Q1 2026 PPG Industries Inc Earnings Call

April 29, 2026

Speaker #1: 2026 PPG Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

Speaker #1: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.

Speaker #1: To allow everyone the opportunity to ask a question, the company requests that each analyst ask only one question. Thank you. I would now like to turn the conference over to Alex Lopez, Director of Investor Relations, please go ahead, sir.

Speaker #2: Thank you, Tracy, and good morning, everyone. This is Alex Lopez. We appreciate your continued interest in PPG and welcome you to our first quarter 2026 earnings conference call.

Speaker #2: Joining me today from PPG are Tim Knavish, Chairman and Chief Executive Officer, and Vince Morales, Senior Vice President and Chief Financial Officer. Our comments relate to the financial information released after U.S.

Speaker #2: equity markets closed on Tuesday, April 28, 2026. We have posted detailed commentary and the accompanying presentation slides on the investor center of our website, ppg.com.

Speaker #2: Following management's perspective on the company's results, we will move to 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.

Speaker #2: These statements involve uncertainties and risks, which may cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements.

Speaker #2: The presentation also contains certain known gap financial measures. The company has provided in the appendix of the presentation materials which are available on our website, reconciliations to of these known gap financial measures to the most directly comparable gap financial measures.

Speaker #2: For additional information, please refer to PPG's filing with the SEC. Now, let me introduce PPG Chairman and CEO, Tim Knavish.

Speaker #3: Thank you, Alex, and good morning, everyone, and welcome to our first quarter 2026 earnings call. Before we begin today's call, I want to take a moment to remember our dear friend and colleague, John Bruno.

Speaker #3: His passing last week is a tremendous loss, John was not only an exceptional contributor to our company but a wonderful husband, father, and friend whose leadership, intellect, compassion, and humor touched everyone who knew him.

Speaker #3: Thank you to the many of you that reached out. It meant a lot to us here at PPG, but more importantly, meant a lot to his family.

Speaker #3: Now, I'd like to start by providing highlights of our first quarter 2026 financial performance. And then I will share our outlook. I am pleased to report that PPG delivered solid performance in the first quarter demonstrating our ability to maintain growth momentum and a challenging macro environment.

Speaker #3: Led by our differentiated aerospace and PPG COMEX businesses. We achieved organic sales growth of positive 1%, marking our fifth consecutive quarter of higher year-over-year organic sales.

Speaker #3: This growth was driven by higher selling prices with further selling prices increased announced. And expected price realization for the remainder of the year targeted to offset any inflationary impact much more quickly than prior inflation cycles.

Speaker #3: First quarter net sales totaled $3.9 billion, up 7% year over year, with adjusted earnings per share of $1.83 and an increase of 6% versus the prior year.

Speaker #3: Our segment EBITDA margin was over 19%, reflecting solid execution of our share gains that benefits of our technology advantaged products, strong brand recognition, along with excellent commercial execution.

Speaker #3: Turning to our segment performance in global architectural coatings, first quarter net sales rose 13% to $965 million, with positive 2% organic growth. Organic sales for architectural coatings Latin America and Asia Pacific increased by a mid-single digit percentage compared to the first quarter of 2025, with equal contributions from selling price and sales volumes.

Speaker #3: In Mexico, retail sales were especially strong, and project-related sales continued their recovery. Architectural coating sales in Europe remain mixed by country, with a low single digit percentage decline in total favorable pricing.

Speaker #3: Segment income increased more than 30%, supported by pricing and execution of self-help actions, which drove EBITDA margins up 230 basis points, above prior year levels.

Speaker #3: We expect organic sales and margin momentum to continue into the second quarter of 2026. Also, we continue to reduce our overall structural costs and our architectural business in Europe and we have four manufacturing plants that will be closed in the second half of 2026, resulting in lower fixed costs going forward.

Speaker #3: Our performance coating segment delivered 5% positive net sales growth to $1.3 billion, led by double digit organic growth in aerospace and high single digit growth in traffic solutions and protective and marine coatings.

Speaker #3: PMC has now delivered 12 consecutive quarters of positive volume growth. As expected, automotive refinish organic sales decreased by double digit percentage as sales volumes were lower reflecting customer order patterns stemming from our U.S.

Speaker #3: distributors during the first half of 2025. On a positive note, we are seeing improvements in the U.S. industry accident claims. February and March industry claims were down 1% year over year, which now makes three out of the last four months with low single digit declines year over year, reinforcing a normalization trend after the high single digit to double digit declines most of last year.

Speaker #1: Now, moving to the industrial coding segment, first quarter net sales grew 4% to $1.6 billion. Organic sales were flat, including share gains that led to 1% sales volume growth well outpacing industry demand, as we realized the benefit of share gains was strength in automotive OEM coatings and packaging coatings.

Speaker #3: Another positive data point, we are seeing our U.S. distributor fulfillment orders sequentially improve as industry levels or inventory levels normalize. In refinish, as we previously communicated, we expect year over year organic sales volume declines in the second quarter as we lap strong prior year first half order patterns.

Speaker #1: We expect to launch additional share gains in the industrial segment throughout this year and into 2027. From a business unit standpoint, our automotive OEM business delivered flat sales volume, which outpaced the decline in global automotive industry production by about 300 basis points.

Speaker #1: The industry decline was largely due to year-over-year comparisons in China, as the first quarter of 2025 was very strong, and the first quarter of 2026 was tepid.

Speaker #3: We anticipate volume growth during the second half of 2026. Segment EBITDA was strong at 24%, driven by the strength of our aerospace business despite the unfavorable year over year refinish volume comparisons.

Speaker #1: Expectations for China industry comparisons are to improve in the coming quarters. For PPG, due to our strong product portfolio and commercial execution, we expect to continue outgrowing the market in the second quarter and for the full year in 2026.

Speaker #3: In fact, the investments that we are making in aerospace to support our customers' demand have resulted in improved productivity and improved output, and we are well positioned to deliver consistent growth in this key end market for the next several years.

Speaker #1: Organic sales for our industrial coatings business were down a low single-digit percentage, as lower volumes due to inconsistent demand were partially offset by positive pricing actions in this business.

Speaker #3: I would like to again emphasize the important and sizable role that our aerospace business plays as a key growth engine for our company. Demand is expected to remain strong given our highly specialized and qualified products for both the OEM and aftermarket channels.

Speaker #1: Packaging coatings organic sales increased by a double-digit percentage year over year, growing significantly above industry rates. Sales volumes for PPG are up over 20% on a two-year stack basis, driven by share gains as customers continue to select our leading technologies.

Speaker #3: Our backlog remains at about 350 million dollars despite year over year output increasing. The PPG Aerospace Business provides unique technology advantaged products in various sub-segments, transparencies, sealants and adhesives, coatings, services, and engineered materials.

Speaker #1: Segment EBITDA margin was negatively impacted by regional mix as China automotive production dropped in comparison to a particularly high level in the first quarter last year.

Speaker #3: In each one of these verticals, we have a strong presence that allows us to provide a superior customer offering including excellent distribution capabilities. Creating a truly unique value driver for our company and for our shareholders.

Speaker #1: Looking ahead, we expect sequential margin improvement, driven by incremental industry and PPG sales volume growth. Selling price realization and aggressive cost management. With the impact of the Iran war, costs have risen for raw materials, energy, logistics, and packaging, across the coatings value chain.

Speaker #3: Another differentiator of PPG Aerospace Business is the balance is not only between OEM and aftermarket, but also we are not overly dependent on any sub-segment as we are well balanced across commercial, general aviation, and military.

Speaker #1: In this rapidly evolving macro environment, we are focused on our ability to supply our technology-differentiated products and services to our customers, which will allow us to maintain our organic growth momentum.

Speaker #3: I'd like to highlight just two examples of the proprietary technology advantaged aerospace products that are designed to provide customized chemistry solutions inside the can and improve productivity for our customers outside the can.

Speaker #1: I'm expecting the actions we are taking, combined with PPG's portfolio strengths, to offset geopolitical-driven impacts. We have had limited impact from supply shortages, and we have the ability to leverage our unique, broad, and global supply chain footprint to securely source raw materials and drive competitive pricing for those raw materials.

Speaker #3: PPG's PRC seal caps deliver lightning strike protection for aircraft while significantly improving application time and material usage for our customers. ARE3D printed sealants are customized gasket solutions that offer superior quality and increased customer productivity solutions.

Speaker #1: Additionally, we are leveraging our years of expertise in product formulation technology and our ability to maximize the use of AI to optimize products to drive reductions in our raw material costs.

Speaker #3: Now, moving to the industrial coating segment, first quarter net sales grew 4% to $1.6 billion, organic sales were flat including share gains that led to 1% sales volume growth well outpacing industry demand, as we realized the benefit of share gains with strength in automotive OEM coatings and packaging coatings.

Speaker #1: Considering our procurement capabilities, our global footprint, our formula flexibility, our portfolio strengths, and the current macro environment, the impact of PPG is expected to be a mid-single-digit percentage in the cost of goods sold for the remainder of the year.

Speaker #3: We expect to launch additional share gains in the industrial segment throughout this year and into 2027. From a business unit standpoint, our automotive OEM business delivered flat sales volume which outpaced the decline in global automotive industry production by about 300 basis points.

Speaker #1: We expect to fully offset these costs, and we are proactively raising prices to secure raw materials for our customers. Given the distribution models and price mechanisms we have in place, we expect to deliver price-cost realization much more rapidly than we did in previous inflation cycles.

Operator: 2026 PPG Earnings Conference Call. After the speaker's remarks, there will be a question and answer session. To allow everyone the opportunity to ask a question, the company requests that each analyst ask only 1 question. Thank you. I would now like to turn the conference over to Alejandro Lopez, Director of Investor Relations. Please go ahead, sir.

Operator: 2026 PPG Earnings Conference Call. After the speaker's remarks, there will be a question and answer session. To allow everyone the opportunity to ask a question, the company requests that each analyst ask only one question. Thank you. I would now like to turn the conference over to Alex Lopez, Director of Investor Relations. Please go ahead, sir.

Timothy M. Knavish: Now, moving to the Industrial Coatings segment. Q1 net sales grew 4% to $1.6 billion. Organic sales were flat, including share gains that led to 1% sales volume growth, well outpacing industry demand, as we realized the benefit of share gains with strengths in automotive OEM coatings and packaging coatings. We expect to launch additional share gains in the industrial segment throughout this year and into 2027. From a business unit standpoint, our automotive OEM business delivered flat sales volume, which outpaced the decline in global automotive industry production by about 300 basis points. The industry decline was largely due to year-over-year comparisons in China, as Q1 2025 was very strong and Q1 2026 was tepid. Expectations for China industry comparisons are to improve in the coming quarters.

Speaker #3: The industry decline was largely due to year over year comparisons in China as the first quarter of 2025 was very strong and first quarter of 2026 was tepid.

Speaker #1: This realization will impact our global architectural coatings and performance coating segments first, and then flow through our industrial coating segment. Importantly, there are areas where we anticipate potential upside to the second half of 2026, such as our growing aerospace business and our architectural coatings Mexico business, where demand has been strong.

Speaker #3: Expectations for China industry comparisons are to improve in the coming quarters. For PPG, due to our strong product portfolio and commercial execution, we expect to continue outgrowing the market in the second quarter and for the full year in 2026.

Speaker #1: Additionally, industry demand in automotive refinish has been recovering faster than we initially expected. As a result, we are reaffirming our full year 2026 EPS guidance range of $7.70 to $8.10.

Speaker #3: Organic sales for our industrial coatings business were down a low single digit percentage as lower volumes due to inconsistent demand were partially offset by positive pricing actions in this business.

Alejandro Lopez: Thank you, Tracy, and good morning, everyone. This is Alex Lopez. We appreciate your continued interest in PPG and welcome you to our Q1 2026 earnings conference call. Joining me today from PPG are Tim Knavish, Chairman and Chief Executive Officer, and Vince Morales, Senior Vice President and Chief Financial Officer. Our comments relate to the financial information released after US equity markets closed on Tuesday, 28 April 2026. We have posted detailed commentary and the accompanying presentation slides on the investor center of our website, ppg.com. Following management's perspective on the company's results, we will move to 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 effects on PPG's operating and financial performance.

Alex Lopez: Thank you, Tracy, and good morning, everyone. This is Alex Lopez. We appreciate your continued interest in PPG and welcome you to our Q1 2026 Earnings Conference Call. Joining me today from PPG are Tim Knavish, Chairman and Chief Executive Officer, and Vince Morales, Senior Vice President and Chief Financial Officer.

Speaker #3: Packaging coatings organic sales increased by a double digit percentage year over year, growing significantly above industry rates. Sales volumes for PPG are up over 20% on a two-year stack basis driven by share gains as customers continue to select our leading technologies.

Speaker #1: Again, let me re-emphasize, our top priority is supporting our customers' needs through technical expertise, products with consistent quality, and continuity of supply. Even as market conditions remain highly dynamic.

Alex Lopez: Our comments relate to the financial information released after US equity markets closed on Tuesday, 28 April 2026. We have posted detailed commentary and the accompanying presentation slides on the investor center of our website, ppg.com.

Timothy M. Knavish: For PPG, due to our strong product portfolio and commercial execution, we expect to continue outgrowing the market in Q2 and for the full year in 2026. Organic sales for our Industrial Coatings business were down a low single-digit % as lower volumes due to inconsistent demand were partially offset by positive pricing actions in this business. Packaging Coatings organic sales increased by a double-digit % year over year, growing significantly above industry rates. Sales volumes for PPG are up over 20% on a two-year stack basis, driven by share gains as customers continue to select our leading technologies. Segment EBITDA margin was negatively impacted by regional mix as China automotive production dropped in comparison to a particularly high level in Q1 last year.

Speaker #1: Now let me talk about our balance sheet and cash. Our strong balance sheet continues to provide financial flexibility. We ended the quarter with cash and short-term investments of about $1.6 billion, we repaid $700 million of debt that matured in the first quarter, and returned approximately $260 million to shareholders through dividends and share repurchases.

Speaker #3: Segment EBITDA margin was negatively impacted by regional mix as China automotive production dropped in comparison to a particularly high level in the first quarter last year.

Alex Lopez: Following management's perspective on the company's results, we will move to 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 effects on PPG's operating and financial performance.

Speaker #3: Looking ahead, we expect sequential margin improvement driven by incremental industry and PPG sales volume growth. Selling price realization and aggressive cost management. With the impact of the Iran War costs have risen for raw materials, energy, logistics, and packaging, across the coatings value chain.

Speaker #1: Our cash deployment remains focused on maximizing shareholder value creation. Looking ahead, our accelerating organic growth momentum and proactive pricing actions position us well for the year.

Alejandro Lopez: These statements involve uncertainties and risks which cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements. The presentation also contains certain non-GAAP financial measures. The company has provided in the appendix of the presentation materials, which are available on our website, reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information, please refer to PPG's filing with the SEC. Let me introduce PPG Chairman and CEO, Timothy M. Knavish.

Alex Lopez: These statements involve uncertainties and risks which 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.

Speaker #1: For the second quarter of 2026, we expect strong growth in aerospace, architectural coatings Latin America, protective and marine coatings, automotive OEM coatings, and packaging coatings.

Speaker #3: In this rapidly evolving macro environment, we are focused on our ability to supply our technology differentiated products, services to our customers. Which will allow us to maintain our organic growth momentum.

Alex Lopez: The company has provided in the appendix of the presentation materials, which are available on our website, reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information, please refer to PPG's filing with the SEC. Let me introduce PPG Chairman and CEO, Timothy M. Knavish.

Speaker #1: While demand in architectural coatings Europe, automotive refinish coatings, and in global industrial end-use markets will remain below prior years. We expect overall pricing for the company to be positive, with the strength from our performance and architectural coating segments in flat year-over-year price in the industrial coating segments.

Speaker #3: I'm expecting the actions we are taking combined with PPG's portfolio strengths to offset geopolitical driven impacts. To date, we have had limited impact from supply shortages and we have the ability to leverage our unique broad and global supply chain footprint to securely source raw materials and drive competitive pricing for those raw materials.

Timothy M. Knavish: Looking ahead, we expect sequential margin improvement driven by incremental industry and PPG sales volume growth, selling price realization, and aggressive cost management. With the impact of the Iran war, costs have risen for raw materials, energy, logistics, and packaging across the coatings value chain. In this rapidly evolving macro environment, we are focused on our ability to supply our technology differentiated products and services to our customers, which will allow us to maintain our organic growth momentum. I'm expecting the actions we are taking, combined with PPG's portfolio strengths, to offset geopolitical driven impacts. To date, we have had limited impact from supply shortages, and we have the ability to leverage our unique, broad, and global supply chain footprint to securely source raw materials and drive competitive pricing for those raw materials.

Timothy M. Knavish: Thank you, Alex, and good morning, everyone, and welcome to our Q1 2026 earnings call. Before we begin today's call, I want to take a moment to remember our dear friend and colleague, John Bruno, whose passing last week is a tremendous loss. John was not only an exceptional contributor to our company, but a wonderful husband, father, and friend whose leadership, intellect, compassion, and humor touched everyone who knew him. Thank you to the many of you that reached out. It meant a lot to us here at PPG, but more importantly, meant a lot to his family. Now, I'd like to start by providing highlights of our Q1 2026 financial performance, and then I will share our outlook.

Tim Knavish: Thank you, Alex, and good morning, everyone, and welcome to our Q1 2026 earnings call. Before we begin today's call, I want to take a moment to remember our dear friend and colleague, John Bruno, whose passing last week is a tremendous loss.

Speaker #1: With all three segments having improved pricing versus the first quarter. This will result in organic sales growth for the second quarter in the range of flat to positive low single digits versus the prior year.

Speaker #3: Additionally, we are leveraging our years of expertise in product formulation technology and our ability to maximize the use of AI to optimize products to drive reductions in our raw material costs.

Tim Knavish: John was not only an exceptional contributor to our company, but a wonderful husband, father, and friend whose leadership, intellect, compassion, and humor touched everyone who knew him. Thank you to the many of you that reached out. It meant a lot to us here at PPG, but more importantly, meant a lot to his family. Now, I'd like to start by providing highlights of our Q1 2026 financial performance, and then I will share our outlook.

Speaker #1: Given our ability to outperform the macro through our commercial momentum, combined with our pricing realization and self-help actions, we expect to deliver adjusted earnings per share growth in the range of flat to a positive low single-digit percentage for the second quarter versus the prior-year period.

Speaker #3: Considering our procurement capabilities, our global footprint, our formula flexibility, our portfolio strengths, and the current macro environment, the impact of PPG is expected to be a mid single digit percentage in the cost of goods sold for the remainder of the year.

Speaker #1: We are confident in our strategy and the strength of our portfolio, whether delivering higher growth in earnings despite challenging market conditions. Thank you to our PPG team around the world who make it happen and deliver on our purpose every day.

Timothy M. Knavish: I am pleased to report that PPG delivered solid performance in Q1, demonstrating our ability to maintain growth momentum in a challenging macro environment, led by our differentiated aerospace and PPG Comex businesses. We achieved organic sales growth of +1%, marking our fifth consecutive quarter of higher year-over-year organic sales. This growth was driven by higher selling prices with further selling prices increased, announced, and expected price realization for the remainder of the year targeted to offset any inflationary impact much more quickly than prior inflation cycles. Q1 net sales totaled $3.9 billion, up 7% year-over-year, with adjusted earnings per share of $1.83 and an increase of 6% versus the prior year.

Tim Knavish: I am pleased to report that PPG delivered solid performance in Q1, demonstrating our ability to maintain growth momentum in a challenging macro environment, led by our differentiated aerospace and PPG Comex businesses. We achieved organic sales growth of +1%, marking our fifth consecutive quarter of higher year-over-year organic sales.

Speaker #3: We expect to fully offset these costs and we are proactively raising prices to secure raw materials for our customers. Given the distribution models and price mechanisms we have in place, we expect to deliver price cost realization much more rapidly than we did in previous inflation cycles.

Timothy M. Knavish: Additionally, we are leveraging our years of expertise in product formulation technology and our ability to maximize the use of AI to optimize products to drive reductions in our raw material costs. Considering our procurement capabilities, our global footprint, our formula flexibility, our portfolio strengths, and the current macro environment, the impact of PPG is expected to be a mid-single digit percentage in the cost of goods sold for the remainder of the year. We expect to fully offset these costs. We are proactively raising prices to secure raw materials for our customers. Given the distribution models and price mechanisms we have in place, we expect to deliver price cost realization much more rapidly than we did in previous inflation cycles. This realization will impact our Global Architectural Coatings and Performance Coatings segments first, and then flow through our Industrial Coatings segment.

Speaker #1: We appreciate your continued confidence in PPG. Now, before we open the line for questions, I would like to congratulate Vince, on his upcoming retirement on this, his final PPG earnings call.

Speaker #3: This realization will impact our global architectural coatings and performance coating segments first, and then flow through our industrial coating segment. Importantly, there are areas where we anticipate potential upside to the second half of 2026, such as our growing aerospace business and our architectural coatings Mexico business where demand has been strong.

Speaker #1: Thank you, Vince, for more than 40 years with PPG. Thank you for being a great contributor to our company, a driver of results, a driver of shareholder value, a great mentor to many talents, a great teammate to our operating committee, a great partner to the last three CEOs, and a great friend to me.

Tim Knavish: This growth was driven by higher selling prices with further selling prices increased, announced, and expected price realization for the remainder of the year targeted to offset any inflationary impact much more quickly than prior inflation cycles. Q1 net sales totaled $3.9 billion, up 7% year-over-year, with adjusted earnings per share of $1.83 and an increase of 6% versus the prior year.

Speaker #1: Thank you, Vince. As PPG makes the CFO transition, we are delighted to welcome Jamie Beggs as our new Chief Financial Officer. With her extensive background in financial leadership, Jamie brings a wealth of experience that will be instrumental in driving our continued growth and success.

Speaker #3: Additionally, industry demand in automotive refinish has been recovering faster than we initially expected. As a result, we are reaffirming our full year 2026 EPS guidance range of $7.70 to $8.10.

Timothy M. Knavish: Our segment EBITDA margin was over 19%, reflecting solid execution of our share gains, the benefits of our technology advantage products, strong brand recognition, along with excellent commercial execution. Turning to our segment performance in Global Architectural Coatings, Q1 net sales rose 13% to $965 million with +2% organic growth. Organic sales for Architectural Coatings Latin America and Asia Pacific increased by a mid-single-digit percentage compared to Q1 2025, with equal contributions from selling price and sales volumes. In Mexico, retail sales were especially strong and project-related sales continued their recovery. Architectural Coatings Europe remain mixed by country, with a low single-digit percentage decline in total, which was partially offset by favorable pricing.

Tim Knavish: Our segment EBITDA margin was over 19%, reflecting solid execution of our share gains, the benefits of our technology advantage products, strong brand recognition, along with excellent commercial execution. Turning to our segment performance in Global Architectural Coatings, Q1 net sales rose 13% to $965 million with +2% organic growth.

Speaker #1: Please join us in extending a warm welcome to Jamie as we work together to achieve new milestones and create lasting value for our stakeholders.

Speaker #3: Again, let me reemphasize, our top priority is supporting our customers' needs through technical expertise, products with consistent quality, and continuity of supply. Even as market conditions remain highly dynamic.

Speaker #1: We are thrilled that Jamie is joining our team. Now, operator, please open the line for questions.

Timothy M. Knavish: Importantly, there are areas where we anticipate potential upside to H2 2026, such as our growing aerospace business and our Architectural Coatings Mexico business, where demand has been strong. Industry demand in automotive refinish has been recovering faster than we initially expected. As a result, we are reaffirming our full year 2026 EPS guidance range of $7.70 to $8.10. Again, let me reemphasize, our top priority is supporting our customers' needs through technical expertise, products with consistent quality, and continuity of supply, even as market conditions remain highly dynamic. Now let me talk about our balance sheet and cash. Our strong balance sheet continues to provide financial flexibility. We ended the quarter with cash and short-term investments of about $1.6 billion.

Speaker #2: Thank you. At this time, I would like to remind everyone that in order to ask a question, press star, then the number one on your key on your telephone keypad.

Speaker #3: Now let me talk about our balance sheet and cash. Our strong balance sheet continues to provide financial flexibility. We ended the quarter with cash and short-term investments of about $1.6 billion, we repaid $700 million of debt that matured in the first quarter, and returned approximately $260 million to shareholders through dividends and share repurchases.

Speaker #2: We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Gancham Punjabi with Baird. Your line is open.

Tim Knavish: Organic sales for Architectural Coatings Latin America and Asia Pacific increased by a mid-single-digit percentage compared to Q1 2025, with equal contributions from selling price and sales volumes. In Mexico, retail sales were especially strong and project-related sales continued their recovery. Architectural Coatings Europe remain mixed by country, with a low single-digit percentage decline in total, which was partially offset by favorable pricing.

Speaker #2: Please go ahead.

Speaker #3: Our cash deployment remains focused on maximizing shareholder value creation. Looking ahead, our accelerating organic growth momentum and proactive pricing actions position us well for the year.

Speaker #3: Thank you, operator, and our best to you, Vince. And our best to very best for John's family as well. I guess, Tim, first off, on your comments on price-cost recovery, we'll be much faster than prior periods.

Speaker #3: Can you just outline some of the specific changes you've made to support that? And then, related to that, you've been very calibrated in the past with pricing and with previous inflation cycles to kind of maintain your market share, etc.

Speaker #3: For the second quarter of 2026, we expect strong growth in aerospace, architectural coatings Latin America, protective and marine coatings, automotive OEM coatings, and packaging coatings.

Timothy M. Knavish: Segment income increased more than 30%, supported by pricing and execution of self-help actions, which drove EBITDA margins up 230 basis points above prior year levels. We expect organic sales and margin momentum to continue into Q2 2026. Also, we continue to reduce our overall structural costs in our Architectural Coatings Europe business, and we have 4 manufacturing plants that will be closed in H2 2026, resulting in lower fixed costs going forward. Our Performance Coatings segment delivered +5% net sales growth to $1.3 billion, led by double-digit organic growth in aerospace coatings and high single-digit growth in Traffic Solutions and protective and marine coatings.

Tim Knavish: Segment income increased more than 30%, supported by pricing and execution of self-help actions, which drove EBITDA margins up 230 basis points above prior year levels. We expect organic sales and margin momentum to continue into Q2 2026.

Speaker #3: Do you expect volumes to hold this go around as well, just given the near 20% increases you've implemented thus far? Thank you.

Timothy M. Knavish: We repaid $700 million of debt that matured in Q1 and returned approximately $260 million to shareholders through dividends and share repurchases. Our cash deployment remains focused on maximizing shareholder value creation. Looking ahead, our accelerating organic growth momentum and proactive pricing actions position us well for the year. For Q2 2026, we expect strong growth in aerospace, architectural coatings Latin America, protective and marine coatings, automotive OEM coatings, and packaging coatings. While demand in architectural coatings Europe, automotive refinish coatings, and in global industrial end-use markets will remain below prior years. We expect overall pricing for the company to be positive, with the strength from our Performance Coatings and architectural coatings segments and flat year-over-year price in the Industrial Coatings segment, with all three segments having improved pricing versus Q1.

Speaker #3: While demand in architectural coatings Europe, automotive refinish coatings, and in global industrial end use markets will remain below prior year. We expect overall pricing for the company to be positive, with the strength from our performance and architectural coating segments in flat year over year price in the industrial coating segments.

Speaker #4: Yeah, thanks, Gancham. Look, the difference this cycle from a volume standpoint is, as you know well, for the last three years, we've been building our organic growth muscle.

Speaker #4: Right? So we have tremendous muscle or tremendous momentum from an organic growth standpoint that will help as we move forward with price increases. And if you compare it to the last couple of cycles, the pre-COVID cycle of 2017-18 took us about a year and a half to get to run rate neutrality.

Tim Knavish: Also, we continue to reduce our overall structural costs in our Architectural Coatings Europe business, and we have 4 manufacturing plants that will be closed in H2 2026, resulting in lower fixed costs going forward. Our Performance Coatings segment delivered +5% net sales growth to $1.3 billion, led by double-digit organic growth in aerospace coatings and high single-digit growth in Traffic Solutions and protective and marine coatings.

Speaker #3: With all three segments having improved pricing versus the first quarter. This will result in organic sales growth for the second quarter in the range of flat to positive low single digits versus the prior year.

Speaker #3: Given our ability to outperform the macro through our commercial momentum, combined with our pricing realization and self-help actions, we expect to deliver adjusted earnings per share growth in the range of flat to a positive low single digit percentage for the second quarter versus the prior year period.

Speaker #4: The 2021 cycle, which was the post-COVID combined with the Texas freeze, took us about a year. Now we're talking months. So it's a combination of two things, Gancham.

Speaker #4: Number one, we've always had a good pricing muscle. And with each cycle, we refined that. We learned. We get better. We get faster. Now, from a volume standpoint, we're combining it with positive momentum on the organic growth muscle that we've been building and demonstrating results through these last five quarters or so.

Timothy M. Knavish: PMC has now delivered 12 consecutive quarters of positive volume growth. As expected, automotive refinish organic sales decreased by double-digit % as sales volumes were lower, reflecting customer order patterns stemming from our US distributors during H1 2025. On a positive note, we are seeing improvements in the US industry accident claims. February and March industry claims were down 1% year-over-year, which now makes 3 out of the last 4 months with low single-digit declines year-over-year, reinforcing a normalization trend after the high single digit to double-digit declines most of last year. Another positive data point, we are seeing our US distributor fulfillment orders sequentially improve as inventory levels normalize. In refinish, as we previously communicated, we expect year-over-year organic sales volume declines in Q2 as we lap strong prior year H1 order patterns.

Tim Knavish: PMC has now delivered 12 consecutive quarters of positive volume growth. As expected, automotive refinish organic sales decreased by double-digit % as sales volumes were lower, reflecting customer order patterns stemming from our US distributors during H1 2025. On a positive note, we are seeing improvements in the US industry accident claims.

Speaker #3: We are confident in our strategy and the strength of our portfolio delivering higher growth and earnings despite challenging market conditions. Thank you to our PPG team around the world who make it happen and deliver on our purpose every day.

Timothy M. Knavish: This will result in organic sales growth for Q2 in the range of flat to positive low single digits versus the prior year. Given our ability to outperform the macro through our commercial momentum, combined with our pricing realization and self-help actions, we expect to deliver adjusted earnings per share growth in the range of flat to a positive low single-digit percentage for Q2 versus the prior year period. We are confident in our strategy and the strength of our portfolio for delivering higher growth and earnings despite challenging market conditions. Thank you to our PPG team around the world who make it happen and deliver on our purpose every day. We appreciate your continued confidence in PPG. Now, before we open the line for questions, I would like to congratulate Vince on his upcoming re-retirement on this, his final PPG earnings call.

Speaker #3: We appreciate your continued confidence in PPG. Now, before we open the line for questions, I would like to congratulate Vince, on his upcoming retirement on this, his final PPG earnings call.

Speaker #4: So, we're confident that we're going to be able to strike the right balance between pricing and volume.

Tim Knavish: February and March industry claims were down 1% year-over-year, which now makes 3 out of the last 4 months with low single-digit declines year-over-year, reinforcing a normalization trend after the high single digit to double-digit declines most of last year.

Speaker #2: Your next question comes from the line of Michael Sisson. With Wells Fargo. Your line is open. Please go ahead.

Speaker #3: Thank you, Vince, for more than 40 years with PPG. Thank you for being a great contributor to our company, a driver of results, a driver of shareholder value, great mentor to many talents, a great teammate to our operating committee, a great partner to the last three CEOs, and a great friend to me.

Speaker #5: Hey, guys. Nice start to the year. And congrats to you, Vince, and John will be sorely missed. In terms of your outlook for the second half, Tim, how do you see volumes sort of shaping up sort of at the midpoint?

Tim Knavish: Another positive data point, we are seeing our US distributor fulfillment orders sequentially improve as inventory levels normalize. In refinish, as we previously communicated, we expect year-over-year organic sales volume declines in Q2 as we lap strong prior year H1 order patterns.

Speaker #3: Thank you, Vince. As PPG makes the CFO transition, we are delighted to welcome Jamie Beggs as our new Chief Financial Officer. With her extensive background in financial leadership, Jamie brings a wealth of experience that will be instrumental in driving our continued growth and success.

Speaker #5: Any effects from the IRAN conflict on each of the segments? And just give us your thoughts on the type of volume growth that could be that's kind of embedded in your outlook.

Timothy M. Knavish: We anticipate volume growth during H2 2026. Segment EBITDA was strong at 24%, driven by the strength of our aerospace business despite the unfavorable year-over-year refinish volume comparisons. In fact, the investments that we are making in aerospace to support our customers' demand have resulted in improved productivity and improved output. We are well-positioned to deliver consistent growth in this key end market for the next several years. I would like to again emphasize the important and sizable role that our aerospace business plays as a key growth engine for our company. Demand is expected to remain strong, given our highly specialized and qualified products for both the OEM and aftermarket channels. Our backlog remains at about $350 million, despite year-over-year output increasing.

Tim Knavish: We anticipate volume growth during H2 2026. Segment EBITDA was strong at 24%, driven by the strength of our aerospace business despite the unfavorable year-over-year refinish volume comparisons. In fact, the investments that we are making in aerospace to support our customers' demand have resulted in improved productivity and improved output.

Speaker #3: Please join us in extending a warm welcome to Jamie as we work together to achieve new milestones and create lasting value for our stakeholders.

Timothy M. Knavish: Thank you, Vince, for more than 40 years with PPG. Thank you for being a great contributor to our company, a driver of results, a driver of shareholder value, a great mentor to many talents, a great teammate to our operating committee, a great partner to the last three CEOs, and a great friend to me. Thank you, Vince. As PPG makes the CFO transition, we are delighted to welcome Jamie Beggs as our new Chief Financial Officer. With her extensive background in financial leadership, Jamie brings a wealth of experience that will be instrumental in driving our continued growth and success. Please join us in extending a warm welcome to Jamie as we work together to achieve new milestones and create lasting value for our stakeholders. We are thrilled that Jamie is joining our team. Now, operator, please open the line for questions.

Speaker #4: Yeah, thanks, Mike. In everything, unfortunately, you kind of have to timestamp right now because it's just so fluid out there, right? But based on today's environment, we feel good about the second-half volume.

Speaker #3: We are thrilled that Jamie is joining our team. Now, Operator, please open the line for questions.

Speaker #2: Thank you. At this time, I would like to remind everyone that in order to ask a question, press star, then the number one on your key on your telephone keypad.

Speaker #4: A couple of things. First of all, aerospace beat our own expectations. In Q1, and we continue to see improving output there. And as you know, we're essentially sold out.

Tim Knavish: We are well-positioned to deliver consistent growth in this key end market for the next several years. I would like to again emphasize the important and sizable role that our aerospace business plays as a key growth engine for our company. Demand is expected to remain strong, given our highly specialized and qualified products for both the OEM and aftermarket channels. Our backlog remains at about $350 million, despite year-over-year output increasing.

Speaker #2: We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Gansham Panjabi with Baird. Your line is open.

Speaker #4: So every incremental output that we get is an incremental volume for us. Second—and this is a significant one for us—we had said all along that refinish would have positive volume in the second half.

Speaker #2: Please go ahead.

Speaker #3: Thank you, Operator, and our best to you, Vince, and our best to very best for John's family as well. I guess, Tim, first off, on your comments on price cost recovery will be much faster than prior periods.

Speaker #4: It's recovering a little earlier than we expected, and we got two really good sets of data points in US collision claims rates, as well as improving US distributor fulfillment orders.

Operator: Thank you. At this time, I would like to remind everyone that in order to ask a question, press star then 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Ghansham Panjabi with Baird. Your line is open. Please go ahead.

Speaker #3: Can you just outline some of the specific changes you've made to support that? And then related to that, you've been very calibrated in the past with pricing and with previous inflation cycles to kind of maintain your market share, etc.

Timothy M. Knavish: The PPG aerospace business provides unique technology advantage products in various subsegments: transparencies, sealants and adhesives, coatings, services, and engineered materials. In each one of these verticals, we have a strong presence that allows us to provide a superior customer offering, including excellent distribution capabilities, creating a truly unique value driver for our company and for our shareholders. Another differentiator of PPG aerospace business is the balance is not only between OEM and aftermarket, but also we are not overly dependent on any subsegment as we are well-balanced across commercial, general aviation, and military. I'd like to highlight just two examples of the proprietary technology advantaged aerospace products that are designed to provide customized chemistry solutions inside the can and improve productivity for our customers outside the can. PPG's PRC Seal Caps deliver lightning strike protection for aircraft while significantly improving application time and material usage for our customers.

Tim Knavish: The PPG aerospace business provides unique technology advantage products in various subsegments: transparencies, sealants and adhesives, coatings, services, and engineered materials. In each one of these verticals, we have a strong presence that allows us to provide a superior customer offering, including excellent distribution capabilities, creating a truly unique value driver for our company and for our shareholders.

Speaker #3: Do you expect volumes to hold this go around as well, just given the near 20% increases you've implemented thus far? Thank you.

Speaker #4: Then on top of that, we've got the industrial segment share wins that we will continue to launch as we move through the year. And finally, Mexico has really recovered nicely for us.

Speaker #4: Yeah, thanks, Gansham. Look, the difference, the difference this cycle from a volume standpoint is, as you know well, for the last three years, we've been building our organic growth muscle.

Ghansham Panjabi: Thank you, operator. Our best to you, Vince Morales, and our very best for John Bruno's family as well. I guess, Timothy M. Knavish, you know, first off, on your comments on price cost recovery will be much faster than prior periods, can you just outline some of the specific changes you've made to support that? Related to that, you've been very calibrated in the past with pricing and, you know, with previous inflation cycles to kind of maintain your market share, et cetera. Do you expect volumes to hold this go around as well, just given the near 20% increases you've implemented thus far? Thank you.

Speaker #4: Right? So we have tremendous muscle or tremendous momentum from an organic growth standpoint that will help as we move forward with price increases. And if you compare it on a couple of cycles, the pre-COVID cycle of 2017, '18, took us about a year and a half to get to run rate neutrality.

Speaker #4: Retail's doing great. And with each passing quarter, projects get a little better. And in some of our other businesses, packaging's doing great, up double digits, PMC, is doing well and has been doing well for a couple of quarters.

Tim Knavish: Another differentiator of PPG aerospace business is the balance is not only between OEM and aftermarket, but also we are not overly dependent on any subsegment as we are well-balanced across commercial, general aviation, and military.

Tim Knavish: I'd like to highlight just two examples of the proprietary technology advantaged aerospace products that are designed to provide customized chemistry solutions inside the can and improve productivity for our customers outside the can. PPG's PRC Seal Caps deliver lightning strike protection for aircraft while significantly improving application time and material usage for our customers.

Speaker #4: We have not seen any order book changes with the Iran conflict. Obviously, we've seen changes in feedstock pricing. But when it comes to volume and order books, based on today's current environment, we have not seen any negativity in our order books.

Speaker #4: The 2021 cycle, which was the post-COVID combined with the Texas freeze, took us about a year. Now we're talking months. So it's a combination of two things, Gansham.

Timothy M. Knavish: Yeah, thanks, Ghansham. Look, the difference this cycle from a volume standpoint is, as you know well, for the last three years we've been building our organic growth muscle, right? We have tremendous momentum from an organic growth standpoint that will help as we move forward with price increases. If you compare it on a couple of cycles, you know, the pre-COVID cycle of 2017, 2018 took us about 1.5 years to get to run rate neutrality. The 2021 cycle, which was the, you know, the post-COVID combined with the Texas freeze, took us about 1 year. Now we're talking months. It's a combination of two things, Ghansham. Number one, we've always had a good pricing muscle, and with each cycle we refine that.

Speaker #5: Yeah, Mike, this has been just to peel the onion back a little on the refinish comments. Just as a reminder for everybody in the baseload, we had very strong refinish activity in the first half of '25.

Timothy M. Knavish: ARE 3D Printed Sealants are a customized gasket solution that offers superior quality and increased customer productivity solutions. Moving to the Industrial Coatings segment, Q1 net sales grew 4% to $1.6 billion. Organic sales were flat, including share gains that led to 1% sales volume growth, well outpacing industry demand, as we realized the benefit of share gains with strength in automotive OEM coatings and packaging coatings. We expect to launch additional share gains in the Industrial segment throughout this year and into 2027. From a business unit standpoint, our automotive OEM business delivered flat sales volume, which outpaced the decline in global automotive industry production by about 300 basis points.

Tim Knavish: ARE 3D Printed Sealants are a customized gasket solution that offers superior quality and increased customer productivity solutions. Moving to the Industrial Coatings segment, Q1 net sales grew 4% to $1.6 billion. Organic sales were flat, including share gains that led to 1% sales volume growth, well outpacing industry demand, as we realized the benefit of share gains with strength in automotive OEM coatings and packaging coatings.

Speaker #5: Distributors stocked up inventory. We were well above market. The second half, the patterns hurt us. So we have much easier comps. So we still expect muted volumes in refinish for the year.

Speaker #4: So we're confident that we're going to be able to strike the right balance between pricing and volume.

Speaker #2: Your next question comes from the line of Michael Sison, with Wells Fargo. Your line is open. Please go ahead.

Speaker #5: But the comparisons are why Tim said we expect growth year over year in the second half.

Speaker #2: Your next question comes from the line of John Roberts with Mizuho. Your line is open. Please go ahead.

Tim Knavish: We expect to launch additional share gains in the Industrial segment throughout this year and into 2027. From a business unit standpoint, our automotive OEM business delivered flat sales volume, which outpaced the decline in global automotive industry production by about 300 basis points.

Timothy M. Knavish: We learn, we get better, we get faster. From a volume standpoint, we're combining it with, you know, positive momentum on the organic growth muscle that we've been building and demonstrating results through these last 5 quarters or so. We're confident that we're gonna be able to strike the right balance between pricing and volume.

Speaker #5: Thanks. It was good to see that PPG family come together for John Bruno. And welcome, Jamie and Vince again. Thank you very much for all the good service and good luck with the penguins, tonight.

Speaker #5: Any effects from the iron conflict on each of the segments? And just give us your thoughts on the type of volume growth that could be that's kind of outlook.

Speaker #5: Tim, on your guidance on slide 9—raw materials—how much higher do you think costs are going up for the smaller competitors who maybe buy raw materials through distributors?

Timothy M. Knavish: The industry decline was largely due to year-over-year comparisons in China, as the Q1 of 2025 was very strong and Q1 of 2026 was tepid. Expectations for China industry comparisons are to improve in the coming quarters. For PPG, due to our strong product portfolio and commercial execution, we expect to continue outgrowing the market in Q2 and for the full year in 2026. Organic sales for our Industrial Coatings business were down a low single-digit percentage as lower volumes due to inconsistent demand were partially offset by positive pricing actions in this business. Packaging coatings organic sales increased by a double-digit percentage year-over-year, growing significantly above industry rates. Sales volumes for PPG are up over 20% on a 2-year stack basis, driven by share gains as customers continue to select our leading technologies.

Tim Knavish: The industry decline was largely due to year-over-year comparisons in China, as the Q1 of 2025 was very strong and Q1 of 2026 was tepid. Expectations for China industry comparisons are to improve in the coming quarters. For PPG, due to our strong product portfolio and commercial execution, we expect to continue outgrowing the market in Q2 and for the full year in 2026.

Operator: Your next question comes from the line of Michael Sison with Wells Fargo. Your line is open. Please go ahead.

Speaker #5: And with the dynamic pricing that's going on out there, are there gaps opening up between competitor pricing, or is it relatively orderly and competition is generally moving up together?

Michael Sison: Hey, guys. Nice start to the year, and, congrats to you, Vince. You know, John will be sorely missed. In terms of your outlook for the H2, Tim, how do you see volumes sort of shaping up, sort of at the midpoint? Any effects from, you know, from the Iran conflict on each of the segments? Just give us your thoughts on, you know, the type of volume growth that could be that's kind of embedded in your outlook.

Speaker #4: Hey, John, thanks for your support of Mr. Bruno. It's really hard for me to say what our smaller competitors are seeing, but what I will say is we are getting more favorable deals and contracts and agreements because of our volume, right?

Speaker #4: A couple of things. First of all, aerospace beat our own expectations. In Q1, and we continue to see improving output there. And as you know, we're essentially sold out.

Tim Knavish: Organic sales for our Industrial Coatings business were down a low single-digit percentage as lower volumes due to inconsistent demand were partially offset by positive pricing actions in this business. Packaging coatings organic sales increased by a double-digit percentage year-over-year, growing significantly above industry rates. Sales volumes for PPG are up over 20% on a 2-year stack basis, driven by share gains as customers continue to select our leading technologies.

Speaker #4: So every incremental output that we get is an incremental volume for us. Second, and this is a significant one for us, we had said all along that refinish would have positive volume in the second half.

Speaker #4: So even though prices are going up and we're projecting basically mid-single digits here based on today's knowledge, but and that's on the back of our volume, our global footprint, and our ability to get the best deals in the market because of our scale.

Timothy M. Knavish: Yeah. Thanks, Mike. You know, in everything, unfortunately, you kind of have to timestamp right now because it's just so fluid out there, right? Based on today's environment, we feel good about the H2 volume. A couple of things. First of all, Aerospace beat our own expectations in Q1, and we continue to see improving output there. As you know, we're essentially sold out. Every incremental output that we get is just incremental volume for us. Second, this is a significant one for us. You know, we had said all along that Refinish would have positive volume in the H2.

Speaker #4: It's recovering a little earlier than we expected, and we got two really good sets of data points in US collision claims rates, as well as improving US distributor fulfillment orders.

Speaker #4: So I would imagine that our smaller competitors are likely like we're seeing higher prices than what we're seeing on the input costs.

Timothy M. Knavish: Segment EBITDA margin was negatively impacted by regional mix as China automotive production dropped in comparison to a particularly high level in Q1 last year. Looking ahead, we expect sequential margin improvement driven by incremental industry and PPG sales volume growth, selling price realization, and aggressive cost management. With the impact of the Iran war, costs have risen for raw materials, energy, logistics, and packaging across the coatings value chain. In this rapidly evolving macro environment, we are focused on our ability to supply our technology differentiated products and services to our customers, which will allow us to maintain our organic growth momentum. I'm expecting the actions we are taking, combined with PPG's portfolio strengths, to offset geopolitical driven impacts.

Tim Knavish: Segment EBITDA margin was negatively impacted by regional mix as China automotive production dropped in comparison to a particularly high level in Q1 last year. Looking ahead, we expect sequential margin improvement driven by incremental industry and PPG sales volume growth, selling price realization, and aggressive cost management.

Speaker #4: Then on top of that, we've got the industrial segment share wins that we will continue to launch as we move through the year. And finally, Mexico has really recovered nicely for us, retail's doing great, and with each passing quarter, projects get a little better.

Speaker #2: Your next question comes from the line of Chris Parkinson with Wolfe Research. Your line is open. Please go ahead.

Speaker #5: Great. Thank you so much. Vince has sincere congratulations and, most importantly, thank you for the life advice going back to 2015, before I was even married.

Tim Knavish: With the impact of the Iran war, costs have risen for raw materials, energy, logistics, and packaging across the coatings value chain. In this rapidly evolving macro environment, we are focused on our ability to supply our technology differentiated products and services to our customers, which will allow us to maintain our organic growth momentum. I'm expecting the actions we are taking, combined with PPG's portfolio strengths, to offset geopolitical driven impacts.

Timothy M. Knavish: It's recovering a little earlier than we expected, and we got two really good sets of data points in US collision claims rates, as well as improving US distributor or fulfillment orders. On top of that, we've got the industrial segment share wins that we will continue to launch as we move through the year. You know, finally, Mexico, you know, has really recovered nicely for us. Retail's doing great, with each passing quarter, projects get a little better. In some of our other businesses, you know, packaging's doing great, up double digits. PMC is doing, you know, is doing well and has been doing well for a couple of quarters. We've got a good order book there.

Speaker #4: And in some of our other businesses, packaging's doing great, up double digits, PMC, is doing well and has been doing well for a couple of quarters.

Speaker #5: And I must disagree with one of my colleagues here, go flyers. Okay. In terms of the second half of the year, sorry, that was an honor of our friend.

Speaker #5: In terms of the second half of the year, Tim, perhaps you could just give us kind of the puts and takes. Obviously, you've been very proactive in pricing in terms of those dynamics, which is helpful in terms of us, the contemplate.

Speaker #4: We've got a good order book there. We have not seen any order book changes with the Iran conflict. Obviously, we've seen change in feedstock pricing.

Speaker #5: But also that you could have some positive mix effects, specifically in PC. So could you just kind of go through your thought process in terms of how you're thinking about margin in the second half, what you want to see, what you need to see, or just overall?

Speaker #4: But when it comes to volume and order books, based on today's current environment, we have not seen any negativity in our order books.

Timothy M. Knavish: To date, we have had limited impact from supply shortages, and we have the ability to leverage our unique, broad, and global supply chain footprint to securely source raw materials and drive competitive pricing for those raw materials. Additionally, we are leveraging our years of expertise in product formulation technology and our ability to maximize the use of AI to optimize products to drive reductions in our raw material costs. Considering our procurement capabilities, our global footprint, our formula flexibility, our portfolio strengths, and the current macro environment, the impact of PPG is expected to be a mid-single-digit percentage in the cost of goods sold for the remainder of the year. We expect to fully offset these costs, and we are proactively raising prices to secure raw materials for our customers.

Tim Knavish: To date, we have had limited impact from supply shortages, and we have the ability to leverage our unique, broad, and global supply chain footprint to securely source raw materials and drive competitive pricing for those raw materials. Additionally, we are leveraging our years of expertise in product formulation technology and our ability to maximize the use of AI to optimize products to drive reductions in our raw material costs.

Speaker #5: Thank you.

Speaker #4: Yeah. Hey, thanks, Chris, and thanks for your support here recently with the passing of John as well. First of all, I'm confident that we'll have positive volume in the second half.

Speaker #5: Yeah, Mike, this is Vince. Just to peel the onion back a little on the refinish comments, just as a reminder for everybody in the base load, we had very strong refinish activity in the first half of '25.

Speaker #4: I'm confident that our net EBITDA margin will improve in the second half. And that's because of a number of things. Number one, aerospace will continue to grow.

Speaker #5: Distributors stopped up inventory. We were well above market. The second half, the patterns hurt us. So we have much easier comps. So we still expect muted volumes in refinish for the year.

Timothy M. Knavish: We have not seen any order book changes with the with the Iran conflict. Obviously, we've seen change in feedstock pricing, but when it comes to volume and order books, based on today's current environment, we have not seen any negativity in our order books.

Tim Knavish: Considering our procurement capabilities, our global footprint, our formula flexibility, our portfolio strengths, and the current macro environment, the impact of PPG is expected to be a mid-single-digit percentage in the cost of goods sold for the remainder of the year. We expect to fully offset these costs, and we are proactively raising prices to secure raw materials for our customers.

Speaker #4: Good margin contributor. The refinish recovery that we've already talked about, a big impact on our net margin. Mexico continuing to grow. That's a good contributor to our net margin.

Speaker #5: But the comparisons are why Tim said we expect growth year over year in the second half.

Speaker #2: Your next question comes from the line of John Roberts with Mizuho. Your line is open. Please go ahead.

Vincent J. Morales: Yeah, Mike, this is Vince, just to peel the onion back a little on the refinish comments. Just as a reminder for everybody in the base load, we had very strong refinish activity in H1 2025. Distributors stocked up inventory. We were well above market. The H2, the patterns hurt us, so we have much easier comps. We still expect muted volumes in refinish for the year. The comparisons are why Tim said we expect growth year over year in H2.

Speaker #4: So from a mix standpoint, it's really all good news for us, right? And then from kind of a top-line and gross margin impacts standpoint, it's all those three things added together, plus the launch of our industrial segment share gains as we progress through the and these are ones that are already locked in.

Timothy M. Knavish: Given the distribution models and price mechanisms we have in place, we expect to deliver price cost realization much more rapidly than we did in previous inflation cycles. This realization will impact our Global Architectural Coatings and Performance Coatings segments first, then flow through our Industrial Coatings segment. Importantly, there are areas where we anticipate potential upside for H2 2026, such as our growing aerospace business and our Architectural Coatings Mexico business, where demand has been strong. Industry demand in automotive refinish has been recovering faster than we initially expected. We are reaffirming our full year 2026 EPS guidance range of $7.70 to $8.10.

Tim Knavish: Given the distribution models and price mechanisms we have in place, we expect to deliver price cost realization much more rapidly than we did in previous inflation cycles. This realization will impact our Global Architectural Coatings and Performance Coatings segments first, then flow through our Industrial Coatings segment.

Speaker #5: Tim, on your guidance on slide nine, raw materials, how much higher do you think costs are going up for the smaller competitors who maybe buy raw materials through distributors?

Speaker #4: So we've got a favorable mix. We've got pricing actions underway. Yes, Ros will be higher energy costs will be higher. And logistics costs will be higher.

Speaker #5: And with the dynamic pricing that's going on out there, are there gaps opening up between competitor pricing? Or is it relatively orderly? And competition is generally moving up together.

Tim Knavish: Importantly, there are areas where we anticipate potential upside for H2 2026, such as our growing aerospace business and our Architectural Coatings Mexico business, where demand has been strong. Industry demand in automotive refinish has been recovering faster than we initially expected. We are reaffirming our full year 2026 EPS guidance range of $7.70 to $8.10.

Operator: Your next question comes from the line of John Roberts with Mizuho. Your line is open. Please go ahead.

Speaker #4: But we feel good about the playbook and the actions that are in place to drive not only the price-cost side of the offsets, but also these other really PPG portfolio differentiators that will drive elevated mix and volume as we move through the second half.

John Roberts: Thanks, it was good to see the PPG family come together for John Bruno. Welcome Jamie and Vince again. Thank you very much for all the good service. Good luck with the Pittsburgh Penguins tonight. Tim, on your guidance on slide 9, raw materials, how much higher do you think costs are going up for the smaller competitors who maybe buy raw materials through distributors? With the dynamic pricing that's going on out there, are there gaps opening up between competitor pricing or is it relatively orderly and competition is generally moving up together?

Speaker #5: Yeah. And baked into our guidance, Chris, if you recall, we still have cost actions we're taking. We have several plants coming out in Europe in the second half of the year.

Speaker #4: So even though prices are going up and we're projecting basically mid-single digits here, based on today's knowledge, but and that's on the back of our volume, our global footprint, and our ability to get the best deals in the market because of our scale.

Timothy M. Knavish: Again, let me reemphasize, our top priority is supporting our customers' needs through technical expertise, products with consistent quality, and continuity of supply, even as market conditions remain highly dynamic. Now let me talk about our balance sheet and cash. Our strong balance sheet continues to provide financial flexibility. We ended the quarter with cash and short-term investments of about $1.6 billion. We repaid $700 million of debt that matured in Q1 and returned approximately $260 million to shareholders through dividends and share repurchases. Our cash deployment remains focused on maximizing shareholder value creation. Looking ahead, our accelerating organic growth momentum and proactive pricing actions position us well for the year.

Tim Knavish: Again, let me reemphasize, our top priority is supporting our customers' needs through technical expertise, products with consistent quality, and continuity of supply, even as market conditions remain highly dynamic. Now let me talk about our balance sheet and cash. Our strong balance sheet continues to provide financial flexibility.

Speaker #5: And so that'll help from a cost structure perspective.

Speaker #2: Your next question.

Speaker #6: Your next question.

Speaker #2: Comes from the line of David Begleiter with Deutsche Bank. Your line is open.

Timothy M. Knavish: Hey, John, you know, thanks for your support of Mr. Bruno. It's really hard for me to say what our, what our smaller competitors are seeing. What I will say is, we are, you know, we are getting more favorable deals and contracts and agreements because of our volume, right? Even though prices are going up and we're projecting, you know, basically mid-single digits here based on today's knowledge, and that's on the back of our volume, our global footprint and our ability to get, you know, the best deals in the market because of our scale. I would imagine that our smaller competitors are likely seeing higher prices than what we're seeing on the input costs.

Speaker #5: Good morning. Thank you. Good morning. And first, the best to John's family. And Vince, congrats and thank you sincerely. Tim, just on the 20% on the price increases you've announced, how should you think about the realizations that you will realize and beyond the current spike in Ros?

Speaker #4: So I would imagine that our smaller competitors, our likely seeing higher prices than what we're seeing on the input costs.

Tim Knavish: We ended the quarter with cash and short-term investments of about $1.6 billion. We repaid $700 million of debt that matured in Q1 and returned approximately $260 million to shareholders through dividends and share repurchases. Our cash deployment remains focused on maximizing shareholder value creation. Looking ahead, our accelerating organic growth momentum and proactive pricing actions position us well for the year.

Speaker #2: Your next question comes from the line of Chris Parkinson with Wolf Research. Your line is open. Please go ahead.

Speaker #5: The sustainability of these increases, what and if oil prices and other fees input costs come down? Thank you.

Speaker #5: Great. Thank you so much. Vince, a sincere congratulations and most importantly, thank you for the life advice going back to 2015 before I was even married.

Speaker #4: Yeah. So thanks, David. Thanks for your support. So we announced I announced to the world price increases up to 20%. And that's because I had the notify our customers around the world that there are some products that will have to go up that much.

Speaker #5: And I must disagree with one of my colleagues here, go flyers. Okay. In terms of the second half of the year, sorry, that was an honor of our friend.

Timothy M. Knavish: For Q2 2026, we expect strong growth in aerospace, Architectural Coatings Latin America, protective and marine coatings, automotive OEM coatings, and packaging coatings, while demand in Architectural Coatings Europe, automotive refinish, and in global industrial end-use markets will remain below prior year. We expect overall pricing for the company to be positive, with the strength from our Performance Coatings and Architectural Coatings segments and flat year-over-year price in the Industrial Coatings segments, with all three segments having improved pricing versus Q1. This will result in organic sales growth for Q2 in the range of flat to positive low single digits versus the prior year.

Tim Knavish: For Q2 2026, we expect strong growth in aerospace, Architectural Coatings Latin America, protective and marine coatings, automotive OEM coatings, and packaging coatings, while demand in Architectural Coatings Europe, automotive refinish, and in global industrial end-use markets will remain below prior year.

Speaker #4: Right? It will be we'll have the actual realization will be spread out dependent on customer size, dependent on what products they actually buy, and dependent on the actual cost impact of those products.

Operator: Your next question comes from the line of Chris Parkinson with Wolfe Research. Your line is open. Please go ahead.

Tim Knavish: We expect overall pricing for the company to be positive, with the strength from our Performance Coatings and Architectural Coatings segments and flat year-over-year price in the Industrial Coatings segments, with all three segments having improved pricing versus Q1. This will result in organic sales growth for Q2 in the range of flat to positive low single digits versus the prior year.

Chris Parkinson: Great. Thank you so much. Vince, a sincere congratulations, and most importantly, thank you for the life advice going back to 2015 before I was even married. I must disagree with one of my colleagues here, go Flyers. In terms of the H2 of the year. Sorry, that was in honor of our friend. In terms of the H2 of the year, Tim, perhaps you could just give us kind of the puts and takes. Obviously, you've been very proactive in pricing in terms of those dynamics, which is, you know, helpful in terms of us to contemplate, but also that you could have some positive mix effects, specifically in PC.

Speaker #5: Thank you.

Speaker #4: So in order to offset the mid-single digit cost of goods sold increase that we're expecting for the remainder of the year, we need to realize low single digits to offset that as a total company.

Speaker #4: Yeah. Hey, thanks, Chris. And thanks for your support here recently with the passing of John as well. First of all, I'm confident that we'll have positive volume in the second half.

Speaker #4: I'm confident that our net EBITDA margin will improve in the second half. And that's because of a number of things. Number one, aerospace will continue to grow, good margin contributor.

Timothy M. Knavish: Given our ability to outperform the macro through our commercial momentum, combined with our pricing realization and self-help actions, we expect to deliver adjusted earnings per share growth in the range of flat to a positive low single-digit percentage for Q2 versus the prior year period. We are confident in our strategy and the strength of our portfolio for delivering higher growth and earnings despite challenging market conditions. Thank you to our PPG team around the world who make it happen and deliver on our purpose every day. We appreciate your continued confidence in PPG. Now, before we open the line for questions, I would like to congratulate Vince on his upcoming re-retirement on this, his final PPG earnings call. Thank you, Vince, for more than 40 years with PPG.

Tim Knavish: Given our ability to outperform the macro through our commercial momentum, combined with our pricing realization and self-help actions, we expect to deliver adjusted earnings per share growth in the range of flat to a positive low single-digit percentage for Q2 versus the prior year period. We are confident in our strategy and the strength of our portfolio for delivering higher growth and earnings despite challenging market conditions.

Speaker #4: And then we're ready if the situation gets worse, if we have to flex more, moving through the year. We will do more. And we'll drift our price up to mid-single digits.

Chris Parkinson: Could you just kind of go through your thought process in terms of, you know, how you're thinking about margin in H2, what you wanna see, what you need to see, or just overall? Thank you.

Speaker #4: The refinish recovery that we've already talked about, a big impact on our net margin. Mexico continuing to grow, that's a good contributor to our net margin.

Speaker #4: But right now, based on today’s operating environment, net-net, we need to get solid low single digits to offset mid-single digit COGS inflation. Now, what happens if and when it comes down the other side?

Timothy M. Knavish: Hey, thanks, Chris Parkinson, and thanks for your support here recently with the passing of John Bruno as well. First of all, I'm confident that we'll have positive volume in H2. I'm confident that our net EBITDA margin will improve in H2. That's because of a number of things. Number one, aerospace will continue to grow, good margin contributor. The, you know, Refinish recovery that we've already talked about, a big impact on our net margin. You know, Mexico continuing to grow, that's a good contributor to our net margin. From a mix standpoint, it's really all good news for us, right?

Speaker #4: So from a mix standpoint, it's really all good news for us, right? And then from kind of a topline and gross margin impacts standpoint, it's all those three things added together, plus the launch of our industrial segment, share gains as we progress through the and these are ones that are already locked in.

Speaker #4: Just like there's a lag going up, there'll be a lag coming down. And also, with yet to be determined, David, what's the impact of the structural damage to petrochem facilities in the region that may stretch out how and when things come back down?

Tim Knavish: Thank you to our PPG team around the world who make it happen and deliver on our purpose every day. We appreciate your continued confidence in PPG. Now, before we open the line for questions, I would like to congratulate Vince on his upcoming re-retirement on this, his final PPG earnings call. Thank you, Vince, for more than 40 years with PPG.

Speaker #4: So we've got a favorable mix. We've got pricing actions underway. Yes, Ros will be higher energy costs will be higher. And logistics costs will be higher.

Speaker #5: Yeah. And just a reminder to everybody, in the prior cycles, in almost every business, we went out for more than one price increase as the situation has developed.

Timothy M. Knavish: Thank you for being a great contributor to our company, a driver of results, a driver of shareholder value, a great mentor to many talents, a great teammate to our operating committee, a great partner to the last three CEOs, and a great friend to me. Thank you, Vince. As PPG makes the CFO transition, we are delighted to welcome Jamie Beggs as our new Chief Financial Officer. With her extensive background in financial leadership, Jamie brings a wealth of experience that will be instrumental in driving our continued growth and success. Please join us in extending a warm welcome to Jamie as we work together to achieve new milestones and create lasting value for our stakeholders. We are thrilled that Jamie is joining our team. Operator, please open the line for questions.

Tim Knavish: Thank you for being a great contributor to our company, a driver of results, a driver of shareholder value, a great mentor to many talents, a great teammate to our operating committee, a great partner to the last three CEOs, and a great friend to me.

Speaker #5: So again, this is not uncommon that we price for what we know today. And then we adjust as necessary.

Speaker #4: But we feel good about the playbook and the actions that are in place to drive not only the price cost side of the offsets, but also these other really PPG portfolio differentiators that will drive elevated mix and volume as we move through the second half.

Tim Knavish: Thank you, Vince. As PPG makes the CFO transition, we are delighted to welcome Jamie Beggs as our new Chief Financial Officer. With her extensive background in financial leadership, Jamie brings a wealth of experience that will be instrumental in driving our continued growth and success.

Timothy M. Knavish: Then from kind of a top line and gross margin impact standpoint, it's all those three things added together, plus the launch of our Industrial Coatings share gains as we progress through. These are ones that are already locked in. We've got a favorable mix. We've got pricing actions underway. Yes, raws will be higher, energy costs will be higher, and logistics costs will be higher. We feel good about the playbook and the actions that are in place to drive not only the price cost side of the offsets, but also these other really PPG portfolio differentiators that will drive elevated mix and volume as we move through H2.

Speaker #2: Your next question comes from the line of Frank Mitch with Fermium Research. Your line is open. Please go ahead.

Speaker #7: Thank you. And yes, rest in peace, John. We lost a truly great one. Hey, Vince, I'm roughly calculating that this is your 80th roughly 80th conference call as I are, or CFO.

Speaker #5: Yeah. And baked into our guidance, Chris, if you recall, we still have cost actions we're taking. We have several plants coming out in Europe in the second half of the year.

Tim Knavish: Please join us in extending a warm welcome to Jamie as we work together to achieve new milestones and create lasting value for our stakeholders. We are thrilled that Jamie is joining our team. Operator, please open the line for questions.

Speaker #7: I was wondering if you could take a moment or two and recap the highlights of each one of those conference calls and perhaps they'll put a plaque in the conference room where these conference calls are held.

Speaker #5: And so that'll help from a cost structure perspective.

Speaker #2: Your next question.

Speaker #6: Next question.

Speaker #2: Comes from the line of David Begleiter, with Deutsche Bank. Your line is open.

Speaker #7: But my business question is: free cash flow generation was negative in the first quarter, as is typically the case. I was wondering how you look at the potentials for free cash flow generation in 2026, and feel free to be as bold as possible so you can give Jamie a stretch target.

Speaker #5: Good morning. Thank you. Good morning. And first, the best of John's family. And Vince, congrats and thank you sincerely. Tim, just on the 20% on the price increases you've announced, how should you think about the realizations that you will realize?

Vincent J. Morales: Yeah. Baked into our guidance, Chris, if you recall, we still have cost actions we're taking. We have several plants coming out in Europe in H2. That'll help from a cost structure perspective.

Speaker #7: Thank you.

Speaker #5: And beyond the current spike in Ros's sustainability these increases, when and if oil prices and other fees input costs come down? Thank you.

Speaker #5: Thank you, Frank. If you look at our cash from ops, we were up about $50 million versus the prior year. We did have elevated capital spending.

Ghansham Panjabi: Thank you, operator. Our best to you, Vince, and our very best for John's family as well. I guess, Tim, you know, first off, on your comments on price cost recovery will be much faster than prior periods. Can you just outline some of the specific changes you've made to support that? Related to that, you've been very calibrated in the past with pricing and, you know, with previous inflation cycles to kind of maintain your market share, et cetera. Do you expect volumes to hold this go around as well, just given the near 20% increases you've implemented thus far? Thank you.

Speaker #5: Lower than the prior year, which was our target. So again, our cash forecasts do not change versus what we gave in January. We're expecting a good strong cash year.

Operator: Your next question comes from the line of David Begleiter with Deutsche Bank. Your line is open.

Ghansham Panjabi: Related to that, you've been very calibrated in the past with pricing and, you know, with previous inflation cycles to kind of maintain your market share, et cetera. Do you expect volumes to hold this go around as well, just given the near 20% increases you've implemented thus far? Thank you.

David Begleiter: Good morning. Thank you. Good morning, and first, the best to John's family. Vince, congrats and thank you sincerely. Tim, just on the 20% on the price increases what you've announced, how should we think about the realizations that you will realize and beyond the current spike in raws, the sustainability of these increases when and if oil prices and other fees input costs come down? Thank you.

Speaker #5: You can talk about the priorities here.

Speaker #4: Yeah. Yeah. Look, first of all, we were thinking about a dartboard rather than a plaque here. But we expect a good proxy walking around number four as far as cash flow to be about 10% of our sales.

Timothy M. Knavish: Yeah, thanks, Ghansham. Look, the difference this cycle from a volume standpoint is, as you know well, for the last 3 years we've been building our organic growth muscle, right? We have tremendous momentum from an organic growth standpoint that will help as we move forward with price increases. If you compare it on a couple of cycles, you know, the pre-COVID cycle of 2017, 2018 took us about a year and a half to get to run rate neutrality. The 2021 cycle, which was, you know, the post-COVID combined with the Texas freeze took us about 1 year. Now we're talking months. It's a combination of 2 things, Ghansham. Number one, we've always had a good pricing muscle, and with each cycle, we refine that.

Tim Knavish: Yeah, thanks, Ghansham. Look, the difference this cycle from a volume standpoint is, as you know well, for the last 3 years we've been building our organic growth muscle, right? We have tremendous momentum from an organic growth standpoint that will help as we move forward with price increases.

Speaker #4: Right? And then the prioritization of that, of course, we got to dividend that not everybody has. We'll keep that going. We've got some really good organic investments like what we're doing in aerospace, for example.

Timothy M. Knavish: Yeah. Thanks, David. Thanks for your support. I announced to the world price increases up to 20%, that's because I had to notify our customers around the world that there are some products that will have to go up that much, right? You know, the actual realization will be spread out, depending on customer size, depending on what products they actually buy, depending on the actual, you know, cost impact of those products. In order to offset the mid-single-digit cost of goods sold increase that we're expecting for the remainder of the year, we need to realize low single digits to offset that as a total company.

Tim Knavish: If you compare it on a couple of cycles, you know, the pre-COVID cycle of 2017, 2018 took us about a year and a half to get to run rate neutrality. The 2021 cycle, which was, you know, the post-COVID combined with the Texas freeze took us about 1 year. Now we're talking months. It's a combination of 2 things, Ghansham. Number one, we've always had a good pricing muscle, and with each cycle, we refine that.

Speaker #4: We've been looking at M&A. It's not our number one priority. It's not the tip of the spear for us, but we will do deals when they make sense for our shareholders.

Speaker #4: And then we're ready if the situation gets worse, if we have to flex more, moving through the year. We will do more. And we'll drift our price up to mid-single digits.

Speaker #4: In my three and a half years, we've done two small bolt-ons. So we'll use that if and when the right asset comes along at the right price.

Speaker #4: But right now, based on today's operating environment, net net, we need to get solid low single digits to offset mid-single digit COGS inflation. Now, what happens if and when it comes down the other side?

Speaker #4: But beyond that, I think we're now at 10 straight quarters of doing repo and you should expect me and Vince and my new CFO to follow that same pattern.

Timothy M. Knavish: We learn, we get better, we get faster. From a volume standpoint, we're combining it with, you know, positive momentum on the organic growth muscle that we've been building and demonstrating results through these last 5 quarters or so. You know, we're confident that we're gonna be able to strike the right balance between pricing and volume.

Tim Knavish: We learn, we get better, we get faster. From a volume standpoint, we're combining it with, you know, positive momentum on the organic growth muscle that we've been building and demonstrating results through these last 5 quarters or so. You know, we're confident that we're gonna be able to strike the right balance between pricing and volume.

Speaker #4: Just like there's a lag going up, there'll be a lag coming down. And determined, Dave, is what's the impact of the structural damage to petrochem facilities in the region that may stretch out how and when things come back down?

Speaker #2: Your next question comes from the line of Jess the Caucus with JPMorgan. Your line is open. Please go ahead.

Timothy M. Knavish: You know, we're ready if the situation gets worse, if we have to flex more moving through the year, we will, you know, we'll do more, and we'll drift our price up to mid-single digits. Right now, based on today's operating environment, net-net, we need to get solid low single digits to offset mid-single-digit COGS inflation. What happens if and when it comes down the other side? You know, just like there's a lag going up, there'll be a lag coming down. Also, what's yet to be determined, Dave, is, you know, what's the impact of the structural damage to petrochem facilities in the region that may stretch out, you know, how and when things come back down.

Speaker #7: Thanks very much. Two-part question. What about the present? What about the future? In the quarter, what was the currency benefit to EBIT year over year?

Operator: Your next question comes from the line of Michael Sison with Wells Fargo. Your line is open. Please go ahead.

Speaker #5: Yeah. And just a reminder to everybody, in the prior cycles, in almost every business, we went out for more than one price increase as the situation has developed.

Speaker #7: And you speak about getting ahead of raw material cost inflation, but you do sell to the auto OEM industry. Do you think that that's an industry area where you will be ahead of raw material cost inflation or behind?

Michael Sison: Hey, guys. Nice start to the year, and congrats to you, Vincent Morales. You know, John will be sorely missed. In terms of your outlook for the H2, Timothy M. Knavish, how do you see volumes sort of shaping up sort of at the midpoint? Any effects from, you know, from the Iran conflict on each of the segments? Just give us your thoughts on, you know, the, you know, the type of volume growth that's kind of embedded in your outlook.

Speaker #5: So again, this is not uncommon that we price for what we know today. And then we adjust as necessary.

Speaker #2: Your next question comes from the line of Frank Mitch with Fermium Research. Your line is open. Please go ahead.

Speaker #7: And in your spending for aerospace, you speak about being capacity constrained. At a point in time, should your volume growth rate elevate because you have more capacity available as a base case?

Speaker #7: Thank you. And yes, rest in peace, John. We lost a truly great one. Hey, Vince, I'm roughly calculating that this is your 80th roughly 80th conference call as I are, or CFO.

Vincent J. Morales: Just a reminder to everybody, in the prior cycles, in almost every business, we went out for more than one price increase as the situations developed. Again, this is not uncommon, that we price for what we know today, and then we adjust as necessary.

Timothy M. Knavish: Yeah. Thanks, Mike. You know, in everything, unfortunately, you kind of have to timestamp right now because it's just so fluid out there, right? Based on today's environment, we feel good about the H2 volume. A couple of things. First of all, aerospace beat our own expectations in Q1, and we continue to see improving output there. As you know, we're essentially sold out. Every incremental output that we get is just incremental volume for us. Second, this is a significant one for us, you know, we had said all along that refinish would have positive volume in H2.

Tim Knavish: Yeah. Thanks, Mike. You know, in everything, unfortunately, you kind of have to timestamp right now because it's just so fluid out there, right? Based on today's environment, we feel good about the H2 volume. A couple of things. First of all, aerospace beat our own expectations in Q1, and we continue to see improving output there.

Speaker #7: Or it doesn't work that way?

Speaker #4: Yeah. Jeff, we might have lost you at the tail end of your questions, but I think I got all three parts of them. So I'll take auto.

Speaker #7: But my business question is, free cash flow generation was negative in the first quarter as is typically the case. I was wondering how you look at the potentials for free cash flow generation in 2026.

Speaker #4: Oh, go ahead, Jeff, please. Yeah. You're very choppy, Jeff. We lost you at the end.

Operator: Your next question comes from the line of Frank Mitsch with Fermium Research. Your line is open. Please go ahead.

Speaker #7: But what I yeah.

Speaker #7: And feel free to be as bold as possible so you can give Jamie a stretch target. Thank you.

Speaker #4: Go ahead, please.

Frank Mitsch: Thank you. Yes, rest in peace, John. We lost a truly great one. Hey, Vince, I'm roughly calculating that this is your 80th roughly 80th conference call as IR or CFO. I was wondering if you could take a moment or two and recap the highlights of each one of those conference calls, and perhaps they'll put a plaque in the conference room where these conference calls are held. My business question is, you know, free cash flow generation was negative in Q1, as is typically the case. I was wondering how you look at the potentials for free cash flow generation in 2026. Feel free to be as bold as possible, so you can give Jamie a stretch target. Thank you.

Tim Knavish: As you know, we're essentially sold out. Every incremental output that we get is just incremental volume for us. Second, this is a significant one for us, you know, we had said all along that refinish would have positive volume in H2.

Speaker #7: Just try to answer the questions. We'll go from there.

Speaker #4: We'll go from there. Okay. Thank you, Jeff. I'm going to take the two and I'll let Vince take the currency one. On auto, I mean, look, we all know it's the toughest of our businesses to get pricing.

Speaker #5: Thank you, Frank. If you look at our cash from ops, we were up about $50 million versus the prior year. We did have elevated capital spending.

Speaker #5: Lower than the prior year, which was our target. So again, our cash forecasts do not change versus what we gave in January. We're expecting a good strong cash year.

Timothy M. Knavish: It's recovering a little earlier than we expected, and we got two really good sets of data points in US collision claims rates, as well as improving US distributor fulfillment orders. On top of that, we've got the industrial segment share wins that we will continue to launch as we move through the year. You know, finally, Mexico has really recovered nicely for us. Retail's doing great, with each passing quarter, projects get a little better. In some of our other businesses, you know, packaging's doing great, up double digits. PMC is doing well and has been doing well for a couple of quarters. We've got a good order book there.

Tim Knavish: It's recovering a little earlier than we expected, and we got two really good sets of data points in US collision claims rates, as well as improving US distributor fulfillment orders. On top of that, we've got the industrial segment share wins that we will continue to launch as we move through the year. You know, finally, Mexico has really recovered nicely for us.

Speaker #4: But we get pricing if you look at the last cycle. We got pricing coming out of COVID and on the Texas freeze. One thing that helps with this situation actually, Jeff, is it's such an acute and well-known event and driver to inflation and petrochem feedstocks that you start from a stronger point of not having to demonstrate and explain and convince.

Speaker #5: And talk about the priorities here.

Vincent J. Morales: Thank you, Frank. If you look at our cash from ops, we were up about $50 million versus the prior year. We did have elevated capital spending, lower than the prior year, which was our target. Again, our cash forecasts do not change versus what we gave in January. We're expecting a good, strong cash year. You can talk about the priorities.

Tim Knavish: Retail's doing great, with each passing quarter, projects get a little better. In some of our other businesses, you know, packaging's doing great, up double digits. PMC is doing well and has been doing well for a couple of quarters. We've got a good order book there.

Speaker #4: Now, that said, as you know, we also have some index contracts that will automatically move but will automatically move with some time lag. So in our guide, in our normalization by acute run rate normalization by the beginning of '27, Q1 of '27, we've got all of that factored in.

Speaker #4: We've been looking at M&A. It's not our number one priority. It's not the tip of the spear for us, but we will do deals when they make sense for our shareholders.

Timothy M. Knavish: Look, you know, first of all, we were thinking about a dartboard rather than a plaque here. You know, we expect a good proxy walking around number for us is for our cash flow to be about 10% of our sales, right? The prioritization of that, of course, we got a dividend that not everybody has. We'll keep that going. We've got some really good organic investments, like what we're doing in aerospace, for example. You know, we've been looking at M&A. It's not our number one priority. It's not the tip of the spear for us. We, you know, we will do deals when they make sense for our shareholders.

Timothy M. Knavish: We have not seen any order book changes with the Iran conflict. Obviously, we've seen change in feedstock pricing, but when it comes to volume and order books, based on today's current environment, we have not seen any negativity in our order books.

Tim Knavish: We have not seen any order book changes with the Iran conflict. Obviously, we've seen change in feedstock pricing, but when it comes to volume and order books, based on today's current environment, we have not seen any negativity in our order books.

Speaker #4: Okay? Now, Arrow absolutely you will see increases in output volume and therefore revenue for our aerospace business going forward. I would put it in a couple of different buckets.

Speaker #4: In my three and a half years, we've done two small bolt-ons. So we'll use that if and when the right asset comes along at the right price.

Speaker #4: But beyond that, I think we're now at 10 straight quarters of doing repo and you should expect me and Vince and my new CFO to follow that same pattern.

Speaker #4: One, we're continuously improving output with some of these incremental debottlenecking kinds of investments that we've been making round numbers over the last year. So we've put about $150 million into those kind of investments.

Vincent Morales: Yeah, Mike, this is Vince. Just to peel the onion back a little on the refinish comments. Just as a reminder for everybody in the base load, you know, we had very strong refinish activity in H1 2025. Distributors stocked up inventory. We were well above market. H2, the patterns hurt us, so we have much easier comps. We still expect muted volumes in refinish for the year, but the comparisons are why Tim said we expect growth year over year in H2.

Vince Morales: Yeah, Mike, this is Vince. Just to peel the onion back a little on the refinish comments. Just as a reminder for everybody in the base load, you know, we had very strong refinish activity in H1 2025. Distributors stocked up inventory. We were well above market. H2, the patterns hurt us, so we have much easier comps. We still expect muted volumes in refinish for the year, but the comparisons are why Tim said we expect growth year over year in H2.

Speaker #2: Your next question comes from the line of Jeff Zekakis with JPMorgan. Your line is open. Please go ahead.

Speaker #4: And they're paying off as we go. You'll see some improvement in late '26 into '27 coming out of those investments. Second, we announced a new plant to the tune of about $380 million that will be more of a step change in volume output as we get out into the '28 timeframe.

Speaker #7: Thanks very much. Two-part question. One about the present, one about the future. In the quarter, what was the currency benefit to EBIT, year over year, and you speak about getting ahead of raw material cost inflation, but you do sell to the auto OEM industry.

Timothy M. Knavish: You know, in my 3 and a half years, we've done 2 small bolt-ons. We'll use that when if and when the right asset comes along at the right price. Beyond that, I think we're now at 10 straight quarters of doing repo, and, you know, you should expect me and Vince and my new CFO to follow that same pattern.

Operator: Your next question comes from the line of John Roberts with Mizuho. Your line is open. Please go ahead.

Speaker #4: The third category Jeff is we've got a lot of engineering work happening right now. We're not done with investments and I can't get ahead of my board or anything, but we're still working on additional investments.

John Roberts: Thanks, and it was good to see the PPG family come together for John Bruno. Welcome Jamie and Vince again. Thank you very much for all the good service. Good luck with the Penguins tonight. Tim, on your guidance on slide nine, raw materials, how much higher do you think costs are going up for the smaller competitors who maybe buy raw materials through distributors? With the dynamic pricing that's going on out there, are there gaps opening up between competitor pricing, or is it relatively orderly and, competition is generally moving up together?

Speaker #7: Do you think that that's an industry area where you will be ahead of raw material cost inflation or behind? And in your spending for aerospace, you speak about being capacity constrained.

Operator: Your next question comes from the line of Jeff Zekauskas with JPMorgan. Your line is open. Please go ahead.

Speaker #4: So you should going forward expect to see a nice increase in our aerospace revenue. Vince, you want to take the currency?

John Roberts: Tim, on your guidance on slide nine, raw materials, how much higher do you think costs are going up for the smaller competitors who maybe buy raw materials through distributors? With the dynamic pricing that's going on out there, are there gaps opening up between competitor pricing, or is it relatively orderly and, competition is generally moving up together?

Jeff Zekauskas: Thanks very much. A two-part question. One about the present, one about the future. In the quarter, what was the currency benefit to EBIT year over year? You speak about getting ahead of raw material cost inflation, but you know, you do sell to the auto OEM industry. Do you think that that's an industry area where you will be ahead of raw material cost inflation or behind? In your spending for Aerospace, do you think about being capacity constrained? At a point in time, should your volume growth rate elevate because you have more capacity available as a base case, or it doesn't work that way?

Speaker #7: At a point in time, should your volume growth rate elevate, because you have more capacity available as a base case? Or it doesn't work that way?

Speaker #1: Yeah. Go ahead, Jeff. The currency impact for Q1 is less than 10 cents year over year, positive. That was included in our guide for the year.

Speaker #1: And for the quarter, if you look at the balance of the year—so the remaining three quarters—the total is going to be less than half of that.

Speaker #4: Yeah. Jeff, we might have lost you at the tail end of your questions, but I think I got all three parts of them. So I'll take auto.

Speaker #1: And most of that in Q2. So again, all included in our original guide back in January.

Timothy M. Knavish: Hey, John, you know, thanks for your support of Mr. Bruno. It's really hard for me to say what our, what our smaller competitors are seeing. What I will say is, we are, you know, we are getting more favorable deals and contracts and agreements because of our volume, right? Even though prices are going up and we're projecting, you know, basically mid-single digits here based on today's knowledge, but that's on the back of our volume, our global footprint and our ability to get, you know, the best deals in the market because of our scale. I would imagine that our smaller competitors are likely seeing higher prices than what we're seeing on the input costs.

Tim Knavish: Hey, John, you know, thanks for your support of Mr. Bruno. It's really hard for me to say what our, what our smaller competitors are seeing. What I will say is, we are, you know, we are getting more favorable deals and contracts and agreements because of our volume, right?

Speaker #4: Oh, go ahead, Jeff, please. Yeah. You're very choppy, Jeff. We lost you at the end.

Speaker #2: Your next question. Comes from the line of Kevin McCarthy. With vertical research partners. Your line is open. Go ahead.

Speaker #7: But what I yeah.

Speaker #4: Go ahead, please.

Speaker #7: Just try to answer the questions. We'll go from there.

Speaker #7: Yes, thank you. And good morning. Vince, congratulations to you. I appreciate all of your help over the last 20 years or so. You'll be greatly missed as well, Mr. Bruno, of course.

Tim Knavish: Even though prices are going up and we're projecting, you know, basically mid-single digits here based on today's knowledge, but that's on the back of our volume, our global footprint and our ability to get, you know, the best deals in the market because of our scale. I would imagine that our smaller competitors are likely seeing higher prices than what we're seeing on the input costs.

Timothy M. Knavish: Yeah. Jeff, we might have lost you at the tail end of your questions, but I think I got all three parts of them. I'll take auto. Oh, go ahead, Jeff, please. Yeah, you're very choppy, Jeff. We lost you at the end.

Speaker #7: My question maybe for Tim is on the subject of M&A. I think you made a small acquisition recently in Ozark as part of Traffic Solutions.

Speaker #7: Curious about that deal. But maybe more importantly, can you put external growth into forward context for us, Tim? I think you’ve been quite focused on organic growth now that you have five quarters of expansion.

Jeff Zekauskas: Um, but what I, what I try-

Timothy M. Knavish: Yeah. Go ahead, please.

Jeff Zekauskas: Just try to answer the questions. We will go from there.

Operator: Your next question comes from the line of Chris Parkinson with Wolfe Research. Your line is open. Please go ahead.

Timothy M. Knavish: Okay. Thank you, Jeff. I'm gonna take the two, and then I'll let Vince take the currency one. On auto, I mean, look, we all know it's the, you know, toughest of our businesses to get pricing. We get pricing. If you look at the last cycle, we got pricing coming out of COVID and on the Texas freeze. One thing that helps with this situation actually, Jeff, is it's such an acute and well-known event and driver to inflation and petrochem feedstocks that, you know, you start from a stronger point of not having to demonstrate and explain and convince. Now that said, as you know, we also have some index contracts that will automatically move, but will automatically move with some time lag.

Speaker #7: Under the belt, do you feel like you have a little bit more license to grow externally? Or should we expect PPG to remain highly disciplined as you have been in recent years?

Chris Parkinson: Great. Thank you so much. Vince, a sincere congratulations, and most importantly, thank you for the life advice going back to 2015 before I was even married. I must disagree with one of my colleagues here, go Flyers. In terms of H2. Sorry, that was in honor of our friend. In terms of H2, Tim, perhaps you could just give us kind of the puts and takes. Obviously, you've been very proactive in pricing in terms of those dynamics, which is, you know, helpful in terms of us to contemplate, but also that you could have some positive mix effects specifically in PC.

Speaker #4: Yeah. Hey, thanks, Kevin. So Ozark, I would call that an opportunistic asset. Highly synergistic for us with double underline under highly. We got a good price.

Chris Parkinson: In terms of H2, Tim, perhaps you could just give us kind of the puts and takes. Obviously, you've been very proactive in pricing in terms of those dynamics, which is, you know, helpful in terms of us to contemplate, but also that you could have some positive mix effects specifically in PC.

Speaker #4: Okay? Now, Arrow absolutely you will see increases in output volume and therefore revenue for our aerospace business going forward. I would put it in a couple of different buckets.

Speaker #4: Relative to what it was sold for, a few years, just a few years ago, walking around number, Kevin, about $100 million in revenue. So it's a small bolt-on, but what it does because of the highly synergistic nature of it is it actually helps our margin position and cash generation position for that small business for us of Traffic Solutions so it raises its margin profile a little bit.

Timothy M. Knavish: Yeah. Hey, thanks, Chris, and thanks for your support here recently with the passing of John as well. First of all, I'm confident that we'll have positive volume in H2. I'm confident that our net EBITDA margin will improve in H2. That's because of a number of things. Number one, aerospace will continue to grow, good margin contributor. The, you know, refinish recovery that we've already talked about, a big impact on our net margin. You know, Mexico continuing to grow, that's a good contributor to our net margin. From a mix standpoint, it's really all good news for us, right?

Tim Knavish: Yeah. Hey, thanks, Chris, and thanks for your support here recently with the passing of John as well. First of all, I'm confident that we'll have positive volume in H2. I'm confident that our net EBITDA margin will improve in H2. That's because of a number of things.

Timothy M. Knavish: In our guide, in our, you know, normalization by Q1 run rate normalization by the beginning of 2027, Q1 of 2027, we've got all of that factored in. Okay. Aerospace, absolutely you will see increases in output volume, and therefore revenue for our aerospace business going forward. I would put it in a couple of different buckets. One, we're continuously improving output with some of these incremental de-bottlenecking kinds of investments that we've been making. Round numbers over the last year or so, we've put about $150 million into those kind of investments. They're paying off as we go. You'll see some improvement in late 2026 into 2027, coming out of those investments.

Speaker #4: But the reason we have that in our portfolio is it's a really consistent cash generator for us that we can use to then deploy that cash on things like new aerospace plants and it's steady because it's safety and infrastructure.

Speaker #4: And they're paying off as we go. You'll see some improvement in late '26 into '27 coming out of those investments. Second, we announced a new plant to the tune of about 380 million that will be more of a step change in volume output as we get out into the '28 timeframe.

Tim Knavish: Number one, aerospace will continue to grow, good margin contributor. The, you know, refinish recovery that we've already talked about, a big impact on our net margin. You know, Mexico continuing to grow, that's a good contributor to our net margin. From a mix standpoint, it's really all good news for us, right?

Speaker #4: It's very, very stable, and so it kind of spits off cash for us year over year. And now with Ozark, it'll deliver great financial returns for us and our shareholders because of the high synergies and the relatively low purchase price.

Speaker #4: Now, more broadly, I am very pleased with how the teams have grown that organic growth muscle. And Kevin, I remember some of our conversations four, five years ago and so we're not done but we're pleased with five straight quarters of organic growth.

Timothy M. Knavish: Then from kind of a top line and gross margin impact standpoint, it's all those three things added together plus the launch of our Industrial segment share gains as we progress through. These are ones that are already locked in. We've got a favorable mix. We've got pricing actions underway. Yes, raws will be higher, energy costs will be higher, and logistics costs will be higher. We feel good about the playbook and the actions that are in place to drive not only the price cost side of the offsets, but also these other really PPG portfolio differentiators that will drive elevated mix and volume as we move through the H2.

Tim Knavish: Then from kind of a top line and gross margin impact standpoint, it's all those three things added together plus the launch of our Industrial segment share gains as we progress through. These are ones that are already locked in. We've got a favorable mix. We've got pricing actions underway.

Speaker #4: So you should going forward expect to see a nice increase in our aerospace revenue. Vince, you want to take the currency?

Speaker #4: And by the way, outperforming the market over those five quarters. So I think we've always had a license. We've always had a strong enough balance sheet to do whatever M&A we want.

Speaker #3: Yeah. Yeah, Jeff. The currency impact for Q1 was less than 10 cents year over year, positive. That was included in our guide for the year.

Timothy M. Knavish: Second, we announced a new plant, to the tune of about $380 million, that will be more of a step change in volume output as we get out into, like, the 2028 timeframe. The third category, Jeff, is we've got a lot of engineering work happening right now. We're not done with investments and I can't get ahead of my board or anything, but we're still working on additional investments. You should, going forward, expect to see, you know, a nice increase in our, in our Aerospace revenue. Vince, you wanna take the currency?

Tim Knavish: Yes, raws will be higher, energy costs will be higher, and logistics costs will be higher. We feel good about the playbook and the actions that are in place to drive not only the price cost side of the offsets, but also these other really PPG portfolio differentiators that will drive elevated mix and volume as we move through the H2.

Speaker #4: But the way I think about it is, first of all, it's got to be the right asset. I'm not interested in just buying something so that I can put another flag somewhere or buying something purely for the sake of raw material synergies.

Speaker #3: And for the quarter, if you look at the balance of the year, so the remaining three quarters, the total is going to be less than half of that.

Speaker #3: And most of that in Q2. So again, all included in our original guide back in January.

Speaker #4: I want to buy something that adds to our future organic growth and margin profile. Second, it's got to be the right time. The last few years has not been the right time as we've been first of all, exiting some things in our portfolio and tripling down on organic growth.

Speaker #2: Your next question. Comes from the line of Kevin McCarthy. With vertical research partners. Your line is open. Go ahead.

Vincent Morales: Yeah. Baked into our guidance, Chris, if you recall, we still have cost actions we're taking. We have several plants coming out in Europe in H2 of the year. That'll help from a cost structure perspective.

Vince Morales: Yeah. Baked into our guidance, Chris, if you recall, we still have cost actions we're taking. We have several plants coming out in Europe in H2 of the year. That'll help from a cost structure perspective.

Speaker #7: Yes. Thank you. And good morning. Vince, congratulations to you. Appreciate all of your help over the last 20 years or so. And you'll be greatly missed as well, Mr. Bruno, of course.

Vincent J. Morales: Yeah. Yeah, Jeff. The currency impact for Q1 was less than +$0.10 year-over-year. That was included in our guide for the year and for the quarter. If you look at the balance of the year, so the remaining three quarters, the total's gonna be less than half of that, and most of that in Q2. Again, all included in our original guide back in January.

Speaker #4: I think we can handle some deals now, but it still has to be at the right price, because I've got some pretty darn good organic investment opportunities that have great financial returns.

Operator: Your next question comes from the line of David Begleiter with Deutsche Bank. Your line is open.

Speaker #7: My question maybe for Tim is on the subject of M&A. I think you made a small acquisition recently in Ozark as part of traffic solutions.

Speaker #4: And so, I'm really—to use your word—disciplined. We will continue to be disciplined, but I do think we have the right license to do selective M&A.

David Begleiter: Good morning. Thank you. Good morning. First, the best to John's family. Vince, congrats and thank you sincerely. Tim, just on the 20% on the price increases what you've announced, how should we think about the realizations that you will realize? Beyond the current spike in raws, the sustainability of these increases, when and if oil prices and other fees input costs come down. Thank you.

Speaker #7: Curious about that deal. But maybe more importantly, can you put external growth into forward context for us, Tim? I think you've been quite focused on organic growth now that you have five quarters of expansion.

Operator: Your next question comes from the line of Kevin McCarthy with Vertical Research Partners. Your line is open. Please go ahead.

Speaker #4: And you’ve seen us with two small bolt-ons this year. We actually did a kind of a productivity, outside-the-can Allied Products acquisition earlier in the year to help industrial refinished pipelines.

Kevin McCarthy: Yes. Thank you, and good morning. Vince, congratulations to you. Appreciate all of your help over the last 20 years or so, and you'll be greatly missed, as will Mr. Bruno, of course. My question, maybe for Tim, is on the subject of M&A. I think you made a small acquisition recently in Ozark as part of Traffic Solutions. Curious about that deal, but maybe more importantly, can you put external growth into forward context for us, Tim? I think you've been quite focused on organic growth. Now that you have 5 quarters of expansion under the belt, do you feel like you have a little bit more license to grow externally? Or, should we expect ABB to remain highly disciplined as you have been recently?

Speaker #7: Under the belt, do you feel like you have a little bit more license to grow externally? Or should we expect PPG to remain highly disciplined as you have been in recent years?

Speaker #4: So it's still not the tip of the spear for us. We will still be extremely disciplined. We will look at every asset that comes available but it's got to meet the right asset, the right time, and the right price.

Timothy M. Knavish: Yeah. Thanks, David. Thanks for your support. We announced, I announced to the world price increases up to 20%, and that is because I had to notify our customers around the world that there are some products that will have to go up that much, right? You know, we'll have the actual realization will be spread out depending on customer size, depending on what products they actually buy, depending on the actual, you know, cost impact of those products. In order to offset the mid-single digit cost of goods sold increase that we are expecting for the remainder of the year, we need to realize low single digits to offset that as a total company.

Tim Knavish: Yeah. Thanks, David. Thanks for your support. We announced, I announced to the world price increases up to 20%, and that is because I had to notify our customers around the world that there are some products that will have to go up that much, right?

Speaker #4: Yeah. Hey, thanks, Kevin. So Ozark, I would call that an opportunistic asset. Highly synergistic for us with double underlying under highly. We got a good price.

Speaker #2: Your next question comes from the line of Duffy Fisher with vertical research partners. Your line is open. Please go ahead.

Speaker #4: Great. Good morning, guys. Two questions on refinish. So first, when you anniversary Q2, revenue will be down about 10%. Has that done anything structurally to the margin there?

Speaker #4: Relative to what it was sold for, a few years, just a few years ago, walking around number, Kevin, about 100 million in revenue. So it's a small bolt-on, but what it does because of the highly synergistic nature of it is it actually helps our margin position and cash generation position for that small business for us of traffic solutions so it raises its margin profile a little bit.

Tim Knavish: You know, we'll have the actual realization will be spread out depending on customer size, depending on what products they actually buy, depending on the actual, you know, cost impact of those products. In order to offset the mid-single digit cost of goods sold increase that we are expecting for the remainder of the year, we need to realize low single digits to offset that as a total company.

Speaker #4: Do you need to do any restructuring to reset that on a profitability basis? And then second, once we get through the snapback in the second half, should we think about that business structurally being kind of flat volumes and price up two to three percent going forward?

Timothy M. Knavish: Yeah. Hey, thanks, Kevin. Ozark Materials, you know, I would call that an opportunistic asset. Highly synergistic for us with double underline under highly. You know, we got a good price relative to what it was sold for just a few years ago. You know, walking around number, Kevin, about $100 million in revenue. It's a small bolt-on, but what it does because of the highly synergistic nature of it is it actually helps our margin position and cash generation position for that small business for us of Traffic Solutions. It raises its margin profile a little bit.

Speaker #3: Yeah. Hey, Duffy. I think you're pretty close there. We don't as far as the go forward, right? The go forward, it's not going to be a high volume growth industry.

Speaker #4: But the reason we have that in our portfolio is it's a really consistent cash generator for us that we can use to then deploy that cash on things like new aerospace plants, and it's steady because it's safety, and infrastructure, it's very, very stable.

Timothy M. Knavish: You know, we're ready if the situation gets worse, if we have to flex more moving through the year, we will, you know, we'll do more, and we'll drift our price up to mid-single digits. Right now, based on today's operating environment, net-net, we need to get solid low single digits to offset mid-single digit COGS inflation. What happens if and when it comes down the other side, you know, just like there's a lag going up, there'll be a lag coming down. What's yet to be determined, Dave, is, you know, what's the impact of the structural damage to petrochem facilities in the region that may stretch out, you know, how and when things come back down.

Tim Knavish: You know, we're ready if the situation gets worse, if we have to flex more moving through the year, we will, you know, we'll do more, and we'll drift our price up to mid-single digits. Right now, based on today's operating environment, net-net, we need to get solid low single digits to offset mid-single digit COGS inflation.

Speaker #3: But it's still a good revenue growth and EBITDA growth machine for us because of our ability to capture value for the total value that we deliver.

Speaker #4: And so it's kind of spits off cash for us year over year. And now with Ozark, it'll deliver financial, great financial returns for us and our shareholders because of the high synergies and the relatively low purchase price.

Speaker #3: Because of the work we've been doing to expand our TAM, right? We're selling more into the body shops now than we ever did beyond just the coatings, right?

Tim Knavish: What happens if and when it comes down the other side, you know, just like there's a lag going up, there'll be a lag coming down. What's yet to be determined, Dave, is, you know, what's the impact of the structural damage to petrochem facilities in the region that may stretch out, you know, how and when things come back down.

Speaker #4: Now, more broadly, I am very pleased with how the teams have grown that organic growth muscle. And Kevin, I remember some of our conversations four or five years ago and so we're not done, but we're pleased with five straight quarters of organic growth.

Speaker #3: So when you think about digital tools, Moonwalks, allied products, we just have a bigger target TAM. That's enabling us to grow. And then we've had a really good run of share gains there and so it's a market normalizes this will be it'll never be our highest growth business but this will be a nice low single digits growth business for us with really good margin and really good cash.

Timothy M. Knavish: The reason we have that in our portfolio is it's a really consistent cash generator for us that we can use to then deploy that cash on things like new aerospace plants. It's steady. Because it's safety and infrastructure, it's very, very, very stable. It kind of spits off cash for us year-over-year. Now with Ozark, it'll deliver great financial returns for us and our shareholders because of the high synergies and the relatively low purchase price. Now more broadly, I am very pleased with how the teams have grown that organic growth muscle. You know, Kevin, I remember some of our conversations 4 or 5 years ago, and we're not done, but we're pleased with 5 straight quarters of organic growth, and by the way, outperforming market over those 5 quarters.

Speaker #4: And by the way, outperforming market over those five quarters. So I think we've always had a license. We've always had a strong enough balance sheet to do whatever M&A we want.

Vincent Morales: Just a reminder to everybody, in the prior cycles, in almost every business, we went out for more than one price increase as the situations developed. Again, this is not uncommon that we price for what we know today, and then we adjust as necessary.

Vince Morales: Just a reminder to everybody, in the prior cycles, in almost every business, we went out for more than one price increase as the situations developed. Again, this is not uncommon that we price for what we know today, and then we adjust as necessary.

Speaker #4: But the way I think about it is, first of all, it's got to be the not interested in just buying something so that I can put another flag somewhere or buying something purely for the sake of raw material synergies.

Speaker #3: Now, to the first part of your question, we have not had to do massive restructuring with this decreased volume. So what you should expect instead is as things normalize in the second half, you should expect outstanding leverage because you've seen some of that negative leverage in a second half of last year, right?

Operator: Your next question comes from the line of Frank Mitsch with Fermium Research. Your line is open. Please go ahead.

Frank Mitsch: Thank you. Yes, rest in peace, John. We lost a truly great one. Hey, Vince, I'm roughly calculating that this is your 80th roughly 80th conference call as IR or CFO. I was wondering if you could take a moment or two and recap the highlights of each one of those conference calls and perhaps they'll put a plaque in the conference room where these conference calls are held. My business question is, you know, free cash flow generation was negative in Q1, as is typically the case. I was wondering how you look at the potentials for free cash flow generation in 2026. Feel free to be as bold as possible, so you can give Jamie a stretch target. Thank you.

Speaker #3: So you should expect a really nice snapback in margin leverage. Now, to find snapback, though, that's really a bottom line snapback. We'll this industry, we expect to return to normal over the last X number of years and normal being a minus one, minus two industry volume.

Timothy M. Knavish: I think we've always had a license. We've always had a strong enough balance sheet to do whatever M&A we want. The way I think about it is, first of all, it's got to be the right asset. I'm not interested in just buying something so that I can put another flag somewhere or buying something purely for the sake of raw material synergies. I wanna buy something that adds to our future organic growth and margin profile. Second, it's got to be the right time. The last few years has not been the right time as we've been, you know, first of all, exiting some things in our portfolio and tripling down on organic growth.

Speaker #4: I think we can handle some deals now, but it still has to be at the right price because I've got some pretty darn good organic investment opportunities that have great financial returns and so I'm really to use your word, discipline, we will continue to be disciplined but I do think we have the right license to do selective M&A.

Speaker #3: We'll do better than that because of our expanded TAM. And then a really nice EBITDA machine for us.

Frank Mitsch: My business question is, you know, free cash flow generation was negative in Q1, as is typically the case. I was wondering how you look at the potentials for free cash flow generation in 2026. Feel free to be as bold as possible, so you can give Jamie a stretch target. Thank you.

Speaker #2: Your next question comes from the line of James Hooper with Bernstein. Your line is open. Please go ahead.

Speaker #4: And you've seen us with two small bolt-ons this year. We actually did a kind of a productivity outside the can, allied products acquisition earlier in the year to help industrial refinish pipelines.

Speaker #4: Thank you very much for taking my question. I'd like to go back to aerospace, please. We've got Europe running out of jet fuel flight cancellations and other potential issues with the conflict continues.

Vincent Morales: Thank you, Frank Mitsch. If you look at our cash from ops, we were up about $50 million versus the prior year. We did have elevated capital spending, lower than the prior year, which was our target. Again, our cash forecasts do not change versus what we gave in January. We're expecting a good strong cash year. You can talk about the priorities.

Vince Morales: Thank you, Frank Mitsch. If you look at our cash from ops, we were up about $50 million versus the prior year. We did have elevated capital spending, lower than the prior year, which was our target. Again, our cash forecasts do not change versus what we gave in January. We're expecting a good strong cash year. You can talk about the priorities.

Speaker #4: So it's still not the tip of the spear for us. We will still be extremely disciplined. We will look at every asset that comes available, but it's got to meet the right asset, the right time, and the right price.

Timothy M. Knavish: I think we can handle some deals now, but it still has to be at the right price, because I've got some pretty darn good organic investment opportunities that have great financial returns. I'm really, you know, to use your word, disciplined. We will continue to be disciplined, but I do think we have the right, the license to do selective M&A. You've seen us with 2 small bolt-ons this year. We actually did a, you know, kind of a productivity outside the can allied products acquisition earlier in the year to help industrial refinish pipelines. It's still not the tip of the spear for us. We will still be extremely disciplined. We will look at every asset that comes available, but it's gotta meet the right assets, the right time, and the right price.

Speaker #4: Can you remind us what your split of OEM and aftermarket is? And can you give a little bit of detail about how aerospace growth could be affected if flying hours are tearing down the rest of this year?

Speaker #2: Your next question comes from the line of Duffy Fischer with vertical research partners. Your line is open. Please go ahead.

Speaker #4: Thanks.

Speaker #3: Thanks. Thanks, James. I'll give it a spoiler alert answer first and then I'll give you a little more details. We see no impact of the potential slowdown in flight miles in some parts of the world in 2026.

Timothy M. Knavish: Yeah. Yeah. Look, you know, first of all, we were thinking about a dartboard rather than a plaque here. You know, we expect a good proxy walking around number for us is for our cash flow to be about 10% of our sales, right? The prioritization of that, of course, we got a dividend that not everybody has. We'll keep that going. We've got some really good organic investments, like what we're doing in aerospace, for example. You know, we've been looking at M&A. It's not our number one priority. It's not the tip of the spear for us. We, you know, we will do deals when they make sense for our shareholders.

Tim Knavish: Yeah. Yeah. Look, you know, first of all, we were thinking about a dartboard rather than a plaque here. You know, we expect a good proxy walking around number for us is for our cash flow to be about 10% of our sales, right? The prioritization of that, of course, we got a dividend that not everybody has.

Speaker #3: Great. Good morning, guys. Two questions on refinish. So first, when you anniversary Q2, revenue will be down about 10%. Has that done anything structurally to the margin there?

Speaker #3: Do you need to do any restructuring to reset that on a profitability basis? And then second, once we get through the snapback in the second half, should we think about that business structurally being kind of flat volumes and price up 2 to 3 percent going forward?

Speaker #3: And now, here's why. First of all, the business is balanced roughly 50% OEM, 50% aftermarket. And then it's balanced across commercial aviation, general aviation, and military.

Tim Knavish: We'll keep that going. We've got some really good organic investments, like what we're doing in aerospace, for example. You know, we've been looking at M&A. It's not our number one priority. It's not the tip of the spear for us. We, you know, we will do deals when they make sense for our shareholders.

Operator: Your next question comes from the line of Duffy Fischer with Vertical Research Partners. Your line is open. Please go ahead.

Speaker #4: Yeah. Hey, Duffy. I think you're pretty close there. We don't as far as the go forward, right? The go forward, it's not going to be a high volume growth industry.

Speaker #3: So kind of one of those subsegments may be affected from a flight mile standpoint. But it's one of many subsegments. And then even that subsegment has learned a very hard lesson coming out of COVID.

Duffy Fischer: Great. Good morning, guys. Two questions on Refinish. First, when you anniversary Q2, revenue will be down about 10%. Has that done anything structurally to the margin there? Do you need to do any restructuring to reset that on a profitability basis? Second, you know, once we get through the snapback in H2, should we think about that business structurally being kind of flat volumes and price up 2% to 3% going forward?

Speaker #4: But it's still a good revenue growth and EBITDA growth machine for us because of our ability to capture value. We're the total value that we deliver.

Timothy M. Knavish: You know, in my 3 and a half years, we've done 2 small bolt-ons, so we'll use that if and when the right asset comes along at the right price. Beyond that, I think we're now at 10 straight quarters of doing repo, and, you know, you should expect me and Vince and my new CFO to follow that same pattern.

Tim Knavish: You know, in my 3 and a half years, we've done 2 small bolt-ons, so we'll use that if and when the right asset comes along at the right price. Beyond that, I think we're now at 10 straight quarters of doing repo, and, you know, you should expect me and Vince and my new CFO to follow that same pattern.

Speaker #3: What the commercial customers did is they radically depleted their inventories of aftermarket products, including a lot of what we sell. And because of the strength across the breadth of this industry, that has never been able to be rebuilt.

Speaker #4: Because of the work we've been doing to expand our TAM, right? We're selling more into the body shops now than we ever did beyond just the coatings, right?

Timothy M. Knavish: Yeah. Hey, Duffy. I think you're pretty close there. We don't as far as the go forward, right? The go forward, it's not gonna be a high volume growth industry, it's still a good revenue growth and EBITDA growth machine for us because of our ability to capture value for the total value that we deliver because of the work we've been doing to expand our TAM, right? We're selling more into the body shops now than we ever did beyond just the coatings, right? When you think about digital tools, Moonwalks, allied products, we just have a bigger target TAM that's enabling us to grow. We've had a really good run of share gains there.

Speaker #4: So when you think about digital tools, Moonwalks, allied products, we just have a bigger target TAM. That's enabling us to grow. And then we've had a really good run of share gains there.

Speaker #3: And I still get phone calls literally weekly about restocking in our ability to keep aftermarket parts and components in stock and rebuilt. So what you should expect if that does happen, I think we would be rebuilding aftermarket inventory for some time period while all the other segments that I mentioned remain red hot.

Operator: Your next question comes from the line of Jeffrey Zekauskas with J.P. Morgan. Your line is open. Please go ahead.

Jeffrey Zekauskas: Thanks very much. A 2-part question. One about the present, one about the future. In the quarter, what was the currency benefit to EBIT year-over-year? You speak about getting ahead of raw material cost inflation, but you know, you do sell to the auto OEM industry. Do you think that that's an industry area where you will be ahead of raw material cost inflation or behind? In your spending for aerospace, you speak about being capacity constrained. At a point in time, should your assume growth rates elevate because you have more capacity available as is the case, or it doesn't work that way?

Speaker #4: And so it's a market normalizes this will be it'll never be our highest growth business, but this will be a nice low single digits growth business for us with really good margin and really good cash.

Speaker #4: Now, to the first part of your question, we have not had to do massive restructuring with this decreased volume. So what you should expect instead is as things normalize in the second half, you should expect outstanding leverage because you've seen some of that negative leverage in a second half of last year, right?

Speaker #3: And I think, if anything, it could be an improved mix for us because typically your aftermarket mix is a little richer than your OEM mix.

Jeffrey Zekauskas: Do you think that that's an industry area where you will be ahead of raw material cost inflation or behind? In your spending for aerospace, you speak about being capacity constrained. At a point in time, should your assume growth rates elevate because you have more capacity available as is the case, or it doesn't work that way?

Speaker #3: So I watched news like everybody does. I see the impacts and I see my customer CEOs talking about this on the news. But we see really no impact here because don't forget, because of what's going on in the world here, and the NATO rebuilding their own defenses, the military side of the business growing tremendously on both OE and aftermarket as well.

Speaker #4: So you should expect a really nice snapback in margin leverage. Now, to find snapback, though, that's really a bottom line snapback. We'll this industry, we expect to return to normal over the last X number of years and normal being a minus one, minus two industry volume.

Timothy M. Knavish: As the market normalizes, it'll never be our highest growth business, but this will be a nice low single-digits growth business for us with really good margin and really good cash. To the first part of your question, you know, we have not had to do massive restructuring with this decreased volume. What you should expect instead is as things normalize in H2, you should expect outstanding leverage because you've seen some of that negative leverage in H2 of last year, right? You should expect a really nice snapback in margin leverage. To find snapback, though, that's really a bottom-line snapback.

Timothy M. Knavish: Yeah. Jeffrey, we might have lost you at the tail end of your questions. I think I got all three parts of them. I'll take auto. Go ahead, Jeffrey, please. You're very choppy, Jeffrey. We lost you at the end.

Tim Knavish: Yeah. Jeffrey, we might have lost you at the tail end of your questions. I think I got all three parts of them. I'll take auto. Go ahead, Jeffrey, please. You're very choppy, Jeffrey. We lost you at the end.

Speaker #4: We'll do better than that because of our expanded TAM. And then a really nice EBITDA machine for us.

Speaker #3: Okay? Thank you.

Speaker #2: Your next question comes from the line of John McNulty with BMO. Your line is open. Please go ahead.

Speaker #2: Your next question comes from the line of James Hooper with Bernstein. Your line is open. Please go ahead.

Jeffrey Zekauskas: but what I try-

Speaker #4: And condolences to John's family, great guy, and Vince. It's been a really, really great ride. So appreciate all the help. Just a quick one on the protective and marine business.

Timothy M. Knavish: Yeah. Go ahead, please.

Tim Knavish: Yeah. Go ahead, please.

Jeffrey Zekauskas: Just try to answer the questions. We'll go from there.

Speaker #5: Good morning. Thank you very much for taking my question. I'd like to go back to aerospace, please. We've got Europe running out of jet fuel flight cancellations and other potential issues if the conflict continues.

Jeffrey Zekauskas: Just try to answer the questions. We'll go from there.

Timothy M. Knavish: We'll go from there. Okay. Thank you, Jeff. I'm gonna take the two, and I'll let Vince take the currency one. On auto, I mean, look, we all know it's the, you know, the toughest of our businesses to get pricing, but we get pricing. If you look at the last cycle, we got pricing coming out of COVID and on the Texas freeze. One thing that helps with this situation, actually, Jeff, is it's such an acute and well-known event and driver to inflation and petrochem feedstocks that, you know, you start from a stronger point of not having to demonstrate and explain and convince. That said, as you know, we also have some index contracts that will automatically move, but will automatically move with some time lag.

Tim Knavish: We'll go from there. Okay. Thank you, Jeff. I'm gonna take the two, and I'll let Vince take the currency one. On auto, I mean, look, we all know it's the, you know, the toughest of our businesses to get pricing, but we get pricing. If you look at the last cycle, we got pricing coming out of COVID and on the Texas freeze.

Speaker #4: I think the expectation was that we were going to see the growth in that business moderate, just given the huge success you've had over the last year and a half or two.

Timothy M. Knavish: Which this industry we expect to return to normal over the last X number of years, and normal being a -1, -2 industry volume. We'll do better than that because of our expanded TAM and then a really nice EBITDA machine for us.

Speaker #5: Can you remind us what your split of OEM and aftermarket is? And can you give a little bit of detail about how aerospace growth could be affected if flying hours are deteriorating for the rest of this year?

Speaker #4: And that and yet you still put up high single digits. I guess, can you help us to think about what drove that presumably stronger than expected volume and how we should think about that throughout the rest of 2026?

Speaker #5: Thanks.

Tim Knavish: One thing that helps with this situation, actually, Jeff, is it's such an acute and well-known event and driver to inflation and petrochem feedstocks that, you know, you start from a stronger point of not having to demonstrate and explain and convince. That said, as you know, we also have some index contracts that will automatically move, but will automatically move with some time lag.

Speaker #4: Thanks. Thanks, James. I'll give it a spoiler alert answer first, and then I'll give you a little more details. We see no impact of the potential slowdown in flight miles in some parts of the world in 2026.

Operator: Your next question comes from the line of James Hooper with Bernstein. Your line is open. Please go ahead.

Speaker #3: Yeah. So we did we have been stacking lots of double digit and high single digit quarters for multiple years. So just by the laws of big denominators, we did expect that to come down somewhat.

James Hooper: Morning, and thank you very much for taking my question. I'd like to go back to Aerospace, please. We've got Europe running out of jet fuel, flight cancellations and other potential issues if the conflict continues. Can you remind us what your split of OEM and aftermarket is? Can you give a little bit of detail about how Aerospace growth could be affected if flying hours are tearing down through the rest of this year? Thanks.

Speaker #3: But we were very pleased that in Q1, we still put up high single digit, high single digit growth off of a much bigger denominator.

Speaker #4: And now here's why. First of all, the business is balanced roughly 50% OEM, 50% aftermarket. And then it's balanced across commercial aviation, general aviation, and military.

Speaker #3: I'd say, in the short term, the real strength is Asia and has been Asia. And both marine new build and marine aftermarket have been stronger.

Timothy M. Knavish: In our, in our guide, in our, you know, run rate normalization, by the beginning of 2027, Q1 of 2027, we've got all of that factored in. Okay? Aero, absolutely you will see increases in output volume and therefore revenue for our aerospace business going forward. I would put it in a couple of different buckets. One, we're continuously improving output with some of these incremental de-bottlenecking kinds of investments that we've been making. Round numbers over the last year or so, we've put about $150 million into those kind of investments. They're paying off as we go. You'll see some improvement in late 2026 into 2027 coming out of those investments.

Tim Knavish: In our, in our guide, in our, you know, run rate normalization, by the beginning of 2027, Q1 of 2027, we've got all of that factored in. Okay? Aero, absolutely you will see increases in output volume and therefore revenue for our aerospace business going forward. I would put it in a couple of different buckets.

Speaker #4: So kind of one of those subsegments may be affected from a flight mile standpoint, but it's one of many subsegments. And then even that subsegment has learned a very hard lesson coming out of COVID.

Timothy M. Knavish: Thanks, James. I'll give you the spoiler alert answer first, and then I'll give you a little more details. We see no impact of the potential slowdown in flight miles in some parts of the world in 2026. Now here's why. First of all, the business is balanced roughly 50% OEM, 50% aftermarket. Then it's balanced across commercial aviation, general aviation, and military. Kind of one of those sub-segments may be affected from a flight mile standpoint, but it's one of many sub-segments. Then even that sub-segment has learned a very hard lesson coming out of COVID. What the commercial customers did is they radically depleted their inventories of aftermarket products, including a lot of what we sell.

Speaker #3: But look, there's a lot of protective coatings work going on around the world. There's a lot of data center work going on around the world.

Speaker #3: We just launched and announced a comprehensive end-to-end offering for data centers. There's a lot of infrastructure work going on. So we see that business continuing to be a growth engine for us for the rest of '26.

Speaker #4: With the commercial customers did is they radically depleted their inventories of aftermarket products, including a lot of what we sell. And because of the strength across the breadth of this industry, that has never been able to be rebuilt.

Tim Knavish: One, we're continuously improving output with some of these incremental de-bottlenecking kinds of investments that we've been making. Round numbers over the last year or so, we've put about $150 million into those kind of investments. They're paying off as we go. You'll see some improvement in late 2026 into 2027 coming out of those investments.

Speaker #3: And frankly, beyond because it's got some strength in some segments that are relatively unaffected by some of the macro issues that are affecting other places.

Speaker #4: And I still get phone calls literally weekly about restocking in our ability to keep aftermarket parts and components in stock and rebuilt. So what you should expect if that does happen, I think we would be rebuilding aftermarket inventory for some time period while all the other segments that I mentioned remain red hot.

Speaker #2: Your next question comes from the line of Vince and Andrews, with Morgan Stanley. Your line is open. Please go ahead.

Speaker #5: Please go ahead.

Timothy M. Knavish: Second, we announced a new plant to the tune of about $380 million that will be more of a step change in volume output as we get out into like the 2028 timeframe. The third category, Jeff, is we've got a lot of engineering work happening right now. We're not done with investments, and I can't get ahead of my board or anything, but we're still working on additional investments. You should, going forward, expect to see, you know, a nice increase in our, in our aerospace revenue. Vince, you wanna take the currency?

Tim Knavish: Second, we announced a new plant to the tune of about $380 million that will be more of a step change in volume output as we get out into like the 2028 timeframe. The third category, Jeff, is we've got a lot of engineering work happening right now.

Speaker #4: And good morning and congrats and thank you to Vince and my condolences, of course, to the Bruno family. John was a wonderful man.

Speaker #6: Could I ask you to talk a little bit about the industrial coatings margins? They came in a little bit softer than expected. You did call out Chinese mix.

Speaker #4: And I think if anything, it could be an improved mix for us because typically your aftermarket mix is a little richer than your OEM mix.

Timothy M. Knavish: Because of the strength across the breadth of this industry, that has never been able to be rebuilt. I still get phone calls like literally weekly, about restocking and our ability to keep aftermarket parts and components in stock and rebuilt. What you should expect if that does happen, I think we would be rebuilding aftermarket inventory for some time period while all the other segments that I mentioned remain red-hot. You know, I think if anything, it could be an improved mix for us because typically, your aftermarket mix is a little richer than your OEM mix. You know, I watch the news like everybody does. I see the impacts, and I see my, customer CEOs talking about this on the news. We see really no impact here.

Tim Knavish: We're not done with investments, and I can't get ahead of my board or anything, but we're still working on additional investments. You should, going forward, expect to see, you know, a nice increase in our, in our aerospace revenue. Vince, you wanna take the currency?

Speaker #6: On the auto OEM side, and I guess there was a little bit of negative price I think is a function of the index contracts.

Speaker #4: So I watched the news like everybody does. I see the impacts, and I see my customer CEOs talking about this on the news. But we see really no impact here because don't forget, because of what's going on in the world here, and the NATO rebuilding their own defenses, the military side of the business growing tremendously on both OE and aftermarket as well.

Speaker #6: But can you just help us understand why the margin contraction was so great and how to think about it through the balance of the year?

Speaker #6: Thank you.

Speaker #3: So Vince and I, you could answer the question for me because you nailed it, right? So let me just give a little more color to it.

Vincent Morales: Yeah. Jeff, the currency impact for Q1 is less than $+0.10 year-over-year. That was included in our guide for the year and for the quarter. If you look at the balance of the year, so the remaining three quarters, the total's gonna be less than half of that, and most of that in Q2. Again, all included in our original guide back in January.

Vince Morales: Yeah. Jeff, the currency impact for Q1 is less than $+0.10 year-over-year. That was included in our guide for the year and for the quarter. If you look at the balance of the year, so the remaining three quarters, the total's gonna be less than half of that, and most of that in Q2. Again, all included in our original guide back in January.

Speaker #3: See, the biggest impact was China Auto. As predicted, it was going to be down, I think it was down well into the double digits as far as China Auto builds for the quarter.

Speaker #4: Okay? Thank you.

Speaker #3: And that we outperformed that a bit because of some of our wins. But it was still down significantly. And that is that's a really good operating margin business for us because if you think about it, one out of every three cars in the world is built in China.

Speaker #2: Your next question comes from the line of John McNulty with BMO. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Kevin McCarthy with Vertical Research Partners. Your line is open. Please go ahead.

Speaker #6: And condolences to John's family. Great guy. And Vince, it's been a really, really great ride. So appreciate all the help. Just a quick one on the protective and marine business.

Kevin McCarthy: Yes, thank you and good morning. Vince, congratulations to you. Appreciate all of your help over the last 20 years or so. You'll be greatly missed, as will Mr. Bruno, of course. My question, maybe for Tim, is on the subject of M&A. I think you made a small acquisition recently in Ozark as part of Traffic Solutions. Curious about that deal, but maybe more importantly, can you put external growth into forward context for us, Tim? I think you've been quite focused on organic growth. Now that you have 5 quarters of expansion under the belt, do you feel like you have a little bit more license to grow externally? Should we expect PPG to remain highly disciplined as you have been recently?

Speaker #3: So the scale and the leverage, it's stronger on the upside when things are in producing China. But the negative also happens. So that was the biggest.

Timothy M. Knavish: Don't forget, because of what's going on in the world here and, you know, the NATO rebuilding their own defenses, the military side of the business growing tremendously on both OE and aftermarket as well. Okay? Thank you.

Speaker #6: I think the expectation was that we were going to see that the growth in that business moderate just given the huge success you've had over the last year and a half or two in that.

Speaker #3: The second was even though we're talking constantly over these last two months about raw material increases, we were still rolling off some index contracts from the deflationary cycle, mostly in our automotive and our packaging businesses, which are both in industrial segment.

Speaker #6: And yet you still put up high single digits. I guess, can you help us to think about what drove that presumably stronger than expected volume and how we should think about that throughout the rest of 2026?

Operator: Your next question comes from the line of John McNulty with BMO. Your line is open. Please go ahead.

Kevin McCarthy: Curious about that deal, but maybe more importantly, can you put external growth into forward context for us, Tim? I think you've been quite focused on organic growth. Now that you have 5 quarters of expansion under the belt, do you feel like you have a little bit more license to grow externally? Should we expect PPG to remain highly disciplined as you have been recently?

Speaker #4: Yeah. So we did we have been stacking lots of double-digit and high single-digit quarters for multiple years. So just by the laws of big denominators, we did expect that to come down somewhat, but we are very pleased that in Q1, we still put up high single-digit, high single-digit growth off of a much bigger denominator.

John McNulty: Condolences to John's family. Great guy. Vince, it's been a really great ride. Appreciate all the help. Just a quick one on the Protective and Marine Coatings business. I think the expectation was that we were going to see that, the growth in that business moderate just given, you know, the huge success you've had over the last year and a half or two in that. Yet you still put up high single digits. I guess, can you help us to think about what drove that presumably stronger than expected volume and how we should think about that throughout the rest of 2026?

Speaker #3: We should be wrapping up the rolloff of those in Q2. We've got a few more that have to roll off. But that's really been the drivers.

Speaker #3: Number one, automotive OEM builds in China and number two, index contracts.

Timothy M. Knavish: Yeah. Hey, thanks, Kevin. Ozark, you know, I would call that an opportunistic asset. Highly synergistic for us with double underline under highly. You know, we got a good price relative to what it was sold for just a few years ago. You know, walking around number, Kevin, about $100 million in revenue. It's a small bolt-on, what it does because of the highly synergistic nature of it is it actually helps our margin position and cash generation position for that small business for us of Traffic Solutions. It raises its margin profile a little bit.

Tim Knavish: Yeah. Hey, thanks, Kevin. Ozark, you know, I would call that an opportunistic asset. Highly synergistic for us with double underline under highly. You know, we got a good price relative to what it was sold for just a few years ago.

Speaker #4: I'd say in the short term, the real strength is Asia. It has been Asia. And both marine new build and marine aftermarket have been stronger.

Speaker #6: And just to add some more color on China auto builds. So last year as Tim mentioned, very, very strong quarter. For the industry, for PPG.

Speaker #6: This year, the reverse. On the two-year stack basis, we're almost flat in China. So again, we had the comp issue is really what we're dealing with.

Speaker #4: But look, there's a lot of protective coatings work going on around the world. There's a lot of data center work going on around the world.

Timothy M. Knavish: We have been stacking like lots of double-digit and high single-digit quarters for multiple years. Just by the laws of big denominators, we did expect that to come down somewhat, but we are very pleased that in Q1, we still put up high single-digit growth off of a much bigger denominator. I'd say in the short term, the real strength is Asia and has been Asia. Both marine new build and marine aftermarket have been stronger. You know, look, there's a lot of protective coatings work going on around the world. There's a lot of data center work going on around the world. We just launched and announced a comprehensive end-to-end offering for data centers.

Speaker #2: Your next question. Comes from the line of Josh Spector with UBS. Your line is open. Please go ahead.

Speaker #4: We just launched and announced a comprehensive end-to-end offering for data centers. There's a lot of infrastructure work going on. So we see that business continuing to be a growth engine for us for the rest of '26.

Tim Knavish: You know, walking around number, Kevin, about $100 million in revenue. It's a small bolt-on, what it does because of the highly synergistic nature of it is it actually helps our margin position and cash generation position for that small business for us of Traffic Solutions. It raises its margin profile a little bit.

Speaker #5: Please go ahead.

Speaker #7: Yeah. Hi, good morning. And echo my congratulations to Vince and Jamie and, of course, my condolences to John and family who'll be sorely missed.

Speaker #4: And frankly, beyond, because it's got some strengths and some segments that are relatively unaffected by some of the macro issues that are affecting other places.

Speaker #7: I did want to ask on pricing and surcharges specifically. How much are you using surcharges this cycle versus prior years? And then kind of similar again on auto OEM, have contracts structures changed to allow that?

Timothy M. Knavish: The reason we have that in our portfolio is it's a really consistent cash generator for us that we can use to then deploy that cash on things like new aerospace plants. It's steady. Because it's safety and infrastructure, it's very, very stable. It just kind of spits off cash for us year over year. Now with Ozark, it'll deliver great financial returns for us and our shareholders because of the high synergies and the relatively low purchase price. Now, more broadly, I am very pleased with how the teams have grown that organic growth muscle.

Tim Knavish: The reason we have that in our portfolio is it's a really consistent cash generator for us that we can use to then deploy that cash on things like new aerospace plants. It's steady. Because it's safety and infrastructure, it's very, very stable. It just kind of spits off cash for us year over year. Now with Ozark, it'll deliver great financial returns for us and our shareholders because of the high synergies and the relatively low purchase price. Now, more broadly, I am very pleased with how the teams have grown that organic growth muscle.

Speaker #2: Your next question comes from the line of Vincent Andrews. Morgan Stanley. Your line is open. Please go ahead.

Speaker #7: Or has the cycle of recovery become a lot faster in that part of the business? Thanks.

Speaker #5: Please go ahead.

Speaker #3: Yeah, Josh, we are using surcharges in some of our businesses more this time because freight costs are up, right? Whereas most of our contracts and even non-contractual business, we're typically talking about raw materials, but we've got two additional ones that don't get as much attention but are pretty significant to that MSD contributor.

Speaker #6: And good morning and congrats, and thank you to Vince. And my condolences, of course, to the Bruno family. John was a wonderful man.

Timothy M. Knavish: There's a lot of infrastructure work going on. You know, we see that business continuing to be a growth engine for us, for the rest of 2026 and, frankly beyond, because it's got some strength in some segments that are relatively unaffected by some of the macro issues that are affecting other places.

Speaker #4: Could I ask you to talk a little bit about the industrial coatings margins? They came in a little bit softer than expected. You did call out Chinese mix.

Speaker #4: On the auto OEM side, and I guess there was a little bit of negative price I think is a function of the index contracts.

Timothy M. Knavish: You know, Kevin, I remember some of our conversations four or five years ago, and, so we're, you know, we're not done, but we're pleased with five straight quarters of organic growth and by the way, outperforming market over those five quarters. I think we've always had a license. We've always had a strong enough balance sheet to do whatever M&A we want. The way I think about it is, first of all, it's got to be the right asset. I'm not interested in just buying something so that I can put another flag somewhere or buying something purely for the sake of raw material synergies. I wanna buy something that adds to our future organic growth and margin profile. Second, it's got to be the right time.

Tim Knavish: You know, Kevin, I remember some of our conversations four or five years ago, and, so we're, you know, we're not done, but we're pleased with five straight quarters of organic growth and by the way, outperforming market over those five quarters. I think we've always had a license. We've always had a strong enough balance sheet to do whatever M&A we want.

Speaker #4: But can you just help us understand why the margin contraction was so great and how to think about it through the balance of the year?

Speaker #3: And that's logistics costs because of diesel fuel. And European energy costs because of what's going on. So I'd say in those two specific areas, we're using surcharges more than we typically have.

Operator: Your next question comes from the line of Vincent Andrews with Morgan Stanley. Your line is open. Please go ahead.

Speaker #4: Thank you.

Speaker #7: So Vincent, you could answer the question for me because you nailed it, right? So let me just give a little more color to it.

Vincent Andrews: Good morning and congrats, and thank you to Vince, and my condolences, of course, to the Bruno family. John was a wonderful man. Could I ask you to talk a little bit about the Industrial Coatings margins? They came in a little bit softer than expected. You did call out Chinese mix on the auto OEM side, and I guess there was a little bit of negative price, I think as a function of the index contract. Can you just help us understand why the margin contraction was so great and how to think about it through the balance of the year? Thank you.

Speaker #7: Say the biggest impact was China Auto. As predicted, it was going to be down, I think it was down well into the double digits as far as China auto builds for the quarter.

Speaker #3: In beyond that, it's largely been our typical price increase, which we prefer. They're stickier. And again, on the auto question, most of the auto contracts are designed around raw material inflation.

Tim Knavish: The way I think about it is, first of all, it's got to be the right asset. I'm not interested in just buying something so that I can put another flag somewhere or buying something purely for the sake of raw material synergies. I wanna buy something that adds to our future organic growth and margin profile. Second, it's got to be the right time.

Speaker #7: And that we outperformed that a bit because of some of our wins. But it was still down significantly. And that is that's a really good operating margin business for us because if you think about it, one out of every three cars in the world is built in China.

Speaker #3: Less so around freight and energy. But those are discussions that we should have with our customers first. And we've started those discussions. So more to come there.

Timothy M. Knavish: The last few years has not been the right time as we've been, you know, first of all, exiting some things in our portfolio and tripling down on organic growth. I think we can handle some deals now, but it still has to be at the right price because I've got some pretty darn good organic investment opportunities that have great financial returns. I'm really, you know, to use your word, disciplined. We will continue to be disciplined, but I do think we have the right, the license to do selective M&A. You've seen us with two small bolt-ons this year. We actually did a, you know, kind of a productivity outside the can allied products acquisition earlier in the year to help industrial refinish pipelines. It's still not the tip of the spear for us.

Tim Knavish: The last few years has not been the right time as we've been, you know, first of all, exiting some things in our portfolio and tripling down on organic growth. I think we can handle some deals now, but it still has to be at the right price because I've got some pretty darn good organic investment opportunities that have great financial returns.

Timothy M. Knavish: Vincent, you could answer the question for me because you nailed it, right? Let me just give a little more color to it. See, the biggest impact was China auto. As predicted, it was going to be down. I think it was down well into the double digits as far as China auto builds for the quarter. That, you know, we outperformed that a bit because of some of our wins, but it was still down significantly. That is, That's a really good operating margin business for us because if you think about it, 1 out of every 3 cars in the world is built in China. The scale and the leverage is stronger on the upside when things are produced in China, but the negative also happens.

Speaker #7: So the scale and the leverage is stronger on the upside when things are being produced in China, but the negative also happens. So that was the biggest.

Speaker #3: But most of the index contracts that we have in auto and packaging are pretty much limited to raw materials.

Speaker #7: The second was even though we're talking constantly over these last two months about raw material increases, we were still rolling off some index contracts from the deflationary cycle, mostly in our automotive and our packaging businesses, which are both in industrial segment.

Speaker #2: Your next question comes from the line of Matthew DeJoe with Bank of America. Your line is open. Please go ahead.

Tim Knavish: I'm really, you know, to use your word, disciplined. We will continue to be disciplined, but I do think we have the right, the license to do selective M&A. You've seen us with two small bolt-ons this year. We actually did a, you know, kind of a productivity outside the can allied products acquisition earlier in the year to help industrial refinish pipelines.

Speaker #8: Good morning. Yeah. Just echo. What everybody's been kind of saying. Vince, congrats on a great career and clearly the sentiment on John. He was just such a core salt of the earth guy.

Speaker #8: So yeah, it's a huge loss. I wanted to ask on the OEM side in China. There's often discussions in the market around Chinese competition or China moving downstream.

Speaker #7: We should be wrapping up the rolloff of those in Q2. We've got a few more that have to roll off, but that's really been the drivers.

Tim Knavish: It's still not the tip of the spear for us. We will still be extremely disciplined. We will look at every asset that comes available. It's gotta meet the right asset, the right time, and the right price.

Timothy M. Knavish: We will still be extremely disciplined. We will look at every asset that comes available. It's gotta meet the right asset, the right time, and the right price.

Speaker #8: And coatings is one area where I feel like maybe there are roadblocks to how far China can compete globally. But in that market, are you seeing better competition?

Speaker #7: Number one, automotive OEM builds in China and number two, index contracts.

Timothy M. Knavish: That was the biggest. The second was, you know, even though we're talking constantly over these last two months about raw material increases, you know, we were still rolling off some index contracts from, you know, the deflationary cycle, mostly in our automotive and our packaging businesses, which are both in Industrial Coatings segment. We should be wrapping up the roll-off of those in Q2. We've got a few more that have to roll off, but that's really been the drivers. Number one, automotive OEM builds in China, and number two, index contracts.

Speaker #6: And just to add some more color on China auto builds. So last year, as Tim mentioned, very, very strong quarter. Were the industry for PPG.

Speaker #8: Are there pushes to adopt local suppliers for the auto companies? And then on the refinish side, I mean, well, I'll just stop there. I'll let you, Tim, go first.

Operator: Your next question comes from the line of Duffy Fischer with Vertical Research Partners. Your line is open. Please go ahead.

Speaker #6: This year, the reverse. On the two-year stack basis, we're almost flat in China. So again, we had the comp issue is really what we're dealing with.

Duffy Fischer: Great. Good morning, guys. 2 questions on Refinish. First, when you anniversary Q2, revenue will be down about 10%. Has that done anything structurally to the margin there? Do you need to do any restructuring to reset that on a profitability basis? Then second, you know, once we get through the snapback in the H2, should we think about that business structurally being kind of flat volumes and price up 2% to 3% going forward?

Speaker #3: Okay. Thanks. So there's no doubt that the China automotive OEM industry has gone through an absolutely radical transformation in the last couple of years with the Western JVs dramatically shrinking and the China domestics dramatically increasing.

Speaker #2: Your next question.

Speaker #5: Your next question comes from the line of Josh Spector with UBS. Your line is open. Please go ahead. Please go ahead.

Speaker #8: Yeah. Hi. Good morning. And echo my congratulations to Vince, Jamie, and of course, my condolences to John and family. It'll be sorely missed. I did want to ask on pricing and surcharges specifically.

Speaker #3: And there's also no question, Matt, that those Chinese domestics have worked hard to get Chinese supplier content on the vehicles. But I would say thus far, that has all been on, let's call it, hard parts, rigid parts, widgets, that the Chinese companies can produce.

Vincent J. Morales: Just to add some more color on China auto builds.

Timothy M. Knavish: Last year, as Tim Knavish mentioned, very strong quarter for the industry, for PPG. This year was the reverse. On a 2-year stack basis, we're almost flat in China. Again, we have the comp issue is really what we're dealing with.

Timothy M. Knavish: Yeah. Hey, Duffy. I think you're pretty close there. We don't as far as the go forward, right? The go forward, it's not gonna be a high volume growth industry, it's still a good revenue growth and EBITDA growth machine for us because of our ability to capture value for the total value that we deliver because of the work we've been doing to expand our TAM, right? We're selling more into the body shops now than we ever did beyond just the coatings, right? When you think about digital tools, MoonWalk, allied products, we just have a bigger target TAM that's enabling us to grow. We've had a really good run of share gains there.

Tim Knavish: Yeah. Hey, Duffy. I think you're pretty close there. We don't as far as the go forward, right? The go forward, it's not gonna be a high volume growth industry, it's still a good revenue growth and EBITDA growth machine for us because of our ability to capture value for the total value that we deliver because of the work we've been doing to expand our TAM, right?

Speaker #8: How much are you using surcharges this cycle versus prior years? And then kind of similar again on auto OEM, have contract structures changed to allow that, or has the cycle of recovery become a lot faster in that part of the business?

Operator: Your next question comes from the line of Josh Spector with UBS. Your line is open. Please go ahead.

Speaker #8: Thanks.

Speaker #4: Yeah. Josh, we do we are using surcharges in some of our businesses more this time because freight costs are up, right? Whereas most of our contracts and even non-contractual businesses were typically talking about raw materials but we've got two additional ones that don't get as much attention but are pretty significant to that MSD contributor.

Speaker #3: When it comes to automotive coatings in China, there's already more competition than the rest of the world because you've got the traditional three, plus you've got the two Japanese players, and one Korean player.

Josh Spector: Yeah. Good morning. Echo my congratulations to Vince and Jamie, and of course my condolences to John's family. He'll be sorely missed. I did wanna ask on pricing and surcharges specifically. You know, how much are you using surcharges this cycle versus prior years? Then kind of similar again on auto OEM, have contract structures changed to allow that, or has the cycle of recovery become a lot faster in that part of the business? Thanks.

Tim Knavish: We're selling more into the body shops now than we ever did beyond just the coatings, right? When you think about digital tools, MoonWalk, allied products, we just have a bigger target TAM that's enabling us to grow. We've had a really good run of share gains there.

Speaker #3: But the finished film on a vehicle is very hard to duplicate, very hard to reverse engineer, all the way back to resin formulation, which is really the backbone of automotive OEM coatings.

Speaker #4: And that's logistics costs because of diesel fuel. And European energy costs because of what's going on. So I'd say in those two specific areas we're using surcharges more than we typically have.

Speaker #3: And so that gives automotive OEM coatings some protection. I don't know what my peers do, but I know we produce the secret sauce outside of China.

Timothy M. Knavish: As the market normalizes, this will never be our highest growth business, but this will be a nice low single-digit growth business for us with really good margin and really good cash. You know, we have not had to do massive restructuring with this decreased volume. What you should expect instead is as things normalize in H2, you should expect outstanding leverage because you've seen some of that negative leverage in H2 of last year, right? You should expect a really nice snapback in margin leverage. That's really a bottom-line snapback. We expect this industry to return to normal over the last X number of years, and normal being a -1, -2 industry volume.

Tim Knavish: As the market normalizes, this will never be our highest growth business, but this will be a nice low single-digit growth business for us with really good margin and really good cash. You know, we have not had to do massive restructuring with this decreased volume.

Timothy M. Knavish: Yeah. Josh, you know, we are using surcharges in some of our businesses more this time because freight costs are up, right? Whereas most of our contracts and even non-contractual businesses, you know, we're typically talking about raw materials, but, we've got two additional ones that don't get as much attention but are pretty significant to that MSD contributor, and that's logistics costs 'cause of diesel fuel and European energy costs because of what's going on. I'd say in those two specific areas, we're using surcharges more than we typically have. Beyond that, it's largely been our typical price increase, which we prefer. They're stickier.

Speaker #3: And ship it into China. So the coatings, by nature of your buying kind of mixed chemicals, and the end product is a finished film on the vehicles, which, because of the transformation that happens in the application or curing process, is different than the mixed chemicals. It does give a nice buffer of protection for automotive OEM coatings versus other automotive parts.

Speaker #4: In beyond that, it's largely been our typical price increase, which we prefer. They're stickier. And again, on the auto question, most of the auto contracts are designed around raw material inflation.

Tim Knavish: What you should expect instead is as things normalize in H2, you should expect outstanding leverage because you've seen some of that negative leverage in H2 of last year, right? You should expect a really nice snapback in margin leverage. That's really a bottom-line snapback.

Speaker #4: Less so around freight and energy. But those are discussions that we should have with our customers first. And we've started those discussions. So more to come there.

Speaker #2: Your next question comes from the line of Laurent Favre with BNP. Your line is open. Please go ahead.

Speaker #4: But most of the index contracts that we have in auto and packaging are pretty much limited to raw materials.

Tim Knavish: We expect this industry to return to normal over the last X number of years, and normal being a -1, -2 industry volume. We'll do better than that because of our expanded TAM and then a really nice EBITDA machine for us.

Speaker #9: Good morning. I'd like to come back to the MSD inflation point, please. And we're seeing energy solvents, lots of spot prices on upstream chemicals that more than 50%, sometimes 100%.

Speaker #2: Your next question comes from the line of Matthew Dio with Bank of America. Your line is open. Please go ahead.

Timothy M. Knavish: We'll do better than that because of our expanded TAM and then a really nice EBITDA machine for us.

Timothy M. Knavish: Again, on the auto question, most of the auto contracts are designed around raw material inflation, less so around, you know, freight and energy. You know, those are discussions that we should have with our customers first, and we've started those discussions, so, more to come there. Most of the index contracts that we have in auto and packaging are pretty much limited to raw materials.

Speaker #9: And I understand you guys don't buy products that are just out of the cracker, but still I'm wondering how it's only MSD? Are those spot numbers not coming through in actual contract negotiations?

Speaker #9: Good morning. Yeah. Just echo. What everybody's been kind of saying. Vince, congrats on a great career and clearly the sentiment on John. He was just such a core salt of the earth guy.

Operator: Your next question comes from the line of James Hooper with Bernstein. Your line is open. Please go ahead.

Speaker #9: Or are the intermediate guys producing resins and additives being squeezed? Or is it that you have contract protection for the rest of the year, but then you will see further inflation into 2027?

Speaker #9: So yeah, it's a huge loss. I wanted to ask on the OEM side in China. There's often discussions in the market around Chinese competition or China moving downstream.

James Hooper: Good morning, thank you very much for taking my question. I'd like to go back to aerospace, please. We've got Europe running out of jet fuel, flight cancellations and other potential issues if the conflict continues. Can you remind us what your split of OEM and aftermarket is? Can you give a little bit of detail about how aerospace growth could be affected if flying hours are tearing down over the course of this year? Thanks.

Speaker #3: Thanks, Ron. I'd say two comments on that. Of course, our suppliers are seeing that energy impact mostly in Europe. And we. Not that built into that blue box of mid-single digits overall cost of good sales inflation.

Speaker #9: And coatings is one area where I feel like maybe there's roadblocks to how far China can compete globally. But in that market, are you seeing better competition?

Operator: Your next question comes from the line of Matthew DeYoe with Bank of America. Your line is open. Please go ahead.

Speaker #9: Are there pushes to adopt local suppliers for the auto companies? And then on the refinish side, I mean, well, I'll just stop there. And I'll let you answer them first.

Matthew DeYoe: Morning. Yeah, just echo what everybody's been kind of saying. You know, Vince Morales, congrats on a great career. Clearly, you know, the sentiment on John. He was just such a core salt of the earth guy. Yeah, it's a huge loss. I wanted to ask on the OEM side in China, there's often discussions in the market around, you know, Chinese competition or China moving downstream, and coatings is one area where I feel like maybe there's, you know, roadblocks to how far China can compete globally. In that market, are you seeing better competition? Are there pushes to adopt local suppliers for the auto companies? On the Refinish side, I mean. Well, I'll just stop there on that, and I'll let you guys go first.

Timothy M. Knavish: Thanks, James. I'll give you the spoiler alert answer first, and then I'll give you a little more details. We see no impact of the potential slowdown in flight miles in some parts of the world in 2026. Now here's why. First of all, the business is balanced roughly 50% OEM, 50% aftermarket, and then it's balanced across commercial aviation, general aviation, and military. Kind of one of those subsegments may be affected from a flight mile standpoint, but it's one of many subsegments. Even that subsegment has learned a very hard lesson coming out of COVID. What the commercial customers did is they radically depleted their inventories of aftermarket products, including a lot of what we sell.

Tim Knavish: Thanks, James. I'll give you the spoiler alert answer first, and then I'll give you a little more details. We see no impact of the potential slowdown in flight miles in some parts of the world in 2026. Now here's why. First of all, the business is balanced roughly 50% OEM, 50% aftermarket, and then it's balanced across commercial aviation, general aviation, and military.

Speaker #3: And then the second piece of energy is logistics costs. And we've got that building there as well. And so we have all of that.

Speaker #4: Okay. Thanks. So there's no doubt that the China automotive OEM industry has gone through an absolutely radical transformation in the last couple of years with the Western JVs, dramatically shrinking and the China domestics dramatically increasing.

Speaker #3: Everything that you've got a timestamp it based on our best estimates of today's operating environment. But we've got that all built in. We're absolutely seeing what you described.

Speaker #3: But we've got that all built into our guys.

Speaker #9: Tim Laurent, as you're fully aware, most large coating companies do not pay anything close to spot. Especially when you have commodity inflation spikes. So we're contracted.

Speaker #4: And there's also no question, Matt, that those Chinese domestics have worked hard to get Chinese supplier content on the vehicles. But I would say thus far, that as all been on, let's call it hard parts, rigid parts, widgets, that the Chinese companies can produce.

Speaker #9: And we are negotiated. Most of our raw material supply not only for the quarter, but for the full year.

Tim Knavish: Kind of one of those subsegments may be affected from a flight mile standpoint, but it's one of many subsegments. Even that subsegment has learned a very hard lesson coming out of COVID. What the commercial customers did is they radically depleted their inventories of aftermarket products, including a lot of what we sell.

Speaker #3: And one final comment I'll make, really Laurent, on your question. And even more broadly, on the whole raw material and total inflation. One big difference between this cycle and the cycle coming out of COVID, which was a combination of post-COVID recovery and the deep Texas freeze, at that time, you'll recall that coatings industry volumes were very high.

Timothy M. Knavish: Thanks. There's no doubt that the China automotive OEM industry has gone through an absolutely radical transformation in the last couple years with the Western JVs, you know, dramatically shrinking and the China domestics dramatically increasing. There's also no question, Matt, that those Chinese domestics have worked hard to get Chinese supplier content on the vehicles. I would say thus far that has all been on what's called hard parts, rigid parts, widgets that the Chinese companies can produce. When it comes to automotive coatings in China, there's already more competition than the rest of the world because you've got the traditional three, plus you've got two Japanese players and one Korean player.

Speaker #4: When it comes to automotive coatings in China, there's already more competition than the rest of the world because you've got the traditional three, plus you've got the two Japanese players, and one Korean player.

Speaker #4: But the finished film on a vehicle is very hard to duplicate, very hard to reverse engineer, all the way back to resin formulation, which is really the backbone of automotive OEM coatings.

Speaker #3: A lot of coatings companies could not keep up with customer demand. So that is a significant difference when it comes to what does a coatings company see, particularly a large coatings company see, versus what is being seen upstream.

Timothy M. Knavish: Because of the strength across the breadth of this industry, that has never been able to be rebuilt. I still get phone calls like literally weekly about restocking and our ability to keep aftermarket parts and components in stock and rebuilt. What you should expect if that does happen, I think we would be rebuilding aftermarket inventory for some time period while all the other segments that I mentioned remain red hot. You know, I think if anything, it could be an improved mix for us because typically your aftermarket mix is a little richer than your OEM mix. I watch the news like everybody does. I see the impacts, and I see my customer CEOs talking about this on the news, but we see really no impact here.

Tim Knavish: Because of the strength across the breadth of this industry, that has never been able to be rebuilt. I still get phone calls like literally weekly about restocking and our ability to keep aftermarket parts and components in stock and rebuilt. What you should expect if that does happen, I think we would be rebuilding aftermarket inventory for some time period while all the other segments that I mentioned remain red hot.

Speaker #3: Supply demand economics still matter. And that's a big differentiator between this cycle and the last cycle.

Speaker #4: And so that gives automotive OEM coatings some protection. I don't know what my peers do, but I know we produce the secret sauce outside of China.

Speaker #2: Your next question comes from the line of Patrick Cunningham with Citi. Your line is open. Please go ahead.

Speaker #4: And ship it in the China. So the coatings by nature of your buying kind of mixed chemicals and the end product is a finished film on the vehicles which, because of the transformation that happens in the application of curing process, is different than the mixed chemicals.

Speaker #3: Hi. Good morning. I'd like to echo my deepest condolences to John's family and the PPG family and thank you to Vince for your partnership over the last few years.

Tim Knavish: You know, I think if anything, it could be an improved mix for us because typically your aftermarket mix is a little richer than your OEM mix. I watch the news like everybody does. I see the impacts, and I see my customer CEOs talking about this on the news, but we see really no impact here.

Timothy M. Knavish: You know, the finished film on a vehicle is very hard to duplicate, very hard to reverse engineer all the way back to resin formulation, which is really the backbone of automotive OEM coatings. That gives automotive OEM coatings some protection. I don't know what my peers do, but I know we produce the secret sauce outside of China and ship it into China. The coatings, by nature of you're buying kind of mixed chemicals, and the end product is a finished film on the vehicles, which because of the transformation that happens in the application and curing process is different than the mixed chemicals. It does give a nice buffer of protection for automotive OEM coatings versus other automotive parts.

Speaker #3: For architectural EMEA, I think you mentioned closing four manufacturing plants in the second half, could you quantify the fixed cost savings there and cost to deliver?

Speaker #4: It does give a nice buffer of protection for automotive OEM coatings versus other automotive parts.

Speaker #3: And then maybe more broadly, how you are thinking of the long-term strategic value for the business?

Speaker #2: Your next question comes from the line of Laurent Favre with BNP. Your line is open. Please go ahead.

Tim Knavish: Don't forget, because of what's going on in the world here and, you know, the NATO rebuilding their own defenses, the military side of the business growing tremendously on both OE and aftermarket as well. Okay? Thank you.

Speaker #5: Yeah. Are you there, Patrick? We lost you a little bit.

Speaker #10: Good morning. I'd like to come back to the MSD inflation point, please. I mean, we're seeing energy solvents, lots of spot prices on upstream chemicals that more than 50%, sometimes 100%.

Speaker #3: I'll just try again. For architectural EMEA, you mentioned closing four plants.

Speaker #5: Yep. Yep.

Speaker #3: Okay. I got it. And then the long-term strategic value.

Speaker #10: And I understand you guys don't buy products that are just out of the cracker, but still I'm wondering how it's only MSD? Are those spot numbers not coming through in actual contract negotiations?

Operator: Your next question comes from the line of John McNulty with BMO. Your line is open. Please go ahead.

Speaker #5: Right. So yeah, four plants. Here's a good walking-around number for you. You'll see this savings in 2027. But a good walking-around number is about a 25 million dollar reduction in our fixed cost base from the closure of those four plants.

John McNulty: Yeah. Thanks for taking my question. Condolences to John's family. Great guy. Vince, it's been a really, really great ride. Appreciate all the help. Just a quick one on the protective and marine business. I think the expectation was that we were going to see that the growth in that business moderate just given, you know, the huge success you've had over the last 1.5 or 2 in that. Yet you still put up high single digits. I guess, can you help us to think about what drove that, presumably stronger than expected volume, and how we should think about that throughout the rest of 2026?

Speaker #10: Or are the intermediate guys producing resins and additives being squeezed? Or is it that you have contract protection for the rest of the year, but then you would see further inflation into 2027?

Operator: Your next question comes from the line of Laurent Favre with BNP. Your line is open.

Speaker #5: And that'll go on in perpetuity for us. Now, in total, you'll see about a 50 million dollar structural restructuring benefits for our company this year.

Laurent Favre: Yes. Good morning.

Operator: Please go ahead.

Speaker #4: Thanks, Ronnie. I'd say two comments on that. Of course, our suppliers are seeing that energy impact mostly in Europe. And we've got that built into that blue box of mid-single digits overall cost of good sales inflation.

Laurent Favre: Morning. I'd like to come back to the MSD inflation point, please. I know we're seeing energy solvents, lots of spot prices on upstream chemicals at more than 50%, sometimes 100%. I understand you guys don't buy products that are just out of the cracker. You know, I'm wondering how it's only MSD. Are those spot numbers not coming through in actual contract negotiations? Are the intermediate guys producing resins and additives being squeezed? Is it that you have contract protection for the rest of the year, you will see further inflation into 2027?

Speaker #5: You'll see another 50 next year, with 25 of that 50 being tied to these four plants. Now, that's not the only kind of fixed cost reduction initiative we've got some restructuring, some back office people costs being reduced.

John McNulty: Yet you still put up high single digits. I guess, can you help us to think about what drove that, presumably stronger than expected volume, and how we should think about that throughout the rest of 2026?

Speaker #4: And then the second piece of energy is logistics cost. And we've got that built in there as well. And so we have all of that.

Timothy M. Knavish: Yeah. We have been stacking like lots of double-digit and high single-digit quarters for multiple years. Just by the laws of big denominators, we did expect that to come down somewhat, but we are very pleased that in Q1 we still put up high single digits, high single-digit growth off of a much bigger denominator. I'd say in the short term, the real strength is Asia and has been Asia, and marine new build and marine aftermarket have been stronger. You know, look, there's a lot of protective coatings work going on around the world. There's a lot of data center work going on around the world. We just launched and announced a comprehensive end-to-end offering for data centers. There's a lot of infrastructure work going on.

Tim Knavish: Yeah. We have been stacking like lots of double-digit and high single-digit quarters for multiple years. Just by the laws of big denominators, we did expect that to come down somewhat, but we are very pleased that in Q1 we still put up high single digits, high single-digit growth off of a much bigger denominator.

Speaker #5: We've got a lot of formula optimization costs going over there as well. So the value to this business, when markets are even flat, this business delivers really good earnings and really good cash to us.

Speaker #4: Everything that you've got a timestamp it based on our best estimates of today's operating environment. But we've got that all built in. We're absolutely seeing what you described.

Timothy M. Knavish: Thanks, Laurent. I'd say two comments on that. Of course, you know, our suppliers are seeing that energy impact, you know, mostly in Europe. We've got that built into that blue box of mid-single digits overall cost of goods sold inflation. The second piece of energy is logistics costs, and we've got that built in there as well. We have all of that, everything that's, you know, you just gotta timestamp it based on our best estimates of today's operating environment. We've got that all built in. We're absolutely seeing what you described, but we've got that all built into our guides.

Speaker #4: But we've got that all built into our guide.

Speaker #5: That's the value in the portfolio. We have over the last couple of months seen a little better volume. We had a good March. In architectural Europe.

Speaker #10: Yeah. Laurent, as you're fully aware, most large coating companies do not pay anything close to spot. Especially when you have commodity inflation spikes. So we're contracted and we are negotiated through most of our raw material supply.

Tim Knavish: I'd say in the short term, the real strength is Asia and has been Asia, and marine new build and marine aftermarket have been stronger. You know, look, there's a lot of protective coatings work going on around the world. There's a lot of data center work going on around the world. We just launched and announced a comprehensive end-to-end offering for data centers. There's a lot of infrastructure work going on.

Speaker #5: So as you think about this market getting to flat volume, and the mission of this business in our portfolio is to spit off good earnings and good cash so that I can deploy that in some of our higher growth, higher technology businesses.

Speaker #10: Not only for the quarter, but for the full year.

Speaker #4: And one final comment I'll make, really Laurent, on your question and even more broadly on the whole raw material and total inflation. One big difference between this cycle and the cycle coming out of COVID, which was a combination of post-COVID recovery and the deep Texas freeze, at that time, you'll recall that coatings industry volumes were very high.

Speaker #5: And every we're constantly evaluating each of our businesses' mission and how they're performing to that mission in our portfolio. But that's how we're viewing it today.

Timothy M. Knavish: you know, we see that business continuing to be a, a growth engine for us for the rest of 2026 and frankly beyond, 'cause it's got some strength in some segments that are relatively unaffected by some of the macro issues that are affecting other places.

Tim Knavish: you know, we see that business continuing to be a, a growth engine for us for the rest of 2026 and frankly beyond, 'cause it's got some strength in some segments that are relatively unaffected by some of the macro issues that are affecting other places.

Vincent J. Morales: Yeah, Laurent, as you're fully aware, most large coatings companies do not pay anything close to spot, especially when you have commodity inflation spikes. We're contracted and we are negotiated through most of our raw material supply, not only for the quarter, but for the full year.

Speaker #5: And we've got we're not waiting. We're not sitting around hoping and waiting for a European recovery. We're building a business that can perform well at flat volume.

Speaker #4: A lot of coatings companies could not keep up with customer demand. So that is a significant difference when it comes to what does a coatings company see, particularly a large coatings company see versus what is being seen upstream.

Timothy M. Knavish: One final comment I'll make really, Laurent, on your question, and even more broadly on the whole raw material and total inflation. One big difference between this cycle and the cycle coming out of COVID, which was a combination of post-COVID recovery and the deep Texas freeze. At that time, you'll recall that coatings industry volumes were very high. A lot of coatings companies could not keep up with customer demand. That is a significant difference when it comes to what does a coatings company see, particularly a large coatings company see, versus what is being seen upstream. Supply-demand economics still matter, and that's a big differentiator between this cycle and the last cycle.

Speaker #2: There are no further questions at this time. I would now like to turn the call back over to Alex for closing remarks.

Operator: Your next question comes from the line of Vincent Andrews at Morgan Stanley. Your line is open. Please go ahead.

Speaker #4: Supply demand economics still matter. And that's a big differentiator between this cycle and the last cycle.

Speaker #5: Thank you, Tracy. We appreciate your interest and confidence in PPG. This concludes our first quarter earnings call.

Vincent Andrews: Good morning, and congrats, and thank you to Vince, and my condolences, of course, to the Bruno family. John was a wonderful man. Could I ask you to talk a little bit about the Industrial Coatings margins? They came in a little bit softer than expected. You did call out Chinese mix on the auto OEM side, and I guess there was a little bit of negative price, I think as a function of the index contract. Can you just help us understand why the margin contraction was so great and how to think about it through the balance of the year? Thank you.

Speaker #2: Your next question comes from the line of Patrick Cunningham with Citi. Your line is open. Please go ahead.

Speaker #4: Hi. Good morning. I'd like to echo my deepest condolences to John's family and the PPG family and thank you to Vince for your partnership over the last few years.

Vincent Andrews: You did call out Chinese mix on the auto OEM side, and I guess there was a little bit of negative price, I think as a function of the index contract. Can you just help us understand why the margin contraction was so great and how to think about it through the balance of the year? Thank you.

Speaker #4: For architectural EMEA, I think you mentioned closing four manufacturing plants in the second half. Could you quantify the fixed cost savings there and cost to deliver?

Speaker #4: And then maybe more broadly, how you are thinking of the long-term strategic value for the business?

Timothy M. Knavish: Vincent, you could answer the question for me ’cause you nailed it, right? Let me just give a little more color to it. See, the biggest impact was China auto. As predicted, it was gonna be down. I think it was down well into the double digits as far as China auto builds for the quarter. That, you know, we outperformed that a bit because of some of our wins, but it was still down significantly. That is a really good operating margin business for us because if you think about it, one out of every three cars in the world is built in China. The scale and the leverage is stronger on the upside when things are being produced in China, but the negative also happens.

Tim Knavish: Vincent, you could answer the question for me ’cause you nailed it, right? Let me just give a little more color to it. See, the biggest impact was China auto. As predicted, it was gonna be down. I think it was down well into the double digits as far as China auto builds for the quarter.

Speaker #5: Yeah. Are you there, Patrick? We lost you a little bit.

Operator: Your next question comes from the line of Patrick Cunningham with Citigroup. Your line is open. Please go ahead.

Speaker #4: I'll just try again. For architectural EMEA, you mentioned closing four plants. And then.

Patrick Cunningham: Hi, good morning. I'd like to echo my deepest condolences to John's family and the PPG family, and thank you to Vince for your partnership over the last two years. For Architectural EMEA, I think you mentioned closing four manufacturing plants in H2. Could you quantify the fixed cost savings there and cost to deliver? And then maybe more broadly, you know, how you are thinking of the long-term strategic value for the business and.

Speaker #5: Yep. Yep. Okay. I got it.

Speaker #4: And then the long-term strategic value.

Tim Knavish: That, you know, we outperformed that a bit because of some of our wins, but it was still down significantly. That is a really good operating margin business for us because if you think about it, one out of every three cars in the world is built in China. The scale and the leverage is stronger on the upside when things are being produced in China, but the negative also happens.

Speaker #5: Right. So yeah, four plants. Here's a good walking around number for you. You'll see this savings in 2027. But a good walking around number is about a 25 million dollar reduction in our fixed cost base from the closure of those four plants.

Speaker #5: And that'll go on in perpetuity for us. Now, in total, you'll see about a 50 million dollar structural restructuring benefits for our company this year.

Timothy M. Knavish: Yeah, are you there, Patrick? We lost you a little bit.

Patrick Cunningham: Uh, w-

Tim Knavish: That was the biggest. The second was, you know, even though we're talking constantly over these last two months about raw material increases, you know, we were still rolling off some index contracts from, you know, the deflationary cycle, mostly in our automotive and our packaging businesses, which are both in Industrial Coatings segment.

Timothy M. Knavish: Okay.

Patrick Cunningham: I'll just try again. For Architectural EMEA, you mentioned closing four plants.

Timothy M. Knavish: Yep, yep.

Speaker #5: You'll see another 50 next year. With 25 of that 50 being tied to these four plants. Now, that's not the only kind of fixed cost reduction initiative we've got some restructuring, some back office people costs being reduced.

Patrick Cunningham: And then-

Timothy M. Knavish: Okay, I got it.

Patrick Cunningham: The long-term strategic value.

Timothy M. Knavish: Right. Yeah, 4 plants. Here's a good walk and around number for you. You'll see this savings in 2027. A good walk and around number is about a $25 million reduction in our fixed cost base from the closure of those 4 plants, and that'll go on in perpetuity for us. In total, you'll see about a $50 million structural restructuring benefits for our company this year. You'll see another $50 next year, with 25 of that 50 being tied to these 4 plants. That's not the only kind of fixed cost reduction initiative. We've got some restructuring, some back office people costs being reduced. We've got a lot of formula optimization costs going over there as well.

Tim Knavish: We should be wrapping up the roll-off of those in Q2. We've got a few more that have to roll off, but that's really been the drivers. Number one, automotive OEM builds in China, number two, index contracts.

Speaker #5: That's the value in the portfolio. We have over the last couple of months seen a little better volume. We had a good March. In architectural Europe.

Vincent Morales: Just to add some more color on China auto builds. Last year, as Tim mentioned, very, very strong quarter for the industry, for PPG. This year was the reverse. On a 2-year stack basis, we're almost flat in China. Again, we have the comp issue is really what we're dealing with.

Vince Morales: Just to add some more color on China auto builds. Last year, as Tim mentioned, very, very strong quarter for the industry, for PPG. This year was the reverse. On a 2-year stack basis, we're almost flat in China. Again, we have the comp issue is really what we're dealing with.

Speaker #5: So as you think about this market getting to flat volume, and the mission of this business in our portfolio is to spit off good earnings, and good cash, so that I can deploy that in some of our higher growth, higher technology businesses.

Operator: Your next question comes from the line of Josh Spector with UBS. Your line is open. Please go ahead.

Timothy M. Knavish: The value to this business when markets are even flat, this business delivers really good earnings and really good cash to us. That's the value in the portfolio. We have, over the last couple of months, seen a little better volume. We had a good March in Architectural Coatings Europe. As you think about this market getting to flat volume, and the mission of this business in our portfolio is to spit off good earnings and good cash so that I can deploy that in some of our higher growth, higher technology businesses. You know, we're constantly evaluating each of our business' mission and how they're performing to that mission in our portfolio. That's how we're viewing it today. You know, we've got, you know, we're not waiting.

Speaker #5: And every we're constantly evaluating each of our businesses' mission and how they're performing to that mission in our portfolio. But that's how we're viewing it today.

Josh Spector: Yeah. Hi, good morning. To echo my congratulations to Vince and Jamie, and of course, my condolences to John's family. He'll be sorely missed. I did wanna ask on pricing and surcharges specifically. You know, how much are you using surcharges this cycle versus prior years? Kind of similar again on Auto OEM, have contract structures changed to allow that, or has the cycle of recovery become a lot faster in that part of the business? Thanks.

Speaker #5: And we've got we're not waiting. We're not sitting around hoping and waiting for a European recovery. We're building a business that can perform well at flat volume.

Speaker #2: There are no further questions at this time. I would now like to turn the call back over to Alex for closing remarks.

Timothy M. Knavish: Josh, you know, we are using surcharges in some of our businesses more this time because freight costs are up, right? Whereas most of our contracts and even non-contractual businesses, you know, we're typically talking about raw materials. We've got two additional ones that don't get as much attention but are pretty significant to that MSD contributor, and that's logistics costs 'cause of diesel fuel and European energy costs because of what's going on. I'd say in those two specific areas, we're using surcharges more this than we typically have. Beyond that, it's largely been our typical price increase, which we prefer. They're stickier.

Speaker #5: Thank you, Tracy. We appreciate your interest and confidence in PPG. This concludes our first quarter earnings call.

Tim Knavish: Josh, you know, we are using surcharges in some of our businesses more this time because freight costs are up, right? Whereas most of our contracts and even non-contractual businesses, you know, we're typically talking about raw materials.

Timothy M. Knavish: We're not sitting around hoping and waiting for a European recovery. We're building a business that can perform well at flat volume.

Tim Knavish: We've got two additional ones that don't get as much attention but are pretty significant to that MSD contributor, and that's logistics costs 'cause of diesel fuel and European energy costs because of what's going on. I'd say in those two specific areas, we're using surcharges more this than we typically have. Beyond that, it's largely been our typical price increase, which we prefer. They're stickier.

Operator: There are no further questions at this time. I would now like to turn the call back over to Alex for closing remarks.

Alejandro Lopez: Thank you, Tracy. We appreciate your interest and confidence in PPG. This concludes our Q1 earnings call.

Operator: This does conclude today's call. Thank you all for attending. You may now disconnect.

Timothy M. Knavish: Again, on the auto question, most of the auto contracts are designed around raw material inflation, less so around, you know, freight and energy. You know, those are discussions that we should have with our customers first, and we've started those discussions, so more to come there. Most of the index contracts that we have in auto and packaging are pretty much limited to raw materials.

Tim Knavish: Again, on the auto question, most of the auto contracts are designed around raw material inflation, less so around, you know, freight and energy. You know, those are discussions that we should have with our customers first, and we've started those discussions, so more to come there. Most of the index contracts that we have in auto and packaging are pretty much limited to raw materials.

Operator: Your next question comes from the line of Matthew Deo with Bank of America. Your line is open. Please go ahead.

Matthew Deo: Morning. Yeah, just echo what everybody's been kind of saying. You know, Vincent Morales, congrats on a great career. Clearly, you know, the sentiment on John Bruno, he was just such a core salt of the earth guy. Yeah, it's a huge loss. I wanted to ask on the OEM side in China, there's often discussions in the market around, you know, Chinese competition or China moving downstream. Coatings is one area where I feel like maybe there's, you know, roadblocks to how far China can compete globally. In that market, are you seeing better competition? Are there pushes to adopt local suppliers for the auto companies? Then on the refinish side, I mean. Well, I'll just stop there, and I'll let you answer first.

Matthew Deo: Coatings is one area where I feel like maybe there's, you know, roadblocks to how far China can compete globally. In that market, are you seeing better competition? Are there pushes to adopt local suppliers for the auto companies? Then on the refinish side, I mean. Well, I'll just stop there, and I'll let you answer first.

Timothy M. Knavish: Okay, thanks. There's no doubt that the China automotive OEM industry has gone through an absolutely radical transformation in the last couple years with the Western JVs, you know, dramatically shrinking and the China domestics dramatically increasing. There's also no question, Matt, that those Chinese domestics have worked hard to get Chinese supplier content on the vehicles. I would say thus far that has all been on what's called hard parts, rigid parts, widgets that the Chinese companies can produce. When it comes to automotive coatings in China, there is already more competition than the rest of the world because you've got the traditional three, plus you've got two Japanese players and one Korean player.

Tim Knavish: Okay, thanks. There's no doubt that the China automotive OEM industry has gone through an absolutely radical transformation in the last couple years with the Western JVs, you know, dramatically shrinking and the China domestics dramatically increasing. There's also no question, Matt, that those Chinese domestics have worked hard to get Chinese supplier content on the vehicles.

Tim Knavish: I would say thus far that has all been on what's called hard parts, rigid parts, widgets that the Chinese companies can produce. When it comes to automotive coatings in China, there is already more competition than the rest of the world because you've got the traditional three, plus you've got two Japanese players and one Korean player.

Timothy M. Knavish: You know, the finished film on a vehicle is very hard to duplicate, very hard to reverse engineer all the way back to resin formulation, which is really the backbone of automotive OEM coatings. That gives automotive OEM coatings some protection. I don't know what my peers do, but I know we produce the secret sauce outside of China and ship it into China. The coatings, by nature of you're buying kind of mixed chemicals, and the end product is the finished film on the vehicles, which because of the transformation that happens in the application and curing process is different than the mixed chemicals. It does give a nice buffer of protection for automotive OEM coatings versus other automotive parts.

Tim Knavish: You know, the finished film on a vehicle is very hard to duplicate, very hard to reverse engineer all the way back to resin formulation, which is really the backbone of automotive OEM coatings. That gives automotive OEM coatings some protection. I don't know what my peers do, but I know we produce the secret sauce outside of China and ship it into China.

Tim Knavish: The coatings, by nature of you're buying kind of mixed chemicals, and the end product is the finished film on the vehicles, which because of the transformation that happens in the application and curing process is different than the mixed chemicals. It does give a nice buffer of protection for automotive OEM coatings versus other automotive parts.

Operator: Your next question comes from the line of Laurent Favre with BNP. Your line is open.

Laurent Favre: Yes, good morning.

Operator: Please go ahead.

Laurent Favre: Morning. I'd like to come back to the MSD inflation point, please. I know we're seeing energy solvents, lots of spot prices on upstream chemicals at more than 50%, sometimes 100%. I understand you guys don't buy products that are just out of the cracker. Still, I'm wondering how it's only MSD. Are those spot numbers not coming through in actual contract negotiations? Are the intermediate guys producing resins and additives being squeezed? Is it that you have contract protection for the rest of the year, but then you will see further inflation into 2027?

Laurent Favre: Are those spot numbers not coming through in actual contract negotiations? Are the intermediate guys producing resins and additives being squeezed? Is it that you have contract protection for the rest of the year, but then you will see further inflation into 2027?

Timothy M. Knavish: Thanks, Laurent. I'd say two comments on that. Of course, you know, our suppliers are seeing that energy impact, you know, mostly in Europe. We've got that built into that blue box of mid-single digits overall cost of goods sold inflation. Then the second piece of energy is logistics cost, and we've got that built in there as well. We have all of that. Everything that's, you know, you gotta timestamp it based on our best estimates of today's operating environment. We've got that all built into our guides.

Tim Knavish: Thanks, Laurent. I'd say two comments on that. Of course, you know, our suppliers are seeing that energy impact, you know, mostly in Europe. We've got that built into that blue box of mid-single digits overall cost of goods sold inflation.

Tim Knavish: Then the second piece of energy is logistics cost, and we've got that built in there as well. We have all of that. Everything that's, you know, you gotta timestamp it based on our best estimates of today's operating environment. We've got that all built into our guides.

Vincent Morales: Yeah, Laurent, as you're fully aware, most large coatings companies do not pay anything close to spot, especially when you have commodity inflation spikes. We're contracted, and we are negotiated with most of our raw material supply, not only for the quarter, but for the full year.

Vince Morales: Yeah, Laurent, as you're fully aware, most large coatings companies do not pay anything close to spot, especially when you have commodity inflation spikes. We're contracted, and we are negotiated with most of our raw material supply, not only for the quarter, but for the full year.

Timothy M. Knavish: One final comment I'll make really, Laurent, on your question and even more broadly on the whole raw material and total inflation. One big difference between this cycle and the cycle coming out of COVID, which was a combination of post-COVID recovery and the deep Texas freeze. At that time, you'll recall that coatings industry volumes were very high. A lot of coatings companies could not keep up with customer demand. That is a significant difference when it comes to what does a coatings company see, particularly a large coatings company, versus what is being seen upstream. Supply-demand economics still matter, and that's a big differentiator between this cycle and the last cycle.

Tim Knavish: One final comment I'll make really, Laurent, on your question and even more broadly on the whole raw material and total inflation. One big difference between this cycle and the cycle coming out of COVID, which was a combination of post-COVID recovery and the deep Texas freeze. At that time, you'll recall that coatings industry volumes were very high.

Tim Knavish: A lot of coatings companies could not keep up with customer demand. That is a significant difference when it comes to what does a coatings company see, particularly a large coatings company, versus what is being seen upstream. Supply-demand economics still matter, and that's a big differentiator between this cycle and the last cycle.

Operator: Your next question comes from the line of Patrick Cunningham with Citigroup. Your line is open. Please go ahead.

Patrick Cunningham: Hi, good morning. I'd like to echo my deepest condolences to John's family and the PPG family, and thank you to Vince for your partnership over the last few years. For Architectural EMEA, I think you mentioned closing 4 manufacturing plants in the H2. Could you quantify the fixed cost savings there and cost to deliver? Then maybe more broadly, you know, how you are thinking of the long-term strategic value for the business?

Timothy M. Knavish: Yeah. Are you there, Patrick? We lost you a little bit.

Tim Knavish: Yeah. Are you there, Patrick? We lost you a little bit.

Patrick Cunningham: Well, I'll just try again. For Architectural EMEA, you mentioned closing plants.

Timothy M. Knavish: Yep. Okay, I got it.

Tim Knavish: Yep. Okay, I got it.

Patrick Cunningham: The long-term strategic value.

Timothy M. Knavish: Right. Yeah, 4 plants. Here's a good walk-around number for you. You'll see this savings in 2027. A good walk-around number is about a $25 million reduction in our fixed cost base from the closure of those 4 plants. That'll go on in, you know, in perpetuity for us. In total, you'll see about a $50 million structural restructuring benefits for our company this year. You'll see another $50 next year, with $25 of that $50 being tied to these 4 plants. That's not the only, you know, kind of fixed cost reduction initiative. We've got some restructuring, some back office people costs being reduced. We've got a lot of formula optimization costs going over there as well.

Tim Knavish: Right. Yeah, 4 plants. Here's a good walk-around number for you. You'll see this savings in 2027. A good walk-around number is about a $25 million reduction in our fixed cost base from the closure of those 4 plants. That'll go on in, you know, in perpetuity for us. In total, you'll see about a $50 million structural restructuring benefits for our company this year.

Tim Knavish: You'll see another $50 next year, with $25 of that $50 being tied to these 4 plants. That's not the only, you know, kind of fixed cost reduction initiative. We've got some restructuring, some back office people costs being reduced. We've got a lot of formula optimization costs going over there as well.

Timothy M. Knavish: The value to this business when markets are even flat, this business delivers really good earnings and really good cash to us. That's the value in the portfolio. We have, over the last couple of months, seen a little better volume. We had a good March in Architectural Coatings Europe. As you think about this market getting to flat volume, and the mission of this business in our portfolio is to spit off good earnings and good cash so that I can deploy that in some of our higher growth, higher technology businesses. You know, we're constantly evaluating the each of our businesses' mission and how they're performing to that mission in our portfolio. That's how we're viewing it today. You know, we've got, you know, we're not waiting.

Tim Knavish: The value to this business when markets are even flat, this business delivers really good earnings and really good cash to us. That's the value in the portfolio. We have, over the last couple of months, seen a little better volume. We had a good March in Architectural Coatings Europe.

Tim Knavish: As you think about this market getting to flat volume, and the mission of this business in our portfolio is to spit off good earnings and good cash so that I can deploy that in some of our higher growth, higher technology businesses. You know, we're constantly evaluating the each of our businesses' mission and how they're performing to that mission in our portfolio.

Tim Knavish: That's how we're viewing it today. You know, we've got, you know, we're not waiting. We're not sitting around hoping and waiting for a European recovery. We're building a business that can perform well at flat volume.

Timothy M. Knavish: We're not sitting around hoping and waiting for a European recovery. We're building a business that can perform well at flat volume.

Operator: There are no further questions at this time. I would now like to turn the call back over to Alex for closing remarks.

Alejandro Lopez: Thank you, Tracy. We appreciate your interest and confidence in PPG. This concludes our Q1 earnings call.

Alex Lopez: Thank you, Tracy. We appreciate your interest and confidence in PPG. This concludes our Q1 earnings call.

Operator: This does conclude today's call. Thank you all for attending. You may now disconnect.

Q1 2026 PPG Industries Inc Earnings Call

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