Packaging / Advertising & Office

·The second quarter achieved a record net sales of nearly $4.4 billion, an increase of about 45% over the same period last year

·Diluted earnings per share (EPS) was $1.80 and adjusted diluted earnings per share was $1.94

·Thanks to the strong recovery of demand in the terminal market, the sales volume increased by about 24% year-on-year

·The supply of raw materials was generally affected, resulting in a double-digit rise in costs

·The sales price increased by 3.5% and further pricing measures are planned

·The acquisition of tikkurila, w ö rwag and cetelon was completed during the quarter. Since December 2020, five acquisitions have been completed, with an annual total revenue of about US $1.7 billion

Pittsburgh, July 21, 2021 - PPG (NYSE: PPG) recently announced its financial results for the second quarter of 2021, with net sales of about $4.4 billion, an increase of about 45% over the same period last year. The sales price increased by 3.5% year-on-year, and the total sales increased by about 24% year-on-year. The positive impact of exchange gains on net sales over the same period was about 6%, equivalent to US $185 million. More than 11% of acquisition related sales growth.

In the second quarter of 2021, the net profit was US $431 million, equivalent to US $1.80 per diluted share. The adjusted net profit was $465 million, equivalent to $1.94 per diluted share. Adjusted net profit excludes after tax items, such as amortization expenses of $31 million and other expenses totalling $3 million related to acquisition transactions. Other expenses mainly include environmental treatment expenses, legal settlement income, reduction of bad debt reserves, natural disaster treatment expenses, other acquisition and integration expenses, and expenses related to changes in UK statutory tax rates. In the second quarter of 2020, the net profit from continuing operations was US $99 million, equivalent to US $0.42 per diluted share. After adjustment, the net profit from continuing operations was US $258 million, equivalent to US $1.09 per diluted share. The effective tax rates before and after adjustment in the second quarter of 2021 are about 27% and 23% respectively, while the effective tax rates before and after adjustment in the second quarter of 2020 are about 23% and 25% respectively. Details of pre - and post adjustment performance are provided below.

Michael H. McGarry, chairman and CEO of PPG, said, "our organic sales growth is very strong, and the contribution rate of each business is higher than the market level, which reflects the partial recovery of demand after the epidemic. However, our sales growth slowed significantly due to disruptions in the supply of raw materials and components, some of which even led to a decline in the overall production capacity of our customers. In addition, despite the strong potential end market demand, the shortage of various coating raw materials and logistics problems make it impossible for us to fully meet the existing order demand in this quarter. Our recently completed acquisition projects have driven our strong year-on-year sales growth, which is fully in line with our expectations. "

"Although we achieved robust adjusted earnings per share in the second quarter, our results were lower than the April forecast," McGarry said. In addition to the impact of supply disruption on revenue, we also experienced a continuous rise in raw material and transportation costs throughout the quarter. However, we have actively raised the sales price, and the price realization speed is far ahead of the raw material inflation cycle from 2017 to 2018. In addition to further raising the product price, we also saved about $40 million in structural costs through business restructuring, and increased the annual savings target in 2021 by about 10% to $135 million. We have also continued to obtain excellent cash flow, which has reached about US $600 million so far this year, about US $250 million higher than that in 2020. "

McGarry added, "we actively manage and control various supply chain interruptions, which is currently expected to continue throughout the third quarter. Therefore, compared with the second quarter, we expect the total investment and logistics costs in the third quarter to rise month on month. Then we will give priority to further raising the product price in order to fully offset the cost pressure caused by the rise in raw material prices before the end of 2021. In fact, the overall economic demand growth is still very strong, and with the normalization of supply conditions, we expect sales to maintain a growth momentum in the second half of this year and next year, which is mainly due to our products with great technical advantages, diversified regional and terminal market layout, and the continuous recovery of our aerospace business. PPG will, as always, actively manage all aspects of the cost structure. "

McGarry concluded, "finally, I'm glad we completed the acquisition of tikkurila, w ö rwag and cetelon in the second quarter. Since December 2020, we have completed a total of five acquisitions. All new colleagues are welcome to join the PPG team. Our experienced team is rapidly integrating these acquisitions and is beginning to achieve initial synergies. These acquisitions have significantly improved our product and technology portfolio, geographic coverage and sustainability. Overall, based on 2019 levels, these acquisitions have brought more than 10% sales growth and strong profit growth potential. I would like to sincerely thank all our employees around the world. It is their commitment and dedication to forge ahead every day and make every effort every day, so that the company continues to develop and make progress, and every day is better than the past day. "

Million dollars

Excluding the impact of exchange rate changes and acquisition transactions (organic sales), the net sales of architectural coatings business in Europe, the Middle East and Africa (EMEA) achieved medium double-digit growth year-on-year. The continued weakness of some American architectural coatings professional pipelines and national retail (DIY) products was offset by the strong demand for architectural coatings products. Organic sales of architectural coatings business in the Americas and Asia Pacific decreased by a low single digit percentage year-on-year, and the performance of each pipeline and region was different. The sales volume is adversely affected by the supply of raw materials and the sluggish demand for professional pipeline and national retail (DIY) products of architectural coatings in the United States. Last year's epidemic has a great impact on this end market, which is difficult to compare with this year's situation. The demand for architectural coating products is growing, and the backlog of PPG customers is higher than usual. In Mexico, organic sales of PPG Comex architectural coatings business achieved medium double-digit growth due to strong sales activities of the franchisee network. Driven by the strong growth of PPG protective coatings in China and the recovery of demand in other regions, the sales volume of industrial protective and marine coatings achieved low double-digit growth. Due to the rebound of commercial after-sales market activity and the stable demand for PPG aviation military applications, the sales volume of aviation coatings increased by a low single digit percentage. The sales volume of automotive touch up paint increased by about 45% compared with the second quarter of 2020, and with the gradual recovery of body repair activities, it also achieved a low single digit percentage growth month on month. Transportation solutions account for the vast majority of acquisition related sales.

The sales volume of PPG automotive original equipment manufacturer (OEM) coatings increased by about 75%, and the performance varies from region to region. This growth rate is still higher than the production rate of the global automobile industry. The production speed of the global auto industry continues to be seriously reduced due to the shortage of computer chips, and the inventory and rental car ownership of U.S. auto dealers remain at a historically low level. As the global industrial demand continues to recover in a large area, the sales volume of industrial coatings continues to grow: nearly 50% year-on-year and about 10% month on month. Driven by the beverage can segment, the sales volume of packaging coatings achieved a year-on-year growth of high single digit percentage.

At the end of the quarter, the company's total cash and short-term investments were about $1.3 billion and its net debt was $5.9 billion. The acquisitions of tikkurila, cetelon and w ö rwag were funded through a combination of the company's cash and external financing.

In addition, based on the current global economic situation, the increasing production constraints of customers caused by the global chip shortage, the continuous interference in the supply of coating raw materials, and the short-term economic uncertainty caused by the continuous impact of the epidemic, the company recently made the following forecast for the performance of the third quarter of 2021:

·Total net sales, including acquisition projects, increased by 21% - 23%, of which organic sales achieved a year-on-year increase of low single digit percentage.

·The structural cost saved through restructuring measures increased by about US $30 million year-on-year.

·The overall operating expenses in the second quarter were $52 million and are expected to be about $60 million in the third quarter.

·Net interest expenses ranged from $28 million to $30 million.

·The current global effective tax rate of the company is between 21% and 23%.

·Adjusted diluted earnings per share for the full year ranged from $7.40 to $7.60.

The detailed supplementary commentary on the second quarter earnings information has been published on the company's investor relations website, and the comparison information with the second quarter of 2019 has also been included as an additional content of the second quarter performance of 2021. The epidemic has the greatest impact on the company's financial performance in the second quarter of 2020.