PPG Industries, Inc.

At this time, I would like to welcome everyone to the second quarter of PPG Addings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by one on your telephone keypad and to withdraw your question, be star followed by two. To allow everyone an opportunity to ask a question, the company requests that each analyst ask only one question. I now turn the conference call over to Alex Lopez, Director of Investor Relations. Please go ahead, sir.

Thank you, Carly, and good morning, everyone. This is Alex Lopez. We appreciate your continued interest in PPG and welcome you to our second quarter, 2025 earnings conference call. Joining me today from PPG are Tim Canavich, Chairman and Chief Executive Officer, and Vince Morales, Senior Vice President and Chief Financial Officer. Our comments relate to the financial information released after US equity markets closed on Tuesday, July 29th, 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, ppe.com. Following management's 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 PPG's operating and financial performance. These statements involve uncertainties and risks, which may cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements. The presentation also contains certain non-GAD financial measures. The company has provided in the appendix of the presentation materials, which are available on our website, because reconciliations of these non-GAD financial measures to the most directly comparable GAD financial measures. For additional information, please refer to PPG's filing with the SEC. Now, let me introduce PPG Chairman and CEO, Tim Canavich.

Thank you, Alex, and welcome, everyone. I'll start by providing a few highlights of our second quarter 2025 financial performance, and then I'll move to our outlook. Our results demonstrate the strength of PPG's global business portfolio in an increasingly dynamic macro environment. We delivered net sales of 4.2 billion with an increase in organic sales of 2%. Our momentum in organic sales growth was led by our aerospace coatings, protective and marine coatings, and packaging coatings businesses. In addition, sales volumes in our industrial coating segment outpaced the industry, reflecting the initial benefits from share gains in our packaging, industrial, and automotive OEM businesses. We expect the benefits from these share gains to accelerate in the second half of 2025. Regionally, we delivered organic growth in both the United States and Latin America with tepid demand in Europe and some softening in Asia. We delivered a quarterly segment EBITDA margin of 20.3%, and our adjusted earnings per diluted share was $2.22. Our balance sheet remains strong, and we are committed to using this balance sheet for shareholder value creation. During the quarter, the company repurchased approximately $150 million of stock, bringing our year to date total to $540 million. Additionally, in July, we raised our quarterly dividend per share by 4%, demonstrating our confidence in the resiliency of our business and the strength and future growth of our company. Looking at each of our segments in the global architectural coating segment, positive selling prices in both regions were offset by lower volumes and the impact of a divestiture. Architectural coatings in Mea, organic sales growth in the Nordic region and in the United Kingdom were offset by lower demand in Eastern Europe. While volumes remained lower in the quarter, we saw evidence of improvement in certain countries, albeit inconsistent. In architectural coatings Latin America and Asia Pacific, we delivered organic sales growth in Mexico, aided by solid retail sales, while results were impacted by the pause in project related spending that we discussed in April. It is important to note that while project related spending was down year over year, we did recognize improvement versus the first quarter of 2025 and we expect continued improvement of project related spending to progress during the second half of 2025. Segment epithel margin decreased, driven by the business divestiture, lower sales volumes and unfavorable currency translation, partially offset by strong cost control actions. The performance coating segment delivered record net sales and earnings with a 6% increase in organic sales driven by both higher selling prices and sales volumes. Within the segment, aerospace delivered high single digit percentage organic sales growth with record quarterly sales and earnings. Customer order backlogs were stable at about $300 million, even with growth related investments that improved our manufacturing output in the quarter. Our unique technology position remains a strong growth engine for PPG. We are investing both OPEX and CAPEX in aerospace to deliver continued solid growth well into the future. In automotive refinish, organic sales decreased by a low single digit percentage versus the prior year. In the US, organic sales were flat despite lower industry collision claims as we benefited from both share gains and customer order patterns. Organic sales outside the US were down with modest sales volumes declines in Asia and Europe. In the second quarter, the company grew the number of PPG link subscriptions as well as Moonwalk installations. And I'm proud to say that in July, we're installing our 3000th Moonwalk, further supporting customer productivity and customer partnerships. We do anticipate lower volumes in the third quarter in refinish due to normalization of the customer order patterns. Protective and marine coatings delivered double digit percentage organic sales growth supported by increasing global demand for our technologies and our recent share gains. This was the ninth consecutive quarter