PPG

PPG’s CEO told analysts “we have continued to improve our pricing realization in both pace and cadence…Our price capture this cycle is much faster.” “Michael McGarry — Chairman and Chief Executive Officer: Additionally, outside of China, COVID restrictions have continued to decrease in many parts of the world. As a company, we have continued to improve our pricing realization in both pace and cadence. This has been necessary to battle the persistence and breadth of inflation. Our price capture this cycle is much faster, and we are now pricing in the second quarter for second quarter inflation impacts, so we are basically pricing in real time. (PPG Industries Q1 2022 Earnings Call, 4/25/2022)

PPG’s CEO said the company’s“ selling prices are up over 12% on a two-year stack basis versus the first quarter of 2020,”“Michael McGarry — Chairman and Chief Executive Officer: Our adjusted earnings were significantly above the upper end of our January financial guide as we delivered strong earnings leverage on the higher-than-expected sales volumes. This leverage was a result of improving manufacturing performance as COVID-related absenteeism subsided significantly as we progressed through the quarter, and we experienced increasing raw material availability. In addition, our selling price increases increased 10% year over year, marking the 20th consecutive quarter of higher selling prices. Our selling prices are up over 12% on a two-year stack basis versus the first quarter of 2020, reflecting our continued actions to offset generationally high inflation. “(PPG Industries Q1 2022 Earnings Call, 4/25/2022)

PPG’s CEO: “we’re implementing incremental selling price increases in the second quarter and expect that we will exit the second quarter offsetting all inflation categories on a run rate basis.”“Michael McGarry — Chairman and Chief Executive Officer: In the first quarter, our selling prices did offset year-over-year raw material inflation but did not offset inflation from other sources, including logistics, energy and labor, and we did not fully recover prior-year inflation. Sequentially, versus the fourth quarter 2021, our overall margins improved by more than 200 basis points. We are targeting continued quarterly sequential margin improvement in the second quarter as well despite further increases in raw material and logistics inflation. We have continued to optimize our commercial processes the last two years and, as mentioned, are now closer to real-time pricing relative to inflation. Due to higher crude oil and energy prices, we’re implementing incremental selling price increases in the second quarter and expect that we will exit the second quarter offsetting all inflation categories on a run rate basis. This drives our expectations for operating margins to sequentially improve further as the year progresses. (PPG Industries Q1 2022 Earnings Call, 4/25/2022)

PPG’s COO: “ We continue to get increasing sequential pricing. And that pricing, while never easy to get, is being accepted by our customers.” “Tim Knavish — Chief Operating Officer: David, Tim Knavish here. Look, in our architectural U.S. business, in fact, our architectural business is around the world. We continue to get increasing sequential pricing. And that pricing, while never easy to get, is being accepted by our customers. And we — our customers have to remain competitive every day. So we can assume that we’re seeing that same kind of behavior from others in the market. So we have not seen what you call discounting in the market.” (PPG Industries Q1 2022 Earnings Call, 4/25/2022)

An analyst asked PPG “when the raw materials eventually or hopefully subside, do you give back some of that pricing in real time?“John McNulty — BMO Capital Markets — Analyst: Yeah, thanks for taking my question. So on the pricing front, Michael, you kind of indicated you’re almost at a point where it’s real-time pricing. I guess what are the mechanisms in place that you’ve put so that we can actually see that real-time pricing? And I guess to that also, when the raw materials eventually or hopefully subside, do you give back some of that pricing in real time? Or is that something where we may see the more traditional lag or even stability when it comes to price? I guess, how should we be thinking about that?” (PPG Industries Q1 2022 Earnings Call, 4/25/2022)

PPG’s CEO responded “we’re not going to be giving this pricing back,” noting that their customers “cannot argue that our competitors are not pricing.” “Michael McGarry — Chairman and Chief Executive Officer: Well, John, first of all, we’re not going to be giving this pricing back. As you know, we are still lagging if you look at this on a two and a half year stack, so there’s plenty of recovery. And the reason that we’re able to get more real-time pricing than ever before is it’s impossible for our customers to argue with what’s going on, right? They fully see the same things that we’re seeing. They’re seeing energy prices go up. They see raw materials that we buy, they can see it in their own systems going up. They can see transportation going up, they’re paying for transportation. And they also cannot argue that our competitors are not pricing. So from that standpoint, most of the bullets that they usually try to fire at us, that our salespeople try to avoid, that’s not happening.” (PPG Industries Q1 2022 Earnings Call, 4/25/2022)

PPG CEO: “it’s not a matter of can we take a price increase? Now it’s about how much of a price increase are you going to take…So we’re telling people, this is the new price. And if you don’t like it, please don’t place purchase orders.” “Michael McGarry — Chairman and Chief Executive Officer: And now it’s not a matter of can we take a price increase? Now it’s about how much of a price increase are you going to take. And the other thing that we’ve done much more aggressively than we ever have is withhold shipments. So we’re telling people, this is the new price. And if you don’t like it, please don’t place purchase orders. And if the purchase orders come in without the new price on it, we’re sending those purchase orders back. And that has gotten the attention of our customers and they understand that we need relief, and we need relief now. And so you could see that there is a palpable energy in the air to get price increases as we’re doing it. So when you see oil at $107, our customers are getting price like that. So I’m really pleased our sales teams have gotten much better at pricing than ever in the history of the company.” (PPG Industries Q1 2022 Earnings Call, 4/25/2022)