PPG Industries Q1 Earnings Call Highlights

Key Points

• PPG delivered a "solid" Q1 with organic sales up 1%, net sales rising 7% to $3.9 billion, adjusted EPS of $1.83 (up 6%), segment EBITDA margin above 19%, and management reaffirmed full‑year adjusted EPS guidance of $7.70–$8.10.
• Management said COGS headwinds from raw materials, energy and logistics (partly tied to the Iran war) will be a mid‑single‑digit percentage for the year, but expects to offset this through pricing, surcharges and procurement actions with a much faster price/cost response — “now we’re talking months.”
• Aerospace is a key growth driver with about a $350 million backlog and balanced OEM/aftermarket exposure; PPG has invested ~$150 million in debottlenecking (benefits late‑2026/2027) and plans a ~$380 million plant to materially increase capacity by ~2028.

PPG Industries NYSE: PPG reported first-quarter 2026 results that management characterized as a “solid performance” despite what Chairman and CEO Tim Knavish called a challenging and fluid macro environment. The company posted organic sales growth of 1%, marking its fifth consecutive quarter of year-over-year organic sales improvement, while net sales rose 7% to $3.9 billion. Adjusted earnings per share were $1.83, up 6% from the prior year, and segment EBITDA margin exceeded 19%.

At the start of the call, Knavish noted the recent passing of colleague John Bruno, calling it “a tremendous loss.” He also highlighted leadership changes, congratulating CFO Vince Morales on his “upcoming re-retirement” following more than 40 years with the company and welcoming Jamie Beggs as PPG’s new CFO.

Segment results led by aerospace, Comex, and margin execution

In Global Architectural Coatings, PPG reported first-quarter net sales up 13% to $965 million and organic growth of 2%. Knavish said Latin America and Asia Pacific delivered mid-single-digit organic sales increases with contributions from both price and volume, with Mexico described as “especially strong” in retail and improving in project-related sales. Europe was “mixed by country,” and total sales declined by a low single-digit percentage, partially offset by pricing. Segment income increased more than 30%, and EBITDA margin improved by 230 basis points year over year, supported by pricing and “self-help actions.”

PPG’s Performance Coatings segment delivered 5% net sales growth to $1.3 billion, driven by double-digit organic growth in Aerospace and high single-digit organic growth in Traffic Solutions and Protective and Marine Coatings. Knavish said Performance Coatings has delivered 12 consecutive quarters of positive volume growth. Automotive Refinish declined by a double-digit percentage organically, which Knavish attributed to customer order patterns connected to U.S. distributors in the first half of 2025. Even so, he pointed to improving U.S. collision claims data and improving distributor fulfillment orders as signs of normalization.

Industrial Coatings net sales grew 4% to $1.6 billion, while organic sales were flat. Knavish said PPG achieved 1% volume growth, “well outpacing industry demand,” with share gains in Automotive OEM and Packaging. Packaging Coatings organic sales increased by a double-digit percentage and, according to Knavish, PPG’s sales volumes in the business are up more than 20% on a two-year stack basis due to share gains. Industrial segment EBITDA margin was pressured by regional mix, particularly tied to weaker China automotive production compared with what management described as a very strong first quarter in 2025.

Pricing and inflation: “Now we’re talking months”

Management emphasized a more rapid price/cost response than in prior inflationary periods, citing both improved pricing execution and what Knavish called a stronger “organic growth muscle.” Responding to Baird analyst Ghansham Panjabi, Knavish said prior cycles took a year or more to reach run-rate price/cost neutrality, while “now we’re talking months,” adding that PPG is “confident that we’re gonna be able to strike the right balance between pricing and volume.”

Knavish said the company is facing higher costs across “raw materials, energy, logistics, and packaging” amid the Iran war’s impact on the coatings value chain. He estimated the impact to PPG as a “mid-single digit percentage on the cost of goods sold for the remainder of the year,” and said PPG expects to fully offset the increase through pricing actions. He also said the company has had “limited impact from supply shortages” so far and is leveraging its global supply chain footprint, procurement scale, formulation flexibility, and AI tools for product optimization to manage costs.

On the company’s publicly announced price increases “up to 20%,” Knavish told Deutsche Bank analyst David Begleiter that the number was meant to reflect that “there are some products that will have to go up that much,” but that actual realization will vary by customer and product. He said that to offset the mid-single-digit COGS inflation expected, PPG needs to realize “low single digits” on price across the total company, and could “drift” higher if conditions worsen. He also noted that while there is typically a lag as pricing moves up, “there’ll be a lag coming down” if inputs ease, and said potential structural damage to regional petrochemical facilities could affect the timing of normalization.

PPG said it is using surcharges more than usual in some businesses due to higher freight and European energy costs, while still preferring traditional price increases because they are “stickier,” according to Knavish.

Aerospace outlook supported by backlog, investments, and balanced exposure

Aerospace was repeatedly cited as a major growth driver. Knavish said demand is expected to remain strong across OEM and aftermarket, noting a backlog of about $350 million “despite year-over-year output increasing.” He described PPG’s aerospace portfolio as spanning transparencies, sealants and adhesives, coatings, services, and engineered materials, and highlighted examples including PRC Seal Caps and 3D-printed sealants designed to improve customer productivity.

Addressing concerns about potential flight reductions in parts of the world, Knavish said PPG expects “no impact” from a possible slowdown in flight miles in 2026. He said the business is “balanced roughly 50% OEM, 50% aftermarket” and diversified across commercial aviation, general aviation, and military. He also said aftermarket inventories were depleted coming out of COVID and “have never been able to be rebuilt,” and argued that if flying hours softened in one area, PPG could still be in a period of rebuilding aftermarket inventory. He added that military demand is growing as NATO countries rebuild defenses.

On capacity and growth, Knavish told JPMorgan analyst Jeff Zekauskas that increased aerospace output should translate into higher volumes and revenue. He said PPG has invested roughly $150 million in debottlenecking over the past year, with benefits expected in late 2026 into 2027. He also referenced a previously announced new plant investment of about $380 million, which he said should provide a “step change” in output around 2028, and noted additional engineering work is underway for potential future investments.

Guidance reaffirmed; capital deployment and restructuring updates

PPG reaffirmed full-year 2026 adjusted EPS guidance of $7.70 to $8.10. For the second quarter, Knavish said PPG expects strong growth in Aerospace, Architectural Coatings Latin America, Protective and Marine, Automotive OEM, and Packaging, while demand in Architectural Coatings Europe, Automotive Refinish, and global industrial end-use markets is expected to remain below the prior year. The company expects overall pricing to be positive, with organic sales growth in Q2 ranging from flat to positive low single digits and adjusted EPS growth ranging from flat to positive low single digits year over year.

On cash and the balance sheet, Knavish said PPG ended the quarter with about $1.6 billion in cash and short-term investments, repaid $700 million of maturing debt in the quarter, and returned about $260 million to shareholders through dividends and share repurchases. Morales said cash from operations increased about $50 million versus the prior year, and that the company’s cash forecasts were unchanged from what it provided in January. Knavish described a “good proxy walking around number” for free cash flow as about 10% of sales, and said cash priorities include maintaining the dividend, funding organic investments such as aerospace capacity, selective M&A when assets meet strategic and valuation criteria, and continued share repurchases.

On restructuring in Europe architectural coatings, Knavish said PPG plans to close four manufacturing plants in the second half of 2026. He quantified the fixed-cost reduction as “about a $25 million” annual reduction beginning in 2027, and said total structural restructuring benefits are expected to be about $50 million in 2026 and another $50 million in 2027, with half of the 2027 benefit tied to the plant closures.

Management also discussed Industrial Coatings margin pressure. Knavish attributed the quarter’s margin contraction primarily to a sharp year-over-year decline in China auto builds—important to leverage due to scale—and secondarily to the roll-off of deflationary index contracts in Automotive and Packaging, which he said should largely wrap up in the second quarter.

Morales said foreign exchange provided a year-over-year benefit to first-quarter results of “less than $0.10” per share, and he said the benefit for the remaining three quarters would total less than half of that amount, with most of it expected in the second quarter.

About PPG Industries NYSE: PPG

PPG Industries is a global supplier of paints, coatings and specialty materials that serves industrial, transportation, consumer and construction markets. Founded in 1883 as the Pittsburgh Plate Glass Company, PPG has evolved from its origins in glass manufacturing into a diversified coatings and materials company headquartered in Pittsburgh, Pennsylvania. The company develops and manufactures a broad array of products used to protect and enhance surfaces, from consumer paints to highly engineered coatings for demanding industrial applications.

PPG's product portfolio includes architectural and decorative paints, automotive original equipment and refinish coatings, industrial coatings for machinery and equipment, protective and marine coatings, aerospace and defense coatings, and packaging coatings and materials.

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