PPG Reports Third Quarter 2017 Financial Results

• Net sales of approximately $3.8 billion, up more than 3 percent versus
  prior year
• Earnings per diluted share from continuing operations of $1.52
  including unfavorable impact of natural disasters
• Progress toward operating margin recovery despite persistent raw
  material cost inflation
• Completed sale of remaining Glass business
• Ended quarter with $2.3 billion of cash and short-term investments
• Continued commitment to spend $3.5 billion on acquisitions and share
  repurchases in combined 2017 and 2018, with more than $700 million
  spent to date

PITTSBURGH–(BUSINESS WIRE)–PPG (NYSE:PPG) today reported third quarter 2017 net sales of
approximately $3.8 billion, up more than 3 percent versus the prior
year. Sales volumes, including the unfavorable impact of several natural
disasters, grew by nearly 1 percent. Prior to the natural disasters,
PPG’s quarterly volume growth was tracking ahead of the growth rate for
the first six months of the year. Selling prices improved modestly
year-over-year for the second consecutive quarter. Favorable foreign
currency translation improved net sales by nearly 2 percent, or about
$65 million.

Third quarter 2017 net income from continuing operations was $392
million, or $1.52 per diluted share, which includes an unfavorable
natural disaster-related impact of approximately 5 cents. The company’s
reported profit contribution margin as a percentage of sales declined
160 basis points year-over-year, and approximately 130 basis points
excluding the impact of natural disasters. This compression is an
improvement from the second quarter 2017 when the company’s profit
contribution margin contracted by 210 basis points versus the prior year.

Third quarter 2016 reported net loss from continuing operations was $211
million, or $0.79 per share. Third quarter 2016 adjusted net income from
continuing operations was $405 million, or $1.52 per share, excluding
net after-tax charges totaling $616 million, or $2.31 per share, for
pension settlement charges.

“While the third quarter was challenging emotionally and operationally
due to the natural disasters, we achieved solid overall financial
results and, more importantly, made some progress in our initial
operating margin recovery efforts,” said Michael McGarry, PPG chairman
and chief executive officer. “Additionally, we were tracking toward
volume growth of about 1.5 percent prior to the disasters, which was an
improvement versus our sales volume growth for the first half of the
year.

“We have achieved some operating margin recovery, despite continuing raw
material cost inflation driven by a variety of supply-related factors,
some of which are transitory,” McGarry said. “We have continued to
aggressively manage our costs, and have secured initial selling price
increases with only a portion of these increases realized during the
quarter. Also, while we still have more work to do to improve our
overall organic growth rate, we are continuing to make measurable
headway in several areas, including our Industrial Coatings segment
which grew sales volumes by more than 3 percent year-over-year and in
our U.S. architectural coatings company-owned stores where same store
sales growth was trending above 6 percent prior to the hurricanes.

“During the quarter, we made progress on our strategic initiatives
including the sale of our remaining Glass business, marking a
transformational milestone for the company. Also, we remain committed to
earnings-accretive cash deployment and have spent more than $700 million
to date toward our $3.5 billion target, with the remaining $2.8 billion
to be deployed by the end of 2018,” McGarry continued.

“Looking ahead to the fourth quarter, we expect moderate global economic
growth to continue. Given the after-effects from the natural disasters,
we no longer expect any notable decline in the level of raw material
cost inflation for the remainder of this year. We are continuing to work
with our customers to address the inflationary environment and expect to
realize additional selling price increases. Lastly, we continue to
execute on our restructuring program and remain on track to deliver
full-year savings of more than $45 million as we continue to manage all
aspects toward margin recovery,” McGarry commented.

The company announced today that it expects the recent natural disasters
will unfavorably affect fourth quarter diluted earnings-per-share by up
to $0.05.

As of Sept. 30, 2017, cash and short-term investments totaled $2.3
billion. Year-to-date, PPG has completed business acquisitions totaling
more than $300 million, including The Crown Group which was finalized on
Oct. 2, and more than $400 million of share repurchases.

Third Quarter 2017 Reportable Segment Financial Results

• Performance Coatings segment third quarter net sales were
  approximately $2.3 billion, up $67 million, or 3 percent, versus the
  prior year. Net sales benefited from higher selling prices across all
  businesses and regions, and acquisition-related sales of approximately
  $25 million. Sales volumes declined by about 1 percent year-over-year,
  primarily due to the natural disasters unfavorably impacting the
  architectural and protective coatings businesses in the U.S. and
  Mexico by approximately $25 million. Favorable foreign currency
  translation increased net sales by more than $45 million, or 2 percent.
  Organic
  sales improved modestly year-over-year in automotive refinish coatings
  driven by growth in developed regions. Aerospace coatings sales
  volumes grew slightly over the prior year period aided by higher
  European demand. Protective and marine coatings sales volumes were
  flat year-over-year, and improved sequentially versus prior quarters,
  despite lower U.S. protective coatings sales volumes stemming from the
  hurricanes. Architectural coatings – EMEA sales volumes declined by a
  mid-single-digit percentage as business was turned away due to either
  low profitability or lack of customer acceptance of selling price
  increases, and demand in certain countries remains sluggish.
  Architectural coatings – Americas and Asia Pacific sales volumes were
  flat year-over-year with differences by channel and region. U.S. and
  Canada company-owned architectural stores grew sales volumes by a
  mid-single-digit percentage year-over year including the unfavorable
  impact from the hurricanes. This increase in sales was more than
  offset by lower sales volumes in national retail (DIY) accounts and
  independent dealer networks as both of these distribution channels
  continue to experience soft demand. Latin American architectural
  coatings sales volume growth was slightly up year-over-year despite
  the impacts from the natural disasters, while modest organic
  architectural coatings sales growth continued in Asia-Pacific.
  Segment
  income for the third quarter was $365 million, down $3 million, or
  about 1 percent, year-over-year, including favorable foreign currency
  translation of $7 million primarily due to the euro and Mexican peso.
  Segment income was negatively impacted by continuing, significant raw
  material cost inflation and lower sales volumes related to the natural
  disasters partly offset by selling price increases and aggressive
  overhead and manufacturing cost reduction efforts, including benefits
  from business restructuring actions.

• Industrial Coatings segment third quarter net sales were about $1.5
  billion, up $49 million, or more than 3 percent, versus the prior-year
  period. Sales volumes increased by more than 3 percent and favorable
  foreign currency translation added $20 million, or about 1 percent,
  versus the prior year. Selling prices were modestly lower
  year-over-year, but improved sequentially versus the second quarter.
  The natural disasters had minimal impact on segment sales, but did
  result in higher raw material and transitory logistics costs.
  Automotive
  original equipment manufacturer (OEM) coatings sales volumes increased
  by a low-single-digit percentage year-over-year, matching global auto
  industry production rates. Aggregate industrial coatings and specialty
  coatings and materials sales volumes increased by a mid-single-digit
  percentage versus the prior year and outpaced regional industrial
  production growth rates for the seventh consecutive quarter, as higher
  volumes were achieved in each major region and in many end-use
  markets. Packaging coatings sales volumes increased a mid-single-digit
  percentage year-over-year and were above industry growth rates in most
  regions, led by customer adoption of new PPG technologies.
  Segment
  income for the third quarter was $223 million, down $26 million, or 10
  percent, year-over-year. Segment income benefited from the impact of
  higher sales volumes and strong cost management, including the
  benefits from business restructuring actions. These improvements were
  more than offset by increases in raw material costs, higher logistics
  costs and lower selling prices. Favorable foreign currency translation
  increased segment income by $3 million.

Figures for all periods present PPG’s former Glass segment as
discontinued operations.

PPG: WE PROTECT AND BEAUTIFY THE WORLD™

At PPG (NYSE:PPG), we work every day to develop and deliver the paints,
coatings and materials that our customers have trusted for more than 130
years. Through dedication and creativity, we solve our customers’
biggest challenges, collaborating closely to find the right path
forward. With headquarters in Pittsburgh, we operate and innovate in
more than 70 countries and reported net sales of $14.3 billion in 2016.
We serve customers in construction, consumer products, industrial and
transportation markets and aftermarkets. To learn more, visit www.ppg.com.

Additional Information

PPG will provide detailed commentary regarding its financial
performance, including presentation-slide content, on the PPG
Investor Center at www.ppg.com at 1 p.m. ET today, Oct. 19. The
company will hold a conference call to review its third quarter 2017
financial performance today at 2 p.m. ET. Participants can pre-register
for the conference by navigating to http://dpregister.com/10112624.
The conference call also will be available in listen-only mode via
Internet broadcast from the PPG
Investor Center at www.ppg.com (Windows Media Player). A telephone
replay will be available today, Oct. 19, beginning at approximately 4:30
p.m. ET, through Nov. 2 at 11:59 p.m. ET. The dial-in numbers for the
replay are: in the United States, 877-344-7529; international,
+1-412-317-0088; passcode 10112624. A Web replay also will be available
on the PPG
Investor Center at www.ppg.com, beginning at approximately 4:30 p.m.
ET today, Oct. 19, 2017, through Oct. 18, 2018.

Forward-Looking Statements

Statements contained herein relating to matters that are not historical
facts are forward-looking statements reflecting PPG’s current view with
respect to future events and financial performance. These matters within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
involve risks and uncertainties that may affect PPG Industries’
operations, as discussed in the company’s filings with the Securities
and Exchange Commission pursuant to Sections 13(a), 13(c) or 15(d) of
the Exchange Act, and the rules and regulations promulgated thereunder.
Accordingly, many factors could cause actual results to differ
materially from the forward-looking statements contained herein. Such
factors include ongoing impacts of the natural disasters described
herein and their length and severity, any currently unanticipated future
impacts from the natural disasters, global economic conditions,
increasing price and product competition by foreign and domestic
competitors, fluctuations in cost and availability of raw materials, the
ability to maintain favorable supplier relationships and arrangements,
the timing of realization of anticipated cost savings from restructuring
initiatives, difficulties in integrating acquired businesses and
achieving expected synergies therefrom, economic and political
conditions in international markets, the ability to penetrate existing,
developing and emerging foreign and domestic markets, foreign exchange
rates and fluctuations in such rates, fluctuations in tax rates, the
impact of future legislation, the impact of environmental regulations,
unexpected business disruptions, and the unpredictability of existing
and possible future litigation, including asbestos litigation. However,
it is not possible to predict or identify all such factors.
Consequently, while the list of factors presented here and in PPG
Industries’ 2016 Form 10-K are considered representative, no such list
should be considered to be a complete statement of all potential risks
and uncertainties. Unlisted factors may present significant additional
obstacles to the realization of forward-looking statements. Consequences
of material differences in results compared with those anticipated in
the forward-looking statements could include, among other things, lower
sales or earnings, business disruption, operational problems, financial
loss, legal liability to third parties and similar risks, any of which
could have a material adverse effect on PPG Industries’ consolidated
financial condition, results of operations or liquidity. All information
in this release speaks only as of October 19, 2017, and any distribution
of this release after that date is not intended and will not be
construed as updating or confirming such information. PPG Industries
undertakes no obligation to update any forward-looking statement, except
as otherwise required by applicable law.

Regulation G Reconciliation

PPG believes investors’ understanding of the company’s operating
performance is enhanced by the disclosure of earnings per diluted share
from continuing operations and PPG’s effective tax rate from continuing
operations adjusted for certain charges. PPG’s management considers this
information useful in providing insight into the company’s ongoing
operating performance because it excludes the impact of items that
cannot reasonably be expected to recur on a quarterly basis or that are
not attributable to our primary operations. Earnings per diluted share
from continuing operations and the effective tax rate from continuing
operations adjusted for these items are not recognized financial
measures determined in accordance with U.S. generally accepted
accounting principles (GAAP) and should not be considered a substitute
for earnings per diluted share, the effective tax rate or other
financial measures as computed in accordance with U.S. GAAP. In
addition, earnings per diluted share from continuing operations and the
adjusted effective tax rate from continuing operations may not be
comparable to similarly titled measures as reported by other companies.

We protect and beautify the world is a trademark and the PPG
Logo is a registered trademark of PPG Industries Ohio, Inc.

Contacts

PPG Media Contact:
Mark Silvey, +1-412-434-3046
Corporate
Communications
[email protected]
or
PPG
Investor Contact:
John Bruno, +1-412-434-3466
Investor
Relations
[email protected]
investor.ppg.com