remarks in Q3, we expect in our industrial segment, all three of those businesses to outperform market.
Enough insight there.
Yeah, and I'll I'll pick up the rest of the performance. So Kevin, uh, this Vince, uh, we, we're well above traffic Endust, you know, us Canada, industry volumes uh where we're probably 2x what we're seeing in the industry and it's very strong industry right now has infrastructure continues to take place. Uh, no question in Aerospace. Uh, we're, we're continuing to serve a very hot Market.
But, uh, our performance there, including some of our debottlenecking, is allowing us to outperform that market. And the stimulus to earlier, we've outperformed and refinished very clearly. Uh, so we talked about that. If you look at our performance segment in Q2, all four of our businesses outgrew their market, and as we said in the prepared remarks, in Q3, we expect in our industrial segments, all three of those businesses to outperform the market.
Carly: Thank you very much. Our next question comes from Janshum Punjabi from BED. Janshum, your line is now open.
Thank you very much.
Our next question comes from Jan Sean Punjabi from Bed.
John Mcnulty: Yeah, thank you, Alberto. Good morning, everybody. You know, just following up on the last question as it relates to the more specifically the industrial coating segment. Clearly, you're benefiting from market share that's going to build through the back half of the year for basically all three major verticals within that segment. But in terms of base market conditions for industrial coatings, how are you thinking about the outlook for the back half of the year relative to your view the last time you reported, you know, in context of still significant uncertainty with tariffs, et cetera?
Transfer your line is now open.
About the output for the back half of the Year relative to your view the last time you reported, you know, in context of still uh significant uncertainty with tariffs Etc.
Timothy Knavish: Yeah, thanks, Goshen. Of course, of course, it's a very uncertain market. It does, that uncertainty probably hits outside of Mexico, the issues there. It probably hits the industrial segment the hardest. So that confidence that you're hearing from us for the second half is entirely share gain driven. You know, the actual segment demand, and it does change every day, as we all know, but the actual segment demand, I would say, is flat to stable in most of our end markets, some of them being a little bit depressed, of course, like auto builds in the US and Europe. You know, some consumer products in the industrial space coming from Asia that were exported to the US, of course, those are a bit depressed. You know, heavy-duty equipment's a bit depressed.
Yeah, thanks. Gosh. I'm of course of course it's very uncertain Market it. It does that uncertainty probably hits. Um,
Outside of outside of Mexico. The issues there, it probably hits the industrial segment, the hardest.
So that that confidence that you're hearing from us for the second half is entirely shared game driven. Uh, you know, the the the actual segment demand and it does change every day as you as, we all know. But the actual segment demand I would say, is is, you know, flat to stable in most of our end markets.
Timothy Knavish: But you know, the aggregate, I'd say, is flat to slightly down from an industry standpoint, but it's our share gains that are already launching. Some of them launched and some of them launching as we speak that give us the confidence across all three segments.
Alex Lopez: Yeah, Goshen, if I could just...
Some of them being a little bit depressed, of course, like, Auto builds in, in, in us and Europe. Um, you know, some, uh, consumer products in the industrial space coming from Asia, there were exported to the US, of course, those are a bit, uh, a bit depressed. You know, heavy duty equipment. It's a bit depressed. But the, you know, if you the aggregate I'd say, is, is flat to slightly down from an industry standpoint, but it's our share gains that that are already launching some of them launched. And some of them launching as we speak that give us the confidence across all 3 cities.
Timothy Knavish: All three businesses, I'm sorry.
Alex Lopez: If I could just add to that, in most of these businesses we're talking about here, we do not see a stacking of inventory in the chain. So we're certainly not, we're certainly beholden to the global macro and the tariff discussion, but there's not a big inventory reaction that we would expect either way, regardless of what happens with tariffs.
All 3 businesses, I'm sorry. If I could just add that to that and most of these businesses were talking about here, we we do not see a stacking of inventory in the chain.
Um so we're certainly uh not we're certainly beholden to the global macro and the Tariff discussion but there's not a there's not a big inventory reaction that we would expect either way uh regardless of what happens with tariffs.
Carly: Thank you very much. Our next question comes from Frank Mitch from Farium Research LLC. Frank, your line is now open.
John Mcnulty: Thank you. Vince, if I could just follow up on that, I mean, the US GDP numbers came out this morning, pretty robust, suggesting that there was some pre-buying. So perhaps you're not, you suggest you're not seeing much in the way of inventories of your customers, but can you talk about the order patterns that you saw throughout the second quarter and what you're seeing so far here in the third quarter from your customers that may be anomalous or perhaps not? And then also, what the FX impact on Q2, what was that and what are your expectations for 2025? Thank you.
Thank you very much. Our next question comes from Frank, Mitch from Fair Research, LLC. Frank, your line is now open.
Thank you. Uh Vince if I could just follow up on that. I mean the US GDP numbers came out this morning. Pretty robust.
Suggesting that there was some pre-b buying. So perhaps um you're not you you you suggest you're not seeing much in the way of inventories of your customers but could you can you talk about the order patterns that you saw throughout the second quarter uh, and what you're seeing? So far here in the third quarter uh from your customers that may be an anomalous uh, or perhaps not. And then also what the FX, uh, impact on, uh, 2q, what was that? And what are your expectations for 2025? Thank you.
Alex Lopez: Yeah, Frank, as we look, again, the most sensitive segment for us as it relates to the global macro and near term is that industrial segment. We did, obviously, in early April, and we talked about this on our April call, we did see some customer concerns around the tariffs. As we progressed through the quarter, we saw a normal order pattern return. We didn't see it, it wasn't jagged, et cetera. I think most people, most people absorb psychologically the impact of the tariffs, and we move forward. And again, no significant changes throughout the quarter in order patterns. Tim talked about it earlier, a little softer in Europe than we wanted, some softening in Asia, again, to be expected. But beyond that, no significant impacts. On a currency basis, we were negative, Frank, in Q1. On a translation basis, that reverted to much less negative in Q2.
Yeah, yeah, Frank. As we look again the most sensitive uh segment for us.
As it relates to the global macro in near term is that industrial segment. Uh, we did obviously in early April. We talked about this on our April call. We did see some customer concerns around the tariffs. Uh, as we as we progress through the quarter, uh, we, we saw a normal order pattern return. Uh, we we didn't see, it wasn't Jagged Etc. I think most people, uh, most people absorb, uh, psychologically, the impact of the tariffs and, and, uh, we we move forward. Uh, and again, no, no significant changes throughout the quarter in order patterns. Tim talked about it earlier, uh, little softer in Europe than we wanted, uh, some sharpening in Asia again, to be expected. Uh, but beyond that, no, no significant, uh, impacts, uh, on the currency basis. We were negative
Alex Lopez: We expect the back half of the year to offset what happened in Q1. On a year-to-date basis, we're closer to zero. But as we exited the quarter on volumes, we didn't see any pull forward into Q2.
Frank in q1, on a translation basis that reverted uh uh, to to much less negative in in, uh, in Q2, we expect the back half of the year, uh, to offset what happened in q1 on the year to date basis. We're we're closer to closer to zero, but we we, as we activated the quarter on volumes, we didn't see any pull forward uh, into Q2.
Carly: Thank you very much. Our next question comes from James Hooper from Bernstein. James, your line is now open.
Thank you very much. Our next question comes from James Hooper from Bernstein.
James, your line is not open.
Aaron Ceccarelli: Hi, good morning, and thank you very much for taking my question. My question is around the share gains and margins from them. Now, clearly, your competitors have acknowledged that you are the coming force in gaining share in the markets, not just you. But I was interested to see whether the share gains you've made have had any impact on the incremental margins from gaining share and whether there's a path to these margins increasing once you've kind of consolidated the share gains going forward. Thank you.
Hi good. Good morning and thank you very much for taking my my question my question is around that the the share gains and and margins from them, now clearly your competitors acknowledge that you you are the coming force and gaining share in the markets, not not just you. But I was interested to see whether the uh, the share gains you've made of any impact on the incremental margins from Gaining share. And whether there's a part of these these uh these margins increasing. Um once you kind of consolidate it Consolidated the share gains going forward. Thank you.
Timothy Knavish: Yeah, thanks, James. I think the way to think about it is the share gains that we've had, you should expect them to be at segment average from a gross margin standpoint, but the volume element of it, as we launch them, will improve our net margin, obviously, with the fixed cost leverage that we'll get from them, the manufacturing efficiencies. So that share gain launch, as we move through the second half of the year, you'll see not only the top line growth from that, but you'll see the net margin expansion as we move through the next two quarters.
It is the share gains that we've had, you should expect them to be.
You know, at segment average from a gross margin standpoint, but the volume element of it, as we, as we launched them, will improve our net margin, obviously, with the, the fixed cost leverage that we'll get from them, the manufacturing efficiencies. So that that share gain launch. Uh, as we move through the second half of the Year, you'll see not only the the, the Top Line growth from that. But you'll see the net margin expansion as we move through the next 2 quarters.
Carly: Thank you very much. As a reminder, if you would like to raise a question, please press star followed by one on your telephone keypad to remove yourself from the line of questioning. It will be star followed by two. Our next question comes from Patrick Cunningham from Citigroup. Patrick, your line is now open.
Thank you very much. As a reminder, if you would like to raise a question, please press star, followed by 1 on your telephone keypad to make a South line of questioning, which will be staffed by 2. Our next question comes from Patrick King from Citigroup. Patrick, your line is now open.
Ryan Weis: Hi, good morning. You know, aerospace continues to be quite strong over two or three years stack. How should we think about the growth level over the next few years, given pricing actions for a longer cycle business, whether that starts to normalize, and then the debottlenecking and new capacity you have potentially allowing you to serve more volume there?
Hi, good morning.
You have 2 or 3 years stack, you know how should we think about, you know, growth levels over the next few years? Given the pricing action for a longer cycle business? You know, whether that starts to normalize and then the deep bottlenecking and and new capacity you have potentially allowing you to serve more volume.
In there.
Timothy Knavish: Yeah, Patrick, so we are anticipating high single digits and double digits, depending on what quarter you're lapping, high single digits and double digit growth, frankly, for the foreseeable future. I meet with a lot of the CEOs of these companies, and every one of them, whether it's military, general aviation, or commercial aviation, their forecasts are extremely strong. And when you combine those through, you kind of get this exponential impact on us because we get the top line margin and the leverage across the whole business. So you know that's why you see us investing both OPEX and CAPEX so much. You know, we just announced a new aerospace factory in the United States this past quarter at about $380 million CAPEX cost, and we continue to invest in debottlenecking.
Yeah, Patrick. So we are um,
Timothy Knavish: So you know I don't see an end to this high single digits, low double digits kind of growth trajectory for at least as many quarters as we're projecting.
We are anticipating, you know, High single digits, and double digits double digit, depending on what quarter, you're lapping, High single digits and double digit growth frankly for the foreseeable future. I meet with a lot of the, the CEOs of these companies and every 1 of them, whether its military general, aviation or commercial, Aviation is, uh, you know, their forecasts are extremely strong. And when you combine those through, you kind of get this exponential impact on us because we get the Top Line margin and The Leverage across across the whole business. So, you know, that's why we are. You see us investing? Both Opex and capex so much, uh, you know, we just announced a new, uh, Aerospace Factory in the United States. Uh, this past quarter at about 380 million dollar, uh, capex cost and we continue to invest and debottlenecking so, um, you know,
I don't see an end to this High single digits low double digits, kind of growth trajectory for at least as many quarters as we're projecting.
Carly: Thank you very much. Our next question comes from Vincent Andrews from Morgan Stanley. Vincent, your line is now open.
Thank you very much. Our next question comes from Vincent Andrews from Morgan Stanley. Vincent, your line is now open.
John Mcnulty: Hi, good morning, everyone. I'm wondering if you can speak a little bit more about the Mexico architectural market, and in particular, both... Hi, I'm unmuted. Can you not hear me?
Hi, good morning everyone. I'm wondering if you can speak a little bit more about the uh, the Mexico architectural Market in particular uh both.
Timothy Knavish: Yeah, we can hear you now.
Hi, I'm unmuted. Can you not hear me?
John Mcnulty: Hi, Vincent.
Yeah, we can hear you now.
Timothy Knavish: Hello? Yes, we hear you, Vincent. Yes.
Hello.
John Mcnulty: You can hear me. Okay, great. Sorry, I don't know what happened, but I'm just curious if you could speak a little bit about the... Okay, terrific. If you could speak a little bit about the Mexico architectural market, and in particular, you know, sort of what you're hearing from customers that's giving you confidence that there'll be a pickup in the large project volume, you know, in 3Q and presumably more so in 4Q. And then what, you know, to that end, have you baked into the guidance, you know, for the full year for that? Thank you.
Yes, we hear you, Vincent. Yes.
You can hear me okay? Great! Sorry, I don't know what happened, but I'm just curious if you could speak a little bit about the...
okay, terrific. If you could speak a little bit about the Mexico architectural market and in particular, you know, sort of what you're hearing from customers. That's giving you confidence that they'll be a pickup in the large project volume, you know, in 3 q and presumably more, so and 4 q. And then what you know to that end of you have you baked into the guidance uh you know, for the full year for that. Thank you.
Timothy Knavish: Sure. So what we're hearing, and as you would expect, given the reach of our business down there, we're pretty well connected, you know, not only to the key, you know, government entities, but to the large project owners, the project managers, the contractors. And as far as the sequential improvement, Vincent, there's a lot of these projects that are already in flight. And so they're kind of dialing back rather than complete stop on the spending. And then as we move forward here, the initial pause from April, you know, they're starting to complete and move forward with completion of some of those projects that were already in flight. Beyond that, there's a high degree of confidence from the folks that we talked to on the ground in Mexico that once our two presidents come to some kind of agreement, that that'll open the floodgates.
Sure. So, what what we're here and as you would expect given the the reach of our business down there. We're we're we're pretty well connected. Um, you know, not only to, to the key, you know, government entities. But to the large project owners, the project managers the the the contractors and as far as the sequential Improvement, uh, Vincent.
There, there's, there's a lot of these projects that are already in flight.
Timothy Knavish: And you know, there'll be some tariff, I'm sure. I don't, I have no idea any more so than anyone else does of what that end game will be. But the advantage that Mexico has and will always have is proximity. So even if there's some tariff that adds cost to goods coming from Mexico to the United States, relative to all the other alternatives who are also getting tariffed, it's still in a significantly advantaged position. It's got a strong workforce, a well-educated workforce, a highly productive workforce, and proximity. And you know, tariffs can't put an ocean between us and Mexico. So I guess the combination of projects in flight, starting to restart, and this pretty high level of confidence that wherever the two governments end up, Mexico will still be in an advantaged position.
And so they're they're kind of dialing back rather than complete stop on the spending. And then, as we move forward, here, the initial pause from April, you know, they're starting to complete and move forward with completion of some of those projects that were already in Flight beyond that. There's a high degree of Confidence from the folks that we talked to on the ground in Mexico that once uh once our 2 presidents, come to some kind of agreement that that'll open the floodgates.
And you know there will be some tariff. I'm sure I don't have any idea any more than anyone else does about what that endgame will be. But the advantage that Mexico has.
Imiti.
Alex Lopez: Yeah, Vincent, just to get to your second question, what's built into our guide, we look at, again, Q2, organic growth in Mexico was low single digits. Again, retail up, our project business down. And we look at the second half holistically. We have that business up modestly to mid-single digits. So it's not a significant step up in terms of total PPG, but it's again a step up sequentially from first half to second half for the project work and continued growth in retail.
So even if there's some tariff that adds cost to Goods coming from Mexico to the United States relative to all the other Alternatives who are also getting tariff. It's still in a significantly advantaged position, it's got a strong Workforce, a well-educated Workforce, a highly productive, Workforce and proximity. And uh, you know, tariffs can't can't put an ocean between us and Mexico. So I guess the combination of projects in flights, starting to restart. And this this pretty high level of confidence that wherever the 2 government end up at Mexico, will still be an advantage position. Yeah, yeah, Vincent, just to get to your second question, what's built into our guide? You look at again, Q2 organic growth. In Mexico was low single digits. Again, retail up our, our project business down and we look at the second half holistically. We have that business up modestly in the mid single digit.
So it's not a significant step up, uh, in terms of total PPG, but it's again a step up sequentially from the first half to the second half for the project work and continued growth in retail.
Carly: Thank you very much. Our next question comes from Aaron Viss-Whonathan from RBC. Aaron, your line is now open.
Thank you very much.
Our next question comes from Aaron Vaughn.
From RBC, Aaron, your line is now open.
John Mcnulty: Hey, thanks for taking my question. You know, so I guess you've shown now a few quarters of consistently improving volume growth. You know, as you just answered, aerospace is definitely contributing to that. But you are showing some better growth in some of the industrial verticals. So maybe you can just give us your outlook as you look into specifically auto OEM. I know you've answered a few questions there already, but I mean, I guess is it really production that you'd expect that would drive you further next year? Is there any other initiatives, whether it be EV growth in China or maybe some Europe customer mix? What else would you point that would maybe help continue to drive maybe a turnaround in auto OEM? Thanks.
Great. Thanks for taking my question. Um, you know, so I guess you've shown now, a few quarters of consistent. Uh uh we uh improving volume growth. Um uh you know as you just answered Aerospace is definitely contributing to that. But you are showing uh some better growth and some of the industrial verticals. Um so maybe you can just give us your outlook as you look into specifically Auto OEM. Uh, I know you've answered a few questions there already but
I mean, I guess, is it really production that you'd expect, uh, that would drive you further. Next year, is there any other, uh, initiatives, whether it be EV growth in China, or, um, maybe some Europe, uh, customer mix. Um, what else would you point? That would maybe help, uh, continue to drive, maybe a turnaround in in Auto OEM, thanks.
Timothy Knavish: Yeah, hey, Aaron. It's a number of the things that you mentioned. I'll try to talk about each one of them. Clearly, we have the share gain momentum that's kicking in now. That's one piece. You know, the longer-term fundamentals for this industry and growth are still there. There's still a deficit in new vehicles. You've got a fleet age. You've got car parts per capita in places like India and China. So the fundamentals are still there, especially given that, you know, the whole world has been pretty much underproducing since COVID. So longer term, the fundamentals are there. So you've got this short-term share gains, and we do expect to start to see stabilization and increase in builds as tariff dynamics and inflation and other affordability and macro conditions get more, you know, get more confidence in the consumer.
Yeah. Hey Iran. Um
it it's a it's a number of the things that you mentioned. I'll try to talk about each 1 of them. Clearly uh we we we have the share gain momentum that's that's kicking in. Now, that's that that's 1 piece. Um, you know, the the longer term fundamentals for this industry and growth are still are still there. Uh, there's still a deficit in new vehicles. You've got a
Timothy Knavish: There's just a, you know, until we get through some of this period of uncertainty, there's an overall lack of confidence that's holding back auto purchases.
Alex Lopez: Yeah, and we said in our, I believe it's Vince, we said in our prepared remarks, you know, we're at industry in terms of volume demand, and we certainly expect in the second half of the year, continuing into '26, us to outperform the industry. Share gain part of that, a couple of customer-specific issues that we're seeing that were negative to us in the back half of last year will be beneficial to us in the back half of this year. So those, and we still have very good positioning in China, where retail sales were up double digits in the second half, and production didn't match that.
Sweet age. You've got car park per capita in places like India and China. So the fundamentals are still there especially given that, you know, the whole whole world has been pretty much under producing since Co so longer term, the fundamentals are there. So you've got this short-term share gains and we do expect to start to see stabilization and increase in builds as uh, tariff Dynamics and inflation, and other affordability and macro conditions, get more, you know, get more confidence in the consumer. Uh, there there's just a, you know, until we get through some of this period of uncertainty, there's a overall lack, lack of confidence. That's holding back Auto purchases.
Yeah. And we said in our Arena events, we said in our
Prepared remarks, uh, you know, we're
We're at industry levels in terms of the volume of demand.
And we certainly expect in the second half of the year, continuing into 2026, to outperform the industry share game. Part of that is due to a couple of customer-specific issues that we saw negatively impacting us in the back half of last year, which we anticipate will be beneficial to us in the back half of this year. Additionally, we still have very good positioning in China, where retail sales were up double digits in the second half, but production didn't match that.
Carly: Thank you very much. Our next question comes from Matthew Deal from Bank of America. Matthew, your line is now open.
Thank you very much.
Our next question comes from Matthew Dior from Bank of America Matthew, your line is not open.
John Mcnulty: Thank you. Can we talk through the puts and takes on price draws and cost cuts in the second half? Because if I look back to some of the prior calls, I think you had said like 75 million of self-help actions and cost savings would hit 3Q. And you know, in a vacuum, that should be able to really get you more than what you're expecting as it relates to margin improvements year over year. So what's kind of diluting that?
Thank you. Um,
Can we talk about the puts and takes on price, raws, and cost cuts in the second half? If I look back to some of the prior calls, I think it's like $75 million in self-help.
Actions and cost savings would hit 3 q and you know, in a vacuum that should be able to, to really get you more than what you're expecting as it relates to.
Margin improvements year-over-year. So
What's kind of diluting that?
Alex Lopez: Yeah, I mean, just some clarification. The restructuring benefits we earmarked for this year were 75 million full year, growing throughout the quarter, or going soon, growing throughout the year. We're about at a $30 million clip through the first half. So we'll still grow incrementally in the second half beyond what we saw in the first half, but it's not an incremental $75 million. Again, as we look at price cost, we still expect the same inflation, raw material inflation rate. We do expect some incremental pricing to benefit us in the second half versus the first half as we put some price increases in in the second quarter in certain businesses.
Yeah, Matt, just some clarification on the restructuring benefits we received. Mark, for this year, were $75 million full year, growing throughout the quarter—excuse me, growing throughout the year. We're about at a $30 million clip through the first half.
So, we'll still grow incrementally in the second half beyond what we saw in the first half. But if it's not an incremental $75 million, again as we look at price-cost.
Uh, we still expect the same inflation rate for raw materials. We do expect some incremental pricing to benefit us in the second half. In the first half, as we implemented some price increases in the second quarter in certain businesses.
Carly: Thank you very much. Our next question comes from Alex Sey from KEYBOOK. Alex Sey, your line is now open.
Thank you very much. Our next question comes from axie from a from keyboard.
Galaxy, your line is not open.
Ryan Weis: Thanks, and good morning, guys. This is Ryan on for Alex Sey. I just wanted to circle back to auto OEM, and specifically in China. I think there's been a lot of news circulating kind of in the last couple of weeks just around potentially some elevated inventories, the end of price cutting wars. So just kind of curious what you guys are hearing from customers there and kind of what maybe the production outlook is going to look like maybe in the next like 6 to 12 months. Thanks.
Timothy Knavish: Yeah, I think, Ryan, I think that, you know, it's certainly doing better than the rest of the world as far as production outlook. You know, and that drives, given the lack of volume in the rest of the world, that drives a competitive dynamic. And you know, our technologies are really productivity-focused. And so we do get an appreciation of that from our customers in the automotive OEM space. You know, EVs are doing better in China, and one company in particular who we are number one with is doing better than the rest of the industry. And you know, about one out of every three cars produced in the world comes from China. So you add all those up, and China is actually acting as a buffer to us in auto OEM relative to what's happening in the US and Europe.
Thanks and good morning guys. This is Ryan on for Alexei. I just wanted to Circle back to to Auto em and specifically in China. I think there was a there's been a lot of news circulating kind of in the last couple weeks, just around potentially some elevated inventories. Uh, the end of, uh, price cutting Wars. So just kind of curious what you guys are hearing from customers there and kind of what the maybe the production Outlook is going to look like maybe in the next, like, 6 to 12 months. Thanks.
Alex Lopez: Yeah, and one other thing I would add, Ryan, is if you look at exports from China, they're up about 10% through the first half of the year on a year-over-year basis. That's another growth element coming out of China, which is driving the auto production.
Yeah, I think um, Ryan I think that, you know, it's certainly doing better than the rest of the world as far as, uh, production Outlook. Um, you know, and and that drives given the lack of volume and the rest of the world that drives a competitive Dynamic. And you know our Technologies are really productivity focussed. And so we do get an appreciation of that from our customers in the auto automotive OEM space, you know, EVS are doing better in China and 1 company, in particular who we are number 1 with, uh, is doing better than the rest of industry. And, you know, about a 1 out of every 3 Cars produced in the world it it comes from China. So you add all those up in China is actually acting as a a buffer to us in Auto OEM relative to what's happening in in us and Europe.
Yeah, the one other thing I would add, Ryan, is if you look at exports from China, they're up about 10%.
Through the first half of the year, on a year-over-year basis, that's another growth element coming out of China, which is driving you out of production.
Carly: Thank you very much. Our next question comes from Josh Becker from UBS. Josh, your line is now open.
Thank you very much. Our next question comes from Josh Becker, UBS. Josh, your line is now open.
John Mcnulty: Yeah, hey, good morning. I wanted to follow up just on the conversation around architectural margins. So I think, you know, Vince has highlighted earlier, you had almost 100% negative incremental. You talked about some things with FX translation, but the reported for the segment was zero, and you talked about some costs. So if I kind of put this together, if I think about a normal 40% incremental margin, correct me if I'm wrong, there's about $30 million of maybe higher costs that hit you. Can you maybe bucket those up between the supply chain issue versus FX? And then as you look at the second half, should we expect this higher decremental to persist, or does it go back to normal? Thank you.
Yeah. Hey, good morning. Um, I wanted to follow up just on the conversation around architectural margins so I think, you know, Vince has highlighted earlier. You had almost 100% negative incremental you, you talked about some things with FX translation but the reported for the segment was zero and you talked about some costs. So if I kind of put this together if I think about a normal 40% incremental margin correct me if I'm wrong there's about 30 million dollars of maybe higher costs that hit you can you maybe bucket those up between the supply chain issue versus FX and then if you look at the second half,
should we expect this higher decremental to persist? Or does it go back to normal? Thank you.
Alex Lopez: Yeah, and as we talked about earlier, Josh, a couple of factors at play here. Most meaningful is the mixed difference between Mexico and our non-Mexico business. So with Mexico B2B down, there's a mixed impact. As we talked throughout the call today, we expect that to become less of an issue as we progress through the year. The FX impact normalizes in the back half of the year, so both on raw materials as well as there's an FX impact between just Europe and the Mexican peso. We did have a transitory issue in Australia. To put that in order of magnitude, that hurt our volume on a year-over-year basis by a half a turn, so 50 basis points. So it was impactful on our bottom line as well. As Tim alluded to earlier, that was primarily contained in Q2. And so those are the big impacts.
Yeah, and as we uh talked about earlier Josh uh a couple factors at play here. Uh most meaningful is is the is the mixed difference between Mexico and our non-mexican business. So with Mexico B2B down, there's a mixed impact because we talked throughout the call today. We expect that to become less of an issue as we progress through the year.
The FX impact normalizes in the back half of of the year so both on raw materials as well as uh there's an fx impact between just Europe and and the and the Mexican peso.
We did have a transitory issue in Australia uh to put that in order of magnitude that that hurt our volume on the year-over-year basis by a half a turn
Uh, so so 50 basis points. So it was impactful on our, on our bottom line, as well uh as Tim alluded to earlier. Uh that was primarily contained the Q2.
Alex Lopez: I think you'll see us return to a normal incremental margin in the back half of the year as some of these FX and one-time events fall by the wayside.
Um and then so those are the big impacts. I think you'll see us return to a normal incremental margin in the back half of the year as some of these FACS.
and one-time events, uh, you know, fall by the wayside.
Carly: Thank you very much. As a reminder, to raise a question, please star followed by one. Our next question comes from Chris Parkinson from Work Research. Chris, your line is now open.
Our next question comes from Chris Parkinson, from walk research Chris, your line is now open.
John Mcnulty: Great. Thank you so much. Tim, when you sit down with David and you think about the outlook for the company over the next, let's say, 16 to 18 months or so, you know, it seems like aerospace and P&M are kind of the leaders. You have some new products in both, especially P&M. You know, and then within that, I know you have some new things in auto throughout, but where would you have the greatest confidence over the next year and a half or perhaps even longer in terms of your ability to significantly outgrow markets to the point where your confidence in the investment community will surely take notice?
Great. Thank you so much. Um, Tim, when you sit down with David and you think about the outlook for the company over the next, let's say, 6 to 18 months or so, it seems like Aerospace and PNM are kind of the leaders. You have some new products in both, especially PNM. You know, and then within that, I know you have some new things in Auto throughout. But where would you have the greatest confidence over the next year and a half or perhaps even longer in terms of your ability to significantly outgrow markets to the point where your confidence in the investment community will surely take notice?
Timothy Knavish: Yeah, hey, Chris. You know, we're outperforming and will continue to outperform in aerospace. Refinish, you didn't mention that one. I'm guessing that's because you were focused on the chemistry-related innovations. But Refinish, we will continue to launch innovations outside the can, some of which you would have seen when you were here that drive shop productivity and digital tools, et cetera. We expect to continue to outperform there. You know, our traffic business, now that we've got it cleaned up and it's only focused on the country where we have a super strong position, we'll continue to perform and outperform there as, you know, as highway projects and infrastructure are invested in. Protective and marine, you know, as I said earlier, no end in sight to particularly our outperformance in the areas of fire protection and marine aftermarket.
Yeah. Hey Chris, uh, you know, we're, you know, we're outperforming and we'll continue to outperform in in in Aerospace. Uh, we finish, you know, you you that, you know, you didn't mention that 1. I'm guessing that's because it's, you know, you were focused on the chemistry related in Innovations, but refinish, we will continue to launch Innovations outside of the can, uh, some of which you would have seen when when you were here, the drive, uh, shop productivity, and digital tools Etc, we we expect to continue to outperform their, you know our traffic business now that we've got it cleaned up. And uh it's only focused on the country where we have a super strong position. Uh, we'll continue to perform and outperform their
Timothy Knavish: This packaging dynamic in Europe, of Europe increasing BPA regulations, that plays to our advantage, and that'll play out in the next couple of years, '26 and '27. You know, COMEX, PPG Mexico will, you know, once we get through this transitory issue with project spending being paused, that'll continue to be an area of outperformance for us. I think share gains in industrial coatings, where we, frankly, across many of our segments where we have a strong product and service offering that are underrepresented in share, as we focus more acutely on the areas where we have a strongest right to win, you'll see that business outperforming.
As, uh, you know, as highway projects and infrastructure, uh, are invested in protective and marine, you know, as I said earlier, no end, no end in sight to particularly our outperformance in the areas of fire protection and marine aftermarket. This, uh, packaging dynamic in Europe.
Um, of Europe, increasing BPA regulations that play to our advantage, and that'll play out in, uh, in the next couple of years, 2026 and 2027. You know, Comex, uh, PPG, Mexico will, uh, you know, once we get through this transitory issue with project spending being paused, that that'll continue to be an area of outperformance for us.
Timothy Knavish: And look, at the end of the day, Chris, you know, our algorithm for growth, you know, a combination of our talented people, our much more focused and sharper kind of future-facing portfolio, much more disciplined around our enterprise growth strategy and where we invest and where we have the strongest right to win, our three new crisply defined operating segments that drive, you know, distinct missions, distinct value propositions, distinct investment criteria, the three-pronged innovation approach that you heard about when you were here between chemistry inside the can, digital productivities outside the can, and then the use of AI not only for productivity internally, but also customer-facing use cases, and the key enablers of a lot of work that we're doing on OPEX and commercial excellence.
I I think share gains in Industrial Coatings where we frankly across many of our strength segments where we have a strong product and service offer offering but are underrepresented and share as we focus uh more acutely on the areas where we have a strongest right to win. You'll see that business outperforming and look at the end of the day. Chris, you know, our algorithm for growth, you know, combination of our, our talented people are much more focused and sharper and kind of future-facing portfolio, um, much more disciplined around our Enterprise growth strategy.
Where we invest and where we have the strongest right to win are 3. New crisply defined operating segments
Timothy Knavish: The outcoming of that is we are committed to what I laid out two years ago, which was ongoing a 2% to 4% organic growth company that delivers an 8% to 10% EPS growth every year and a billion dollars of adjusted free cash flow. So that's kind of our growth algorithm. When you take everything I described in each of the businesses, plus what we're doing to build this organic growth in margin machine, we're comfortable that those commitments that we've made to the investment community are, in fact, what we'll deliver.
That drive, you know, distinct missions, distinct, distinct value propositions distinct investment criteria. The 3-pronged Innovation approach that you heard about when you were here, between chemistry inside, the can digital productivity is outside the can and then the use of AI not only for productivity internally, but also customer-facing use cases, and the key enablers of a lot of work that we're doing on Opex and Commercial Excellence. The, the outcoming of that is we we are committed to what I laid out 2 years ago which was ongoing a 2 to 4% organic Growth Company that delivers an 8 to 10% EPS growth
Alex Lopez: Yeah, and that free cash flow number, again, as everybody recalls, includes the deduction for capital spending.
Every year, a billion dollars of adjusted free cash flow. So that's kind of our growth algorithm. When you take everything I described in each of the businesses, plus what we're doing to build this organic growth in margin machine, we're comfortable that those commitments that we've made to the investment community are, in fact, what we'll deliver.
Yeah, and that's a pretty casual number again. Does everybody recall that this includes the deduction for capital spending?
Carly: Thank you very much. Our next question comes from Jeff Sokocos from JP Morgan. Jeff, your line is now open.
Thank you very much.
Our next question comes from Jessica Caucus.
From J.P. Morgan. Jeff, your line is now open.
Jeff Sokocos: Thanks very much. Two-part question. For Vince, cash flow from operations was 370 or so for the first couple of quarters, and last year you did 1.4 billion. Do you expect cash flow from operations this year to be the same as last year or higher or lower? And for Tim, the results in performance coatings were good. That is, volume growth was plus three and price was plus three. But your operating income was up maybe 9% or 30 million. I could imagine it being up double that with that kind of price and volume. Were you satisfied with the performance coatings results, or was there something that's been holding the margins back? Your incrementals were in the low.
Thanks very much. Uh, 2-part question.
Uh, for Vince, cash flow from operations was.
Higher lower.
And for Tim, um, the results.
Um in performance, codings were good, that is volume. Growth was plus 3 and price was plus 3.
Um, but your operating income was up maybe 9%, or $30 million. I can imagine it being up double that with that kind of price and volume. What were you satisfied with the...
Performance. Codings results or was was there something that's been holding the margins back?
Alex Lopez: Yeah, Jeff. Sorry, Jeff. Yeah, this is Vince. We are tracking ahead of prior year in cash from operations. Certainly, as you're well aware, most of our cash flow, because of the seasonality of our businesses, is back half weighted. We still have, you know, we still have our net normal blocking and tackling to do as it relates to inventory management as we come out of the peak seasons with collections from our customers. But our expectation is for our cash to grow on a year-over-year basis. Our cash from us to grow on a year-over-year basis.
Your incremental is worth the, yeah, John, this.
So sorry, Jeff, yeah, this is Vince. Uh, we are tracking ahead of Prior year. In cash from operations.
Uh, certainly, as you're well aware.
Most of our cash flow because of the seasonality of our businesses is back half weighted.
Uh, we still have, you know, we still have our our normal blocking and tackling to do as it relates to, to inventory management as we come out of the peak seasons.
With collections from our customers, our expectation is for our cash to grow.
Timothy Knavish: Yeah, Jeff, on the margin question, of course, I would have wanted the net margin for performance coatings to drop more, you know, EBITDA and cash to the bottom line. But we made a conscious decision coming into the year. I mean, this segment is, I mean, 25.7% EBITDA segment, strong growth of mid-single digits in a very difficult operating environment. It is a shining star right now, and we want to capture as much of that value as we can for the future for our shareholders. So we made a conscious decision to make some fairly significant investments, particularly in aerospace and protective and marine and some digital investments in Refinish so that we can keep this thing running like it is and growing into the future, Jeff.
Uh, on a year-over-year basis, our cash is off to grow in a year-over-year basis.
Yeah. Jeff, uh, on the margin question. Of course, uh, I would have wanted the net.
Timothy Knavish: So we made a conscious decision to spend more on OPEX growth, focused OPEX for things like debottlenecking in aerospace, digital initiatives in Refinish, and, you know, feet on the street and penetration initiatives in protective and marine.
Uh, margin for performance Coatings to drop more, you know. Ebit, EBA cash to the bottom line, but we made a conscious decision, uh, coming into the year. I mean this segment is, uh, I mean 25.7%, EBA segment, uh, strong. Strong growth of mid single digits in a very difficult operating environment. It, it is a shining star right now and we want to capture as much of that value as we can for the future for our shareholders. So we made a conscious decision to make some fairly significant Investments, um, particularly in Aerospace, uh, and protective in Marine, and some digital investments in refinish, so that we can keep this thing uh running like it is, and growing into the future, Jeff. So we made a conscious decision to spend more on on Opex uh, growth focused up at
Um, for things like debottlenecking in aerospace digital initiatives in, um,
In refinish and, you know, feed on the street and penetration initiatives in protective and marine.
Carly: Thank you very much. As a reminder, to raise a question, it will be star followed by one. Our next question comes from Aaron Ceccarelli from Berenberg. Aaron, your line is now open.
Thank you very much. As a reminder to raise a question, we'll be staff followed by 1.
Our next question comes from Aaron Shikari from Baron B, and your line is not open.
Aaron Ceccarelli: Hello, good morning, and congrats on the good quarter. You selectively revised down your organic sales growth guidance for both architectural paints and industrial coatings. I take the point that Q2, perhaps on the volume side, was a bit softer than expected in architectural paints. But could you please break down the contributing factors in terms of volumes and pricing for the second half for these two segments, particularly because from what I see, you are quite positive on the outlook for industrial coatings? Thank you.
Hello, good morning and congrats on the on the good quarter. You said to your revised down, your organic sales growth guidance for both architectural, paints and Industrial. Coatings, I take the point that Q2. Perhaps on the volume side was a bit softer than expected in architectural paints, but could you please break down the contributing factors in terms of volumes and pricing for the second half, uh, for these 2 segments particularly because from from what I see, you are quite positive on the outlook for Industrial Coatings. Thank you.
Timothy Knavish: Yeah, so I'll take the first part of it on architectural. We did adjust down our outlook, particularly for Europe. You know, we were disappointed in Europe that the momentum that we saw in late Q1 didn't continue in the Q2. So we thought the prudent thing to do going forward was to assume that it would be, you know, kind of current state plus our share gains that would drive and did not count on any market recovery.
yeah, so I I'll take the the the first part of it um on on
You know, on architectural we we did adjust down, uh, our Outlook, uh, particularly for, for Europe. Um, you know, we were disappointed in Europe that the momentum that we saw in late q1, um, you know, didn't didn't continue.
Timothy Knavish: So the flip side of that, Aaron, is that any stimulus, any catalyst, whether it be, you know, the impact of a tariff agreement, whether we see some progress in Ukraine, whether we see some progress in the Middle East, anything that would give a little bit of consumer confidence in Europe would be a positive to what we have guided in our revised guide for architectural Europe, because actually the household balance sheets are pretty strong, generally speaking. So it's much more about consumer confidence.
Alex Lopez: Yeah, and on industrial, very modest decrement to our prior guide, really relating to what we saw in Q2 in China, just carrying forward again.I
Carly: would call it more rounding, in terms of percentages.
In Q2 in China uh, just carrying forward again, I would call it more rounding uh in the terms of percentages.
Alex Lopez: Thank you very much. We currently have no further questions, so I'd like to hand back to Alex Lopez for any further remarks.
Thank you very much. We currently have no further questions so I'd like to hand back to Alex Lopez for any further remarks.
Timothy Knavish: Thank you, Carly. We appreciate your interest and confidence in PPG. This concludes our second quarter earnings call.
Uh, thank you Carly. We
compute our second quarter earning School.
Alex Lopez: As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.
Yes, we conclude today's call. We'd like to thank everyone for joining you now. Disconnect your lines