PPG Industries, Inc.
Analysis
PPG now grows while its markets shrink — but profit has not followed, because its best-margin business spent two years in a slump and aerospace costs arrive before the sales that pay for them. The second half is where that has to change. How much profit does PPG's refinish business still deliver?
- Refinish, the best-margin business, is growing again.
U.S. collision claims fell only mid-single digits in the last two quarters and management says distributor destocking is done. Refinish volumes grow from Q3, so PPG's best-margin business starts pulling its weight again. How does PPG's refinish margin compare with its main rivals'?
- PPG priced through the war-driven cost spike a quarter early.
War-driven costs jumped across raw materials, energy and freight, and PPG covered 90% of that increase with price in a single quarter — ahead of its own promise. Past cycles took a year, so pricing speed decides how fast profit catches up. Which PPG businesses still need another price rise to break even?
- Growth is broad, but earnings have not followed it yet.
PPG grew organically for six quarters running, beating its markets almost everywhere, yet sales rose 7% and adjusted earnings barely moved. Volume becomes profit once the mix stops dragging, so the growth is real and the earnings are not.
- Refinish volumes grow in both Q3 and Q4. Every extra litre carries the company's best margin, so profit grows faster than sales as this business recovers.
- Aerospace keeps selling everything it can make. Debottlenecking lifts output this year and the new plant lands in 2028, so sales rise without winning new customers.
- Price catches up with cost by the fourth quarter. Once PPG stops absorbing the war-driven cost spike, profit starts growing alongside the volume it has been winning.
- Refinish recovery slips past the second half. The slump is already two years old, and each extra quarter of it holds down the company's most profitable business.
- Aerospace spending keeps running ahead of the sales it pays for. PPG pays for consultants, debottlenecking and a new plant now, while the extra revenue arrives years later.
- Costs keep climbing faster than the price increases. PPG then absorbs the difference itself, and the profit growth promised for the second half never arrives.
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How PPG Industries turned $15.9B of revenue into $2.2B of operating income.
| Revenue | ||
|---|---|---|
| Industrial Coatings | $6.5B | |
| Performance Coatings | $5.5B | |
| Global Architectural Coatings | $3.8B | |
| Total revenue | $15.9B | |
| Gross profit | $6.6B | 41.3% |
| Operating income | $2.2B | 13.6% |