Good morning, my name is Bricka and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter PPG earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. if you would like to review your question please press star then to to allow everyone an opportunity to ask a question the company requests that each analyst ask only one question thank you i would now like to turn the call over to alex lopez director of investor relations please go ahead sir thank you rica and good morning everyone this is alex lopez director investor relations.

We appreciate your continued interest in PPE and welcome you to our fourth quarter and full year 2024 earnings conference call. Joining me today from PPE are Tim Kanavich, Chairman and Chief Executive Officer, and Vince Morales, Senior Vice President and Chief Financial Officer. Our comments relate to the financial information released after U.S. equity markets disclosed on Thursday, January 30th, 2025. We have posted detailed commentary and the accompanying presentation slides, which are being shown on this webcast, on the Investor Center of our website, ppg.com. Following management perspective on the company's results, we will move to a Q&A session. Both the prepared commentary and discussion during this call may contain forward-looking statements. reflecting the company's current view of future events and their potential effect on PPE's operating and financial performance. These statements involve uncertainties and risks, which may cause actual results to differ. The company's under no obligation to provide subsequent updates to these forward-looking statements. The presentation also contains certain non-GAAP financial measures. The company has provided in the appendix of the presentation materials, which are available on our website, reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information, please refer to PPG filing with the SEC. Now, let me introduce PPG Chairman and CEO, Tim Kanabish.

Thanks, Alex, and good morning, everyone. Welcome to our fourth quarter and full year 2024 earnings call. Before I start, I'd like to offer prayers and condolences to those who lost their lives in yesterday's terrible air collision in Washington, D.C. Our prayers are with their family, friends, loved ones. It's a terrible tragedy, and I hope and pray that none of you had any loved ones affected. Now I'll begin by providing a few highlights of our full year 2024 and fourth quarter financial performance, and then I'll move to our outlook. And on behalf of PBG, I'd also like to apologize for the volume of changes, the recasting of financials, the new segmentation, the guide structure, but this is a positive and critical inflection point for our company. We wanted to structure the reporting on a go-forward basis to reflect this. As a result of the architectural coding's U.S. and Canada divestiture, all financial information provided in the earnings material has been recast to reflect this business as a discontinued operation consistent with U.S. GAAP requirements. In 2024, the team demonstrated resilience in a challenging macro by driving growth in adjusted EPS from continuing operations and aggregate segment EBITDA led by sales of our technology-advantaged products, structural cost actions and moderated input costs. We delivered record results in several of our businesses including aerospace coatings, automotive refinish coatings and architectural coatings Latin America. Despite strong share gains in certain businesses organic sales declined a low single digit percentage year over year driven by overall weak macros. However we delivered growth in Mexico and China, as well as growth in aerospace, protective and marine, packaging, traffic solution businesses, offset by industry declines in auto OEM, industrial, and our architectural EMEA coatings business. For the full year, adjusted EPS was $7.87, which grew 6% year-over-year, and excludes 27 cents of EPS that has been reclassified to discontinued operations. It reflected results of the divestiture of the U.S. and Canada architectural business, with the exception of certain allocated costs. Strategically, during the fourth quarter, we further optimized our portfolio as we completed the divestitures of our silica products and architectural coatings U.S. and Canada businesses. This is a significant step forward for our company as these divestitures improve our financial profile, including higher operating margins, and results in a more focused organization which positions the company to deliver sustainable organic growth. As we've said, our portfolio moves this past year have strengthened the company's financial profile. When you combine the impact of these transactions with the organic improvement in margins we delivered on our remaining businesses, you will note that we have now achieved top-tier EBITDA margins. This performance reflects the value that our customers assign to our technology-advantaged products and services, our solutions, our well-trusted brands, our strong global positions across the coatings verticals, and the cross-synergies of our business portfolio. We believe that both this margin profile and our enterprise growth actions are great catalysts for the future value creation of PPG. Given the revised portfolio, we have expanded our segment reporting structure and will now report all of our architectural coatings businesses as a separate segment, global architectural coatings. The reporting of the remainder of the businesses within performance coatings and the industrial coatings segment will remain the same. This expanded segmentation provides investors with enhanced visibility as we drive the company's Our global architectural coatings and performance coatings segments both now have full-year EBITDA margins at or above 20%, reflecting the differential technologies and strong brand positions of our various businesses. Our industrial coding segment delivered 16% EBITDA margin despite operating a weak global industrial macro environment. Each of our segments has unique characteristics that allow us to deliver exceptional value to our customers. By leveraging the distinct strengths of our businesses, we are positioned to drive innovation, increase demand for our technology advantage products, and deliver sustainable and profitable growth while increasing returns to our shareholders in our global architectural coding segment we have excellent and well-recognized brands with world-class distribution and a strong number one or number two position in more than 15 countries our performance coding segment is focused on various after markets that traditionally are more stable and have a more fragmented customer base within this segment we offer differentiated and highly specified product and digital solutions that enable our customers productivity our industrial coding segment delivers highly technical products and services for our global b2b customers we operate field service teams and our customers facilities which allows us to develop strong relationships and deep understanding of their productivity needs also we typically grow with our customers as they expand around the world in the fourth quarter despite the choppy environment our adjusted eps grew by six percent year over year excluding the impact of unfavorable foreign currency translation we delivered strong organic sales growth in aerospace coatings protective and marine coatings and traffic solutions this was our ninth consecutive quarter of aggregate segment margin improvement and we have delivered cumulative margin improvement of of approximately 400 basis points since 2022. In the global architectural coding segment, fourth quarter net sales were significantly impacted by unfavorable foreign currency translation, primarily the Mexican peso. Sales volumes declined due to weak consumer confidence in the European architectural coatings market. However, we benefited from our strong concessionary network in Mexico, where demand is robust for our products and services. For the full year, segment EBITDA margin improved by 70 basis points as lower volumes were offset by our cost control actions and net price impact during the year. In the performance coding segment, fourth quarter organic sales grew 4% with both price and sales volume improvements. Within the segment, aerospace codings demonstrated continued strong performance with record fourth quarter sales and double digit percentage organic sales growth. despite improved production capacity and other productivity gains the order backlog increased to approximately 300 million dollars demonstrating the strong demand for our technology advantage products as well as excellent industry dynamics in auto refinish sales volumes declined in the u.s with benefits from share gains more than offset by lower industry collision claims these share gains are a product of the demand for our technology advantage products and services in 2024 the company grew the number of link services subscriptions and added more than 600 additional moonwalk installations that now total more than 2500 around the world adding to our subscription revenue protective and marine coatings this demonstrated strong growth in the fourth quarter supported by increasing global demand of our technologies and our recent share gains. This was the seventh consecutive quarter with positive year-over-year sales volume growth and we expect the positive momentum to continue. Segment EBITDA margin improved in both the fourth quarter and full year due to positive volume and strong net price impact. In the industrial coding segment, demand was constrained by soft global industrial production and weak automotive OEM industry production. As expected and forecasted by industry consultants, auto OEM industry production was lower year-over-year in the U.S. and Europe. Our results followed that lower demand trend, and we were able to partially offset the decline in sales volumes with share gains in Latin America and China. Industrial production was also sluggish in Europe and the U.S., which resulted in lower year-over-year sales volume in the industrial coatings business. Sales volume declines in those regions were partially offset by strong growth in Latin America. Prices in the industrial coding segments declined due to lower index-based selling prices as raw material costs declined in the latter part of 2024. This impact is expected to moderate in 2025 as most have reached their anniversaries and will be reset based on recent stability in raw material prices. Segment EBITDA margin reduced 160 basis points for the quarter and was slightly lower on a full-year basis as the lower volumes were partially offset by strong cost control. We ended the fourth quarter with cash of about $1.4 billion. During the quarter, we completed $250 million in share repurchases and paid approximately $160 million in dividends. On a year-to-date basis, we repurchased approximately $750 million of stock, which represented approximately 3% of our outstanding shares. We honored our pledge to return cash to shareholders, and combined with our dividend, we've returned $1.4 billion to our shareholders in 2024. Our balance sheet remains strong, which continues to provide us with financial flexibility, and we remain committed to driving shareholder value creation. Thus, we're deploying about $400 million towards share repurchases during the first quarter of 2025. Looking ahead, we anticipate a slow start to 2025 as demand in Europe and in global industrial end-use markets remains challenged. However, we expect stabilization on a full-year basis of some key economic indicators like light vehicle builds and global industrial production, as well as additional aircraft deliveries. In the first quarter of 2025, we'll begin to see the impacts of already enacted tariffs, which is expected to result in low single-digit percentage inflation and raw material costs, while raw material inflation was flat in the fourth quarter of 2024. Despite a challenging macroeconomic landscape and a slow macro start for 2025, I'm genuinely optimistic about this year. we expect to deliver organic sales growth of low single-digit percentage for the year, with the first quarter organic growth flat to slightly down. Stronger results in the second half of the year, supported by the realization of more than $100 million in annual share gains in our industrial coatings. As we enter the next chapter for PPG with a new, sharper portfolio in focus, we're progressing further on the execution of our enterprise growth strategy with several elements that include building upon our organic growth capabilities on commercial excellence with the right processes, people, tools, and incentives, taking decisive self-help actions to further reduce costs, including global structural costs and European manufacturing consolidations. This program will deliver approximately $175 million once fully implemented, including savings of 60 million dollars in 2025. Execution of our operational excellence programs will also deliver manufacturing productivity that will more than offset general inflation. We'll deploy cash in a disciplined manner investing for growth, selective M&A if appropriate, and returning cash to shareholders. As a result of these actions we expect to deliver adjusted earnings per share for the full year in 2025 in the range of $7.75 to $8.05, which at midpoint represents an EPS growth of 7%, excluding the impact of foreign currency and higher tax. Consistent with our sales growth, EPS growths will be weighted towards the second half of 2025 as global industrial demand weakened and the U.S. dollar strengthened in the second half of 2025. I'm excited about 2025 and beyond. We have a sharper, more focused, future-facing portfolio and a higher growth and margin profile company. For our customers, we're both delivering solutions that ensure their success today and innovating tomorrow to improve both their productivity and their success. We remain committed to our heritage of strong cost management and improved productivity that reinforces the ability to maintain our momentum in driving higher margins and earnings growth. The result will be profitable organic growth for PPG and shareholder returns for our owners. These successful divestitures and solid performance in 2024 would not have been possible without the dedication of our employees. We are now a much more focused organization dedicated to driving ongoing growth with strong margins. Thank you to our PPG teams around the world who make it happen and deliver on our purpose every day. Thank you for your continued confidence in PPG. And this concludes our prepared marks. And would you now please open the line for questions?

Thank you. At this time, I would like to remind everyone, in order to ask a question, to please press a star followed by the number one on your telephone keypad. And just as a reminder, to allow everyone to have an opportunity to ask a question, We ask that you please each limit yourself to one question. We will pause here for a moment to compile the Q&A voice. The first question we have from the phone lines comes from John Roberts with Mizzuho. Please go ahead.

Thank you. Could you talk about the $100 million new win for industrial? Is that related to a major competitor pulling back, or is something else driving that?

Good morning, John. Thanks for the question. Certainly, the South American exit of one of our competitors is a part of that. I'd say slightly less than half of that. We've got a number of other significant wins in auto OEM, as well as our industrial coatings and our packaging coatings businesses. And as you know, in the industrial segment, the time lag between win and conversion is longer than our other segments because these are B2B factories that need change over time, et cetera. But the wins are kind of spread across those three major businesses. But a big piece of it is the exit in South America. Thank you.

We now have Ganshom Panjabi with Baird. Please go ahead when you're ready.

Thank you, operator. Hey, Tim, just, you know, just giving your comments on the slight increase in raw material prices for 2025, tariffs and whatever else. Can you just give us more specifics on how are you adjusting pricing across the portfolio to reduce the risk of any sort of price cost mismatch as, you know, 2025 unfolds in context of all this uncertainty on tariffs?

Sure, Ganchem. So what's in our guide for raw materials, which is basically up low single digits inflation throughout the year, is almost entirely based on the tariffs that have already been enacted in our basket, which is pretty much TIO2 and epoxies. So we've got that as well as our mitigation efforts of those already baked into our guide. So what you'll see from a pricing standpoint is, you know, I think Q1 will be flat-ish to slightly positive as, you know, some of our businesses are on, you know, traditional calendars as to when they raise prices. And that's scattered throughout the first few months of the year. In raw material, I'm sorry, raw material pricing, index pricing on the industrial segment, we'll still have a little bit of carryover for the first quarter, but then for the full year, we're expecting, you know, positive pricing, low single digit positive pricing for the company across the board. Now, we'll remain flexible and agile and do what we need to do if there's other tariffs or things we need to do from a competition standpoint to remain competitive in the market, but that's what's baked into our guide.

And, Ganjom, this is Vince. If you pull back to 50,000 feet and look at the supply chain, it's still a loose supply chain, still a buyer's market for coatings commodities beyond the tariffs. Got it.

Thank you. We now have David of Berglider with Deutsche Bank.

Hi, it's David Huang here for Dave. I guess you're expecting four-year segment margins to be up 50 bps and down 150 bps in Q1. How do you expect margins to trend, I guess, from Q2 to Q4?

This is Vince. I'll start and I'll let Tim add some color. As we noted in our materials in Q1, and Tim just also noted, we have some raw material inflation around those enacted tariffs in Q1, pricing's coming in throughout the quarter. We also expect a flat, low single-digit decline in volumes. And as you progress through the year, our volume performance gets better. So that's the differential between Q1 and full year in terms of the margin progression.

Yeah, I would just add a little bit of color, particularly on the industrial coating segment. You know, that's our most volume sensitive segment at this point from a margin standpoint because of the, you know, the leverage you get with a little uptick in margin. So as we have a very soft Q1, you'll see that look, you know, pretty much like Q4 with the volume kicking in an industrial segment more in the second half of the year.

Thank you. We have Chris Parkinson with Wolf Research on the line now.

Great. Thank you so much. Tim, I'm guessing getting out to slide five, no one was more excited to get that one out than you because it just represents obviously everything you've been working for. um when we take a step back and look at the three new segments can you just give kind of the one or two points on you know i understand the first half macro is what it is but can you just talk about how you and your teams are now thinking about the respective growth rates of those end markets in terms of share gain market outperformance just anything that would potentially filter into the buy side perceptions of ppg's ability to grow in the new you know framework would be particularly helpful thank you yeah sure sure chris so global architectural coatings now that we have our

business uh refined to where we've got positions where we got a really good strong right to win in those countries we you know you could you could use housing construction gdp uh as kind of proxies for the base growth rate of the end markets. But then because of the strength of our position, you can add incremental share gain on top of that. If you look at performance coatings, that's now largely an aftermarket business. And the demand there is a lot more steady on average. And as you know, from things like our refinish business and, you know, the new differentiated technology that we've launched for, you know, marine aftermarket, for example, we feel that we've got a pretty strong advantage in the performance coding standpoint to, you know, to pick up additional share. And with industrial coatings, you know, that's much more tied to industrial production so automotive that's the easiest you know we'll just follow the builds beyond that we'll follow industrial production as the baseline market and then share gains from our technologies on top of that so that's how i that's how we think about those three different segments yeah yeah chris if i could just add a couple bits of color here uh as tim mentioned on the industrial side, given the differential or specified technologies, we've picked up share in packaging over the past two years.

Certainly, in certain industrial end markets, we've grown our position globally, including growing our market share in powder, some of that inorganically. And if you look at the performance coding segment, we've talked a lot about some of our tools in the refinish area especially the digital tools and on those digital tools you know we're recognizing subscription revenue in addition to the customer intimacy that brings so those are some of the differential items that uh will give us i think uh an advantage versus the market rates yeah if i could just add one more piece of color chris if you refinish in in performance coatings good example um you know claim collision claims in the u.s were down around high single digits in 2024, and we far outperformed that and won about 2,500 net new

shops. So that's how we should think about the market drivers plus our differentiated advantage in each of those segments.

Thank you so much.

We now have a question from Duffy Fisher with Goldman Sachs. Yeah, good morning, guys.

I was hoping you could help me. You know, if you look, the published number for last year was 787. The midpoint of your guide for this year is 790, right? So basically on top of each other for the year. But when you look at the shape of how that 787 came about last year, how does that look this year? So can you help us kind of with the shape the year over year, either EPS or EBIT, whichever way you want to look at it. You know, it sounds like you're going to be beating more in the second half, probably behind in the first half. But can you just help us with kind of the year over year shape of those two numbers?

Well, Duffy, considering how little time we gave you to digest all these new numbers, you're pretty darn close. We'll be behind last year in the first half, particularly in the first quarter and then we'll be nicely above it in the second half that's that's your last comment if you look at it operationally it's it's seven percent operational eps growth and then there's a couple of big things on top of that that bring it down about to the same level with the biggest one being about $0.33 of EPS of FX. And then my CFO will give you all the details below it. But high level, weaker in the first half, especially first quarter, strong second half, YOY, net-net 7% operational EPS gain for the full year.

Yeah, and Duffy, we provided, as Tim mentioned, a flurry of information last night. One of the pieces we want to add to that is our quarterly EPS for the last two years on a recast basis. So Alex, could you give those numbers?

Yeah, for your reference, Sophie, last year Q1, as you saw in the exhibit, it's 187 adjusted EPS, Q2, 235, Q3, 203, Q4, 161 for the full year of 787. In 2023, Q1, adjusted EPS, 175, Q2, 212, Q3, 198, Q4, 156, with a full year of 742.

And then if you look at the shape of the year, we talked about this on an earlier question, If you look at the shape of the year, again, because of the slightly negative volumes in Q1 and the additional tariffs that were enacted in Q4 that will affect Q1, our Q1's light. We'll interject pricing as we go through that first quarter. We'll see the volumes flatten and grow in the back half of the year. We'll also get some more restructuring benefit as we progress through the year. We talked about our self-help actions, and those will drive some cost benefit it later in the year.

Great. Thank you, guys.

Thank you, Duffy. We now have Frank Mitch with Ferry and Research. Please go ahead.

Hey, good morning. Russell or Justin?

What are you putting your money on, Frank? And I'll go the opposite.

Good call. Good call. So the $400 million buyback in 1Q, I think, Vince, on the last call, you indicated that the sale of North American Architectural with all your moves to the cash, et cetera, would wind up being neutral or accretive on EPS. I'm curious if that's still the case. And in terms of the $400 million buyback in 1Q, that almost indicates that there's not much you're seeing right now on the M&A side of things, because one would have thought that you might keep your powder dry. Some of the coatings companies have indicated that they are looking at portfolio moves and divestitures and so forth. So any comments in terms of uses of cash and when the final, when all is said and done with respect to the divestiture of North American architectural, you know, accretive, neutral dilutive? Thank you.

Yeah, Frank, this is Vince. I'll talk to you. I'll take the $400 million and the proceeds from the divestiture. We did receive those proceeds late in the fourth quarter in 2024. They're not appearing in our cash flow statement we put out last night because we didn't put out a discontinued operations cash item, but they'll be in the 10-K when we file that. Certainly, we're putting those proceeds to work immediately as we committed to do in Q1, which, again, reflects that $400 million. Tim, you want to take the M&A?

Sure. So let me just be very clear. First of all, I think part of your question on the 400, was it accretive? And the answer is absolutely yes. But on the M&A, let me be very clear, our strategy on M&A has not changed from what I told you all in May of 2023 when I first came into the job, that it's not the tip of the spear for us, and we're very focused on building an organic growth machine, but that we would still evaluate any targets because we believe there still is consolidation to happen in this industry. And there are some good assets out there that would add shareholder value. So that has not changed. And if you look, you know, 2023, I told everybody we'd pay down debt. We did that early. And then we started buying back shares for the first time in a long time in Q4 of 23. 2024, I said if there was no targeted collective M&A, we'd buy back shares and we bought back 750 million. As we come into this year, we're starting off Q1 buying shares. We fully expect to have another good cash generation year. So we've got good optionality, especially with where our leverage is right now. There are also a couple of assets uh come into market are already on market one of them i've already said does not fit our enterprise growth strategy so you're not interested one of them the brazilian asset is uh is an attractive asset uh it's a good asset it's a good fit to our strategy of either being a strong number one or strong number two um but we have to decide you know we were not the only ones that would draw that conclusion. So we have to decide, you know, right price, right time. We want to make sure that whatever we do, if we do anything on acquisitions, that it doesn't distract from building the organic growth machine. But if we do it, if we do want to take a look at that asset or any of the other assets that may come, is it the best use of our shareholders cash? Because right now we believe our stock's undervalued and we're generating cash and so we can deliver returns by buying back shares. So it all comes down right asset, right time so as to not distract the organization. And finally, of course, right price is at the best use of the cash.

Terrific. Thanks so much.

Thank you. Your next question comes from Stephen Byrne with Bank of America. Please go ahead.

Yes, thank you. So, Tim, if your end markets normalized and now you have three segments with more transparency and you've divested slower growth businesses and you focus on share gains, et cetera, what you target as a sustainable earnings growth rate down the road here and what do you think it needs to get to to move you out of a 15 multiple yeah hey steve uh i'll be consistent with what i've been saying uh in my first uh two plus years now is that uh as we start to deliver on each of our

commitments, this is an 8% to 12% EPS growth company. And where it falls in that range is dependent on macros. If you look at 2025, you know, operationally, we're going to be a 7, which, you know, compared to the macros that are in front of everybody right now is a good, It's, I think, a pretty robust number. Now, going forward, all the things you said in the beginning of your question are exactly right. More focused portfolio. We don't have the drag on the company from a business that was underperforming. We're not distracted by a high CapEx business that didn't fit our ambitions. And we've been investing in the organic growth muscle. And so we're still confident that this is an 8% to 12% EPS growth company.

Yeah, Steve, I could just add a couple bits of color. This is Vince. Again, if you look by segment, we've got two segments at or above 20% EBITDA margins. So obviously as they grow, that will enforce our mixed benefits. The industrial segment, which we've been in a two-year industrial recession globally. So we think that business and that segment by itself is hopefully close to trough or a trough in terms of volumes. And as Tim mentioned earlier, that's our most volume-sensitive segment. So as we see any volume return there, it should come at enhanced incrementals and get back to a differential EBITDA margin on a go-forward basis.

Thank you.

Thank you. Your next question comes from Kevin McCarthy with VRP.

Yes, thank you, and good morning, everyone. Tim, I think you mentioned that in the first quarter you would expect volume to be flat to down. My question would be, you know, how do you expect volume to trend through the balance of the year, and how much of, you know, the implied improvement in the progression relates to potential macro uplift, you know, getting out of this two-year industrial recession that we've been in, and how much relates to, you know, company-specific controllables, you know, such as the $100 million share pickup that John asked about in industrial. Maybe you can kind of parse that out and give us a sense of your level of confidence in restoring volume growth here and what that balance looks like.

Hey, Kevin. So, you know, the first quarter, you know, will be a challenge, as we've said multiple times, and you just reinforced. So we're expecting negative volume, you know, similar trend to what we saw in Q4. You'll then start to see it flat-ish to positive, low single digits, and we expect that then certainly for the rest of the year, low to mid-single digits as we get into the second half. All in, what we are expecting is positive volume on a full-year basis at about low single digits. Now, as far as the breakdown of the components, we are not, in none of the segments, are we excluding a hockey stick kind of recovery. We're expecting stabilization, frankly, stabilization in, if you look at Europe, for example, stabilization in European architectural demand, stabilization in refinish. but we're not expecting recovery, frankly, in Europe. Auto builds, you know, IHS has them essentially flat for the year. So we're not, it's not like we've got this big hope and prayer built into that. It's about stabilization in the end markets, plus the hundred million or so share gains in the industrial segments, and then the ongoing share gains that we have in some of our key uh performance coatings and global architectural coatings but you know those are a lot of singles as opposed to you know triples and home runs that that you get when on the industrial side so all in we're expecting the year to be positive volume in low single digits negative in q1 and then uh ramping up from there yeah yeah kevin i'll add a couple points of color about q1 We did have a strong, very strong Q1 in 2024, especially in China, high single-digit growth

in China, so we're comping against that. We also had double-digit growth in a couple businesses, including packaging, so some of the Q1 year-over-year comp is related just to hard comparables. And again, as Tim mentioned, the trend line in our industrial business really just continuing the second half of 2024. We saw activity globally decline in the second half. So as we anniversary that in the first half of 2025, again, we're not expecting significant hockey stick in the back half.

Thank you both.

Thank you. We now have the next question from Michael Sisson with Wells Fargo. Please go ahead when you're ready.

Hey, guys. Thanks. You know, for performance coatings and industrial coatings, when you look at the business units within that, are they all, you know, are the businesses in there the ones that you want to run, you know, similar to U.S. architecture, you exit to that, or there are businesses you want to exit, you know, just maybe give us your thoughts on why, you know, what's left or what's in performance industrial coatings can support, you know, your goal of growing, I think you at 8% to 12% longer term for PPG.

Yeah. Hey, Mike, Tim, we don't have any additional divestitures in our recipe right now. Every business has its right to stay in a portfolio on a longer term basis. But as we sit here today, there's no other divestiture announcements coming out. We like our portfolio. We believe we've got strong positions, strong right to win in all of the businesses that we have you know performance coatings you know frankly it's crushed it um we've got a really strong position in all those businesses uh aerospace you've heard about refinish you've heard about pmc seven straight quarters of growth we've now got our traffic business pruned to where you know we've got a really strong position in north america and it's uh it's it's performing so uh and it's this business or that segment's almost all aftermarket So we're really happy with that portfolio. If you look at industrial, those businesses are high technology businesses, which is right in our wheelhouse. And you might look at the margin today and say, oh, well, it's not up to snuff with the other two segments. But as Vince mentioned, we're delivering 16 plus percent EBITDA at, frankly, the trough with a lot of volume leverage to come as things recover, and a lot of our self-help is directed at that segment as well. Also, as we start the anniversary of that index pricing, that stabilizes, and, you know, we'll have opportunistic opportunities there. You know, all in, Mike, I think it's slide four. You know, the actions we took moved us up 220 BIPs, you know, top tier now in EBITDA margin. So we really like the blend of businesses we have with upside, given where we are from a macro standpoint.

Thank you.

Thank you. Your next question comes from Patrick Cunningham with Citigroup.

Hi, good morning. On the architectural coatings in MIA business, demand seems to be weak on consumer confidence. You experienced demand declines in all regions, but you said you had some growth in Eastern and Central Europe. Is that mostly a price impact? Are you making some share gains here? And what do you see as some of the catalysts to get consumer confidence off the bottom here?

I know you're not calling for a hockey stick recovery, but just wondering what gives you some confidence that we can be stable here. yeah um so performance of our business you're right um in q4 most you know east to west north to south was a pretty weak quarter uh but if you look at the full year basis we performed really well in in poland uh we performed really well frankly in the uk and ireland so we had pockets of strength france was very weak for us and the nordics were very weak for us so so that that's That's kind of a breakdown of the performance by country, by sub-region. We from your statement about how is the outperformance being driven, share or price, it's both, this team has done an outstanding job for the last decade of pricing appropriately to offset at input costs, pricing appropriately on our differentiated products, and pricing at the street fighting level when we need to win shelf space. So the team does a great job of price volume management, and we have gained some share in those countries where we are performing. As far as Europe more broadly, again, we are not expecting what I would call a recovery, But more of stabilization as inflation stabilizes, as whenever central banks begin the journey in the other direction, some increases in consumer confidence. We're not baking in end of the Ukraine war or anything like that, but that would certainly help. We just believe that there's enough factors out there, and we've come down so far over the last five years from COVID and then the war and then high interest rates and high inflation. We believe that there's enough easing there to stabilize, but not hockey stick.

Yeah, I'm Patrick Vincent here. Just some confidence from a pace perspective is if you look at 2023 in this business, architectural Europe, we were down, let's say, roughly mid-single digits. We were down mid to low in the first half of 2024. We were flat in the back half of 2024. So, again, that's stabilization. And we know the COVID, we did, when we had COVID, we had a pull forward of activity in what's called 21 and even early 22. This is a maintenance cycle type business. So we pulled forward some of that maintenance, which was reflected in our 23 and 24 volume numbers. And as that stabilizes and we start to see some of that maintenance come back, we will benefit from that in terms of volume as well as we'll be able to price accordingly, as Tim said.

Thank you.

Thank you. We now have Mike Harrison with Seaport Research Partners on the line.

Hi, good morning. I wanted to go into a little more detail about three different regions or countries that you've mentioned so far. First is Latin America, where it sounds like architectural and industrial are pretty solid. Second, you mentioned India. I think in your prepared remarks as a growth opportunity, maybe give us an update on how you position your key businesses there. And then finally, China. I was just hoping you could give us some thoughts on how you're thinking about demand trends going forward, maybe with or without some trade policy shifts.

Yeah, sure. So LATAM, as has been and continues to be, you know, a rock star performer for us, you know, some of the stronger GDPs in the world, and we're outperforming the GDPs. I just came back from our concessionaire meeting, which, you know, the owners of our 5,200 stores across Mexico, and their sellout is just fantastic. And they're bullish going forward. You know, the nearshoring helps them, but also just the strong consumer confidence and GDP. You know, our businesses in South America, automotive business outperformed last year, industrial business. So not as big as Mexico, of course, but, you know, good fundamentals down there. And then we'll pick up some additional share, as we mentioned earlier on this call. So, you know, Latin America performance will continue, particularly as we take to the next chapter of our COMEX business, where we start to use that network to distribute other business unit products. You know, India, we have a very unique situation there where we have a joint venture with the number one deco player, number one overall paint company in India, and that's Asian Paints. Obviously, they run the Deco side, but we've got a joint venture that covers essentially all of the industrial and performance businesses where we bring more to the game from a technology standpoint, global products, specifications, application expertise, all those things. And so we leverage the strength of Asian paints in their footprint, in their brand, in their reputation in the country and complement that with our technologies and our people. And we've been outgrowing what's been a very nice growth market for us. Then the million or billion or many billion dollar questions is China. And our business in China, unlike many other industrials, we are China for China. we don't make and ship product. We make and paint product locally. And even within that, we're in the right segments. We're in the right segments like auto, aero, PMC, and industrial, not anything really associated with real estate or real estate construction. So local for local, we're in the right segments. And throughout 24, despite some of the really challenging macros that you've heard about from us and others, we grew every quarter, somewhere between low single digits and mid single digits. And so it's not, it's definitely not the China of a decade ago, where you had high single digits, low double digits kind of growth. But we're very pleased with the progression of China. Once we had to reprogram ourselves to think of a elongated recovery as opposed to a hockey stick recovery. But that elongated recovery has another benefit for us in that it really helps to drive the supply-demand equation on raw materials in our favor. Because it's elongated, it keeps that supply situation on a favorable side for buyers. So, you know, we're not having big celebration parties about a hockey stick recovery in China, but we're pleased with the results of 24, and we're looking forward to a good 25.

Very helpful. Thanks.

Thank you. Your next question comes from Alex Giyas Remus with Key Corp. Please go ahead.

Thanks, and good morning, guys. This is Ryan on for Alexi.

Just wanted to pull the curtain back a little bit on china autos uh obviously you mentioned improvement in 4q and discussed the increase in exports just overall during 24. so wondering what you're hearing from customers at this stage and kind of what your expectation is you know here in 2025. thanks yeah hey ryan uh thank you for joining us this morning um here's the most one of the more exciting data points for us in our china auto business is that china first of all remember china produces approximately one out of every three cars manufactured in the world and yes there's an export portion of that but most of that is is for domestic consumption great data point is that china q4 retail sales were up 19 so um and you know this is an industry and china certainly has its eco economic problems as we all know. But this is an industry that is very critical to the overall China economy and China employment. And so it's one that gets help from the government and stimulus activity. And I'm confident that going forward, I believe there will be additional help in China from the government as we move forward through 25 and into 26. So on the ground, our teams are telling us the China domestic market is doing well. We are gaining share with the domestic players. So historically, we've had a nice mix of the JVs of Western companies and China domestics. And over this last couple of years, we've really, really had a nice share gain with the Chinese domestics, including the one that everybody talks about. And so you've got this combined effect of local consumption being pretty good, and share gain of us with the winners on the ground in China Auto. Yeah, and just one last piece to that, Ryan, is the shine has certainly come off of the EV story globally, but EVs in China are now, at the end of 2024, 37% of every car built in China. And so, yes, we won't see as many EV sales here in the US and Europe and other parts of the world as what everybody thought two years ago. But within China, it's still a big growth market. And that's more content for companies like PPG.

Thank you. We now have John McNulty with VMO Capital Markets.

Yeah, good morning. Just a quick question on COMEX. Just given how you've broadened it out in terms of the platform, can you help us to think about how much of the product that they're selling is tied to Mexico for Mexico versus export? And just to give us a little bit of color on potential tariff risk around that potential platform.

Yeah, within Within maybe a couple of decimal points way to the right, it's 100% domestic use from what we distribute through COMEX. I mean, I may be missing some small piece of metal that gets painted and comes across the border, but it is really immaterial. It's, you know, even the PMC parts of our business that we're now distributing into Mexico are for Mexico construction, for nearshoring, for, you know, data centers, automotive plants, industrial plants. our traffic business that we're now running through those concessionaires is obviously for for roads in in uh in mexico our refinish that we've started to run through the networks or for collisions in mexico of mexican cars so nothing that i can think of that uh comex concessionaires distribute for us would end up being shipped back to us but i may be again i I may be missing a fraction of a decimal somewhere, but I can't think of it.

Yeah, and John, I just want to pick up on those last three things Tim mentioned. You know, we start at an active program, and the concessionaires are pulling through product, you know, in the middle of 24, and it'll grow, you know, one of our growth engines in 25 is more through that world-class distribution network. I think we talked about it on the third quarter call, and that includes, again, protective coatings, It's really around the amount of capital infrastructure being built in Mexico due to near-shoring. Our traffic solutions products are world-class, and we're now pushing those through the concessionaire network. Same with Refinish. We have 5,200 distribution points, so that Refinish product. These are all growth platforms for us in 25 and, frankly, beyond.

Got it. Appreciate the color.

Thank you. We have the next question from Stephen Haynes with Morgan Stanley.

Hey, good morning. Thanks for squeezing me in here. Here's a quick one on the CapEx 750 at the midpoint. Yeah, a bit higher, I guess, than historically what you would be guiding to. And I think there's some, you know, some catch up in there. But how would we be thinking about that CapEx number kind of evolving over the next couple of years? Is this kind of the right range or would you expect it to step down? or step up to help kind of fund growth initiatives from here.

Thanks, Stephen. I'm glad you asked it. It is not our aspiration to be spending CapEx at this level going forward, and it won't be. We will get back to our normal kind of, you should think about 3% of sales as a normal run rate CapEx for us, which is what we did for a very long time. And then we stopped spending, frankly, in some COVID times for obvious reasons. So we do some of what you're seeing in there in that elevated CapEx, honestly, both for 24 and 25 is what's called catch up for the COVID era. But that we do have some kind of transitory incremental spend on a couple of key growth, organic growth areas. Mexico, building a new resin capacity down there because we need it, because we've grown so much. We've got some incremental CapEx in Arrow because, you know, we've got more orders than we can fill. And you'll see some CapEx there. refinish a growing business for us we've spent uh we've spent more capex even in our u.s refinish factory we've spent capex there we've been investing in uh our digital capabilities and we're now over 1.3 billion of digitally enabled sales so we've had some incremental there and the last one as far as this wasn't didn't impact us in 24 but it will in 25 as part of our self-help program, we're exiting some surplus capacity that we have in some higher cost regions, particularly Europe. And as you go from, say, three factories down to one in a particular sub-region, we've got to spend some capex at the one to get it ready to receive the volume coming from the other two. So thank you for the question, because it's not a number. It's a red number for us but we believe it's good use of shareholder money one to catch up for what we didn't spend for a couple of years and two to drive drive organic growth and margin as we move forward great thank you thank you your next question comes from lawrence with bmp arabas i'm sorry of my questions have been answered, so thanks and have a great day.

Thank you. We now have Lawrence Alexander with Jeffrey.

Hi, this is Dan Rizzone from Lawrence. Thanks for fitting me in. If we think about the newly formed architectural segment, how should we think about incremental margins in a recovery and how it compares to industrial and performance?

Yeah, so as a recovery, we'll get some good leverage and maybe eventually can try to estimate the quantification of it, but we'll get some good leverage, particularly in Europe, right? Because our business global architecture was almost all Mexico and Europe now, right? We have a small presence in, very small presence in China, almost negligible, and a decent number two position in Australia, but relative to the other two, it's quite small. So let's talk Europe. We will get fairly significant incremental leverage with not volume uptick, just volume stabilization because of the self-help and pricing that we've done over the last couple of years. Just the stabilization of volume we would view as a win. And then, of course, any uptick we would get great leverage on. On the Mexico side, really it would just be the, you know, approximation of the gross margin dropping to the bottom line because we're pretty well utilized down there. So not a tremendous amount of fixed cost leverage. It's mostly just the variable margin dropping to the bottom line.

Yeah, Dan, this is Vincent. If you put some numbers to it and you look at our portfolio, to Tim's point, the architectural businesses, they typically have a higher gross margin and they have a higher SG&A to support the feed on the street, the sales teams, et cetera. We are underutilized, certainly in Europe. We don't need to add any SG&A for any of our businesses, any of our countries. So that will come through at close to growth margin, which is, depending on the country, mid-40s to mid-50s. In Mexico, as Tim said, we are sold out, so we do have to add some commensurate cost, but most of the cost is borne by the concessionaires on their dime, and they get the growth for that. So, again, we're talking high incrementals relative to the company average.

Thank you very much. That was helpful.

Thank you. Your next question comes from Josh Spector with UBS.

Good morning. This is Lucas Bowman on to Josh. I've started to ask about pricing. So looking at the new segment structure, legacy performance pricing was up about 7% the last two years. So that was 5% in 23, 2% in 24. Could you give us the splits on the contribution there in 23 and 24 from the new architectural and the new performance segments? So I'd assume performance would be above architectural, but correct me if I'm wrong. And then just kind of what are you assuming there for reaching 25? And lastly, like, I mean, we have the history in industrial, but just what are you assuming in industrial for 25? I've splattered down. Thanks.

Yeah, this is Vince. We're not going to give specifics by business. Just when you look at the segments, as we've said in the past, the industrial segment, we'll certainly get some pricing if there's raw material inflation. That's typically, it comes on a lag. And then we get pricing above that for differential technology. The performance segment, and Tim said this in his opening remarks, it's a business where we heavily impact our customers' productivity. We get paid for that. They get paid for that. We typically see one of our better pricing segments there on a recurring basis. Some of that's perennial pricing. In global architectural, it's really market by market and depends what's happening competitively. We typically have the capability to more real-time offset inflation, and where we have differential products, where we have differential distribution and service capabilities, we price above that. So if we rack and stack them, performance is typically the best pricing. Architectural is steady, but good pricing. And industrial, it depends on the environment.

Thank you. The final question on the line, unless you would like to ask, and that is star one is around this or what happens with RBC.

Thanks for taking my question. And I guess I get a couple of questions. So if you go back over the last couple of years, I think we've often thought that maybe low single-digit organic growth was in the cards, but then we have kind of seen a lot of volatility in the form of inflation and interest rates and many of the things you mentioned. So as you look into 25, I know you're guiding to a softer first half, and a lot of that is reflected in your outlook. What would you say are some risks that you do see in front of you? It doesn't look like SG&A would be one of those. It looks like you still have the $100 million or so share gains across industrial and then the recovery there as well. but what are some of the risks that you guys are keeping an eye on that would kind of prevent you from achieving that growth rate of organic low single digits? And as a follow-up, if you look into 26, do you see any impediments to achieving that 8% to 12% EPS growth? Thanks.

So let me start, Arun. You mentioned history, and we didn't hit the low single-digit organic growth this year, we hit 3%, if I remember correctly, in 2023. And this year, organic is about minus one, minus two, all in, but all in includes FX and things like that. So the organic side of that was minus one. This year, as we project to low single digits organic growth, That $100 million that we've talked about earlier, that's not a hope and a prayer. Those are deals that we've won. Now, there could be some variability in timing of execution of our customers' launches and things like that, but we feel confident about that. We have done a tremendous amount of work over the last two years of building our organic growth muscle across all of the businesses and that is starting to deliver results so you know i feel good about the full year uh guide for everything that's within our control i just can't tell you what this is a strange geopolitical environment with post-elections in many countries You know, we have really good plans and contingency plans for what we can do in the event of various scenarios, but at the end of the day, those would be the risks to achieving both 25 and 26. you know, what's going to happen with all of the potential, you know, stressors between the United States and other countries, other countries in Europe. But, you know, with everything we know today, we are committed to our four-year guide and we feel good about what we have in our commercial and launch pipeline.

Thank you. That does conclude the question and answer session and I will now turn it back over to Alex Lopez.

Thank you, Bricka, and thank you, everyone, for joining us this morning. We appreciate your interest and confidence in PPE. This concludes our fourth quarter earnings call.

Thank you. This does conclude today's call. You may now disconnect.