We appreciate your continued interest in PPG Industries and welcome you to our third quarter 2025 earnings conference call. I'll start by providing a few highlights on Q3 2025 and then move to our outlook. In a very challenging world, the team delivered organic growth, which included both volume growth and price growth, and delivered a record high Q3 EPS. Our results for the quarter reflect the accelerating momentum in PPG's organic sales growth with an increase of 2%, including our third consecutive quarter of sales volume growth.

In addition, sales volumes in our industrial coatings segments once again outpaced industry demand, reflecting benefits from share gains in both packaging coatings and automotive OEM coatings. Several of our businesses in the performance coatings segment delivered outstanding results, including double-digit organic sales growth in both aerospace coatings and protective and marine coatings. Despite this, PPG organic sales grew a low single-digit percentage in the U.S. Organic sales also increased in Latin America and Asia Pacific and were flat in Europe.

Solid sales improvement combined with our aggressive cost management and consistent cash deployment drove an adjusted EPS increase of 5% year over year, establishing a third quarter record of $2.13. EMEA organic sales growth in Eastern Europe was more than offset by lower demand in Western Europe, while volumes remained lower in the quarter. We delivered mid single digit organic sales growth in Mexico, aided by solid retail sales. We expect sales growth to strengthen in Mexico in the fourth quarter, including stronger year over year consumer sales and modest improvement in project related work segment.

What went well
  • Delivered a record-high Q3 adjusted EPS of $2.13, up 5% year-over-year, with organic sales growth of 2% including the third consecutive quarter of sales volume growth.
  • Aerospace delivered double-digit percentage organic growth with record quarterly sales and earnings, and customer order backlog increased to $310 million even as growth investments improved manufacturing output.
  • Protective and Marine Coatings delivered its 10th consecutive quarter of year-over-year volume growth with double-digit organic growth, prompting additional growth-related investments.
  • Industrial Coatings volumes again outpaced industry demand on share gains in Packaging and Automotive OEM; U.S./Canada organic sales grew low single digits for the third straight quarter and Mexico delivered mid-single-digit organic growth on solid retail.
  • Launched the Deltron Premium Glamour Speed Clear Coat, the first Refinish product fully designed with AI technology, and grew Refinish LINQ subscriptions plus MoonWalk installations past 3,000 units.
What went wrong
  • Automotive Refinish organic sales decreased a double-digit percentage versus the prior year, driven by lower U.S. volumes as distributor order patterns were weighted to 1H2025 and industry collision claims stayed depressed.
  • Industry claims normalization did not happen as early as expected, pushing distributor destocking deeper and forcing PPG to lower its Q4 guidance below consensus.
  • Performance Coatings operating income declined year-over-year despite sales growth, on adverse Refinish mix plus above-normal OpEx/CapEx investment in Aerospace and PMC.
  • Architectural EMEA remained soft, with Western Europe demand and lower volumes more than offsetting Eastern Europe organic growth, plus a drag from divestitures.

Guidance Changes

MetricPeriodCurrent guidance
Full-year 2025 EPS / Q4 guideQ4 2025Lowered; implied Q4 below consensus, entirely due to Refinish destocking
Refinish industry normalizationMid-2026Now expected middle of 2026, with carryover volume challenges through 1H2026
Aerospace sales growth CAGRNext 3 yearsMid- to high-single-digit percentage
Raw material inflationFY2025 / into 2026Low single digits; supply-demand expected to stay long and supportive into 2026
Aerospace + PMC investment2025 into 2027More than $0.5 billion total, including a new facility commissioned in 2027
CapEx target2025-2027Glide path back toward 3% of sales by 2027

Performance Breakdown

MetricYoYNote
Adjusted EPS +5% to $2.13 (Q3 record) Sales improvement, aggressive cost management, and consistent cash deployment
Organic sales +2% Third consecutive quarter of volume growth plus pricing, despite Refinish drag
Aerospace organic sales Double-digit % Strong demand for highly specialized qualified products; backlog up to $310 million
Automotive Refinish organic sales Double-digit % decline Lower U.S. volumes from distributor destocking and depressed collision claims
Protective and Marine organic sales Double-digit % 10th consecutive quarter of volume growth on marine and energy-market demand
Performance Coatings operating income Declined Refinish mix plus elevated Aerospace and PMC growth investment

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Refinish slump causeQ2 expected Q3 softness on order-pattern normalizationDeeper, longer destocking; insurance-rate spikes (16% CAGR 2022-2024, now ~3%) suppressed claims; normalization pushed to mid-2026—
Aerospace scaleGrowth engine, ~mid-single-digit 10-year CAGRNow a third of Performance Coatings; >$0.5B investment underway, new 2027 facility, mid-to-high-single-digit 3-year CAGR—
AI in innovationNot yet commercializedFirst fully AI-designed Refinish clear coat launched; ~50 commercialized AI-optimized products expected by year-end, scraping 100+ years of proprietary data—
Industrial share gains~$100 million quantified a year agoThat $100M now flowing through as launches occur, with additional wins beyond it building through 2026—
Portfolio managementMajor pivot to coatingsActive recent pruning (Architectural, U.S. Silicas, Russia, Africa exit); EBITDA moved from ~15% to ~20%; only edge-pruning remains—

Q&A Summary

Why was the Refinish hit (mid-to-high-teens decline) so hard and when does it recover?
Knavish attributed it to industry claims normalizing later than expected, deepening distributor destocking; insurance affordability suppressed claims, but normalizing insurance rates should drive claims and PPG recovery to sales and earnings growth by mid-2026.
What drove the lower full-year guidance and below-consensus implied Q4?
Knavish said it is all Refinish: PPG and its distributors expected earlier industry normalization, and when it did not arrive distributors focused on running down inventory for year-end, a double whammy that lowered the Q4 guide.
Why did Performance Coatings operating income decline despite sales growth and ~4% price?
Knavish cited Refinish mix (an above-segment-average business swinging to earnings reduction) plus well-above-normal OpEx and CapEx in Aerospace and PMC to capture long-runway double-digit growth, which hurts near-term but benefits the long term.
How big is the Aerospace CapEx spike and where does total CapEx go?
Knavish said Aerospace CapEx peaks across 2025-2027; total CapEx peaks in 2025 then glides back toward the 3%-of-sales target by 2027; the spike is temporary to capture multi-year, possibly decade-long Aerospace growth.
What does Aerospace content-per-plane growth look like and can it accelerate?
Knavish said growth is well above 1-2%, driven by the sealant business (specialty packaging, frozen end-caps, 3D-printed military sealants) and transparencies (canopies/windshields with rising content per new aircraft), making PPG an aerospace solutions provider, not just coatings.

More on Ppg Industries Inc

Reported 2025-10-29 · figures from the Ppg Industries Inc Q3 2025 earnings call.

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