Michael H. McGarry
Chairman & Chief Executive Officer at PPG Industries
Thank you, John, and good morning, everyone. I would like to welcome you to our third quarter 2021 earnings call. I will provide some results to supplement the detailed financial results we released last evening.
For the third quarter, we achieved record net sales of nearly $4.4 billion and our adjusted earnings per diluted share from continuing operations were $1.69. As we communicated in early September, our sales and adjusted EPS were significantly impacted by worsening supply chain disruptions and increasing raw material cost inflation. Our raw material costs in the quarter inflated by about 25% year-over-year. For context, this is about 3 times higher than any previous coatings raw material inflation peak in recent history. We're also experiencing elevated logistics costs and are incurring increased manufacturing costs due to the sporadic nature of these outages. Commercially, we have taken significant mitigation efforts due to the high level inflation through rapid implementation of structural selling price increases.
In aggregate, our selling price realization is about 6%, with more than 6% price realization in our Industrial reporting segment. Our price capture pace is much faster than previous inflationary cycles and we have further pricing initiatives underway.
Coming into the quarter, we expect that the supply chain and customer production disruptions would impact our sales by about $150 million. However, this actual impact was more than $350 million. Additionally, this prevented us from completely fulfilling our strong order books and further depleted retail inventory in many of our end-use markets. We expect much of this demand will be deferred into 2022. And in particular, these current conditions will elongate the global automotive OEM recovery.
To put the automotive OEM situation in perspective, US dealer inventories had record historic lows in the mid-20-day range. And in 2021, global production in this industry is expected to be about 20% below prior peak levels. Despite the current challenges, several of our businesses, including our Automotive Refinish, Protective & Marine, and Packaging Coatings delivered strong above market performance, driven by our strong service capabilities and advantaged technology.
Our PPG-Comex business achieved record third quarter sales with year-over-year organic sales growth of more than 10%. In addition, our US Architectural Coatings business delivered about 10% same-store sales growth as we continue to expand our customer base with many new wins and increase our digital sales as a percentage of our total sales base.
More generally, we continue to experience improving trade painter demand globally and architectural DIY coatings sales returned closer to 2019 levels after notable growth last year driven by the stay-at-home impacts. We remain focused on cost management, which is evidenced by our SG&A as a percent of sales being 100 basis points lower than the third quarter 2020. This is being supported by our ongoing execution on our structural cost savings programs as we delivered an incremental $35 million of savings in the third quarter. We continue to target and on track for a full year 2021 savings of about $135 million.
In the quarter, we also continued to make good progress integrating our five recent acquisitions contributing to our overall earnings for the quarter. Our two larger acquisitions, Tikkurila and Ennis-Flint delivered good top line results despite the challenging supply constraints. We continue to expect them to deliver an aggregate of $25 million of synergies for the full year of 2021. We once again delivered strong operating cash flow during the quarter and had about $1.3 billion of cash and cash equivalents at the quarter end, including sequential reduction of our net debt by about $400 million.
This was supported by a continuing strong working capital management as we maintain our positive step change improvement achieved last year and are at multiyear lows on a percentage of sales basis. While we will continue to evaluate accretive deals in our M&A pipeline, we are initiating stock repurchases in the fourth quarter and will continue to focus on debt reduction.
As a reminder, based on the seasonality of our businesses, the fourth quarter is typically our strongest cash generation quarter of the year. Also during the quarter, in support of further enhancing our ESG program, we were happy to announce an agreement with Constellation Energy to power our Carrollton, Texas manufacturing facility with 100% renewable solar energy. We are also working on our very first ever diversity report and developing science-based climate targets, both of which we will communicate in 2022. Equally important is PPG's market-leading sustainable products continue to enable our customers to meet their respective sustainability goals. We will continue to provide updates on these initiatives on subsequent quarters.
In addition, I'm extremely pleased to announce that yesterday, PPG earned three R&D 100 awards for 2021. The R&D World Magazine honors the 100 most innovative technologies and services over the past year with the R&D 100 awards. Even more importantly, two of the three innovations that we were recognized are growth initiatives in electric vehicles, including BFP SC battery fire protection coating, which protects the vehicle occupants from fire and mitigates thermal runaway events plus Envirocron Extreme Protection thermally conductive dielectric powder for battery packs, providing dielectric protection and thermal conductivity. Our dielectric powder has already been commercialized by a leading EV maker and our battery fire protection product will launch in 2022 by one of the world's largest car makers.
Moving to our outlook. We are continuing to evidence solid demand in aggregate. Many of our customers continue to indicate that their order books are at high levels and have lower than normal inventory levels. In the near term, we anticipate only modest improvements to the supply disruptions that we've been experiencing. Our estimate is that our sales are expected to be unfavorably impacted by about $250 million to $300 million in the fourth quarter, both for the semiconductor chip shortage issue and chronic supplier operational capabilities.
Recent production curtailments in China may add incremental pressures to availability and inflation, and we expect our inflation to approach 30% compared to the fourth quarter of 2020. As a result, all our businesses are securing additional selling price increases, and now we expect to fully offset raw material cost inflation in the early part of 2022.
We continue to strongly believe there is sufficient capacity available in our supply chain as operating conditions continue to normalize. Absent any further disruption, we expect supply chains to operate more normally by year's end, supported by normal seasonality trends. To provide further assistance and assurance of more consistent supply going forward, we are rapidly qualifying additional regional and global commodity suppliers across a variety of our key raw material procurement groupings. We expect these increases in product availability, coupled with continued improvement in the existing supply chain, will provide ample supply beginning early in 2022.
While the current environment remains difficult to predict, I remain very optimistic about our specific growth catalysts for 2022. Specifically, we expect continued recovery in automotive refinish, OEM and aerospace coatings, which collectively account for about 40% of our pre-pandemic sales where we have broad global businesses supported by advantaged technology. We expect a measurable rebuild of inventories in many of our end-use markets.
Specific to PPG is year-over-year earnings growth in 2022 due to further synergy capture from our recent acquisitions. In closing, these continue to be dynamic times, but thanks to our more than 50,000 employees around the world, we are well positioned today and in the future. Their dedication and commitment to making it happen are reasons why our customers, our communities and our many stakeholders can count on us and protect and beautify the world.
Thank you for your continued confidence in PPG. This concludes our prepared remarks. Now Jason, would you please open the line for questions?