PPG Annual Report and 10K 2019

2019 PPG ANNUAL REPORT AND FORM 10-K 23 Performance of Reportable Business Segments Performance Coatings $ Change % Change ($ in millions, except percentages) 2019 2018 2019 vs. 2018 2019 vs. 2018 Net sales $9,034 $9,087 ($53) (0.6)% Segment income $1,409 $1,300 $109 8.4% Performance Coatings net sales decreased slightly due to the following: Unfavorable foreign currency translation (-3%) Lower sales volumes (-1%) Partially offset by: Higher selling prices (+2%) Acquisition-related sales (+1%) For the full year 2019, PPG achieved higher selling prices across all businesses, reflecting the value of our products and services, offset by unfavorable foreign currency translation in all businesses. Architectural coatings - Americas and Asia Pacific net sales decreased by a mid-single-digit percentage versus the prior year. The unfavorable impact from customer assortment changes in the U.S. architectural DIY channel negatively impacted sales volumes. The U.S. and Canada company-owned stores network net sales decreased slightly compared to the prior year. The PPG-Comex architectural coatings businesses had slightly higher net sales, excluding the impact of foreign currency translation and acquisitions (organic sales), and continued to benefit from the opening of a net of approximately 160 new concessionaire locations. Net sales in Asia Pacific were negatively impacted by unfavorable foreign currency translation. Architectural coatings - EMEA net sales decreased by a mid-single-digit percentage due to unfavorable foreign currency translation; however, organic sales increased by a low-single-digit percentage year-over-year driven by higher selling prices. Despite volume growth in certain key countries, sales volumes were lower year-over-year. Automotive refinish coatings net sales were relatively flat versus the prior year including the increase in net sales from the SEM acquisition. Sales volumes were impacted by softer U.S. industry demand evidenced by lower collision claims during the year. Organic sales increased in all other major geographic regions as customers continued to adopt PPG’s industry- leading technologies. Aerospace coatings net sales increased by over 10% versus the prior year, driven by higher sales volumes. This increase was supported by market outperformance in all major platforms stemming from technology-advantaged products and robust industry demand. Protective and marine coatings increased net sales by a mid-single-digit percentage versus the prior year, driven by strong sales volumes in China and Europe and price gains in each region. Net sales in the U.S. were negatively impacted by reduced activity in the oil and gas sector. Segment income increased $109 million year-over-year due to higher selling prices and the continued benefits from the Company’s ongoing restructuring programs. These benefitswere partially offset by the earnings impact of lower sales volumes, which were mostly attributable to the previously announced customer assortment changes, and other cost inflation. Additionally, unfavorable foreign currency translation decreased segment income by approximately $25 million, primarily related to the weakening of key currencies, including the Mexican peso and euro. Looking Ahead Looking ahead, industry demand levels in the first quarter of 2020 are expected to be similar to those experienced in the fourth quarter of 2019. Acquisitions are forecasted to add about $25 million of net sales primarily from Dexmet, Texstars, and ICR. In addition, net sales will be impacted due to lower production rates by an aerospace customer. Based on current exchange rates, foreign currency translation is not expected to have a material impact on segment sales or earnings.