3Q14 Prepared Comments

8/10/2019 3Q14 Prepared Comments

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PPG Industries, Inc. Third Quarter 2014 Financial ResultsEarnings Brief October 16, 2014

Third Quarter Financial Summary PPG net sales from continuing operations forthe third quarter were $3.94 billion, anincrease of 4 percent versus the prior year.Higher year-over-year volumes contributed 3percent, a level consistent with the 2014second quarter change. Volumes advancedin all major regions, led by North America and

Asia, with a modest increase in Europe.

Selling prices improved modestly, reflectingefforts to offset slight cost inflation, includinghigher logistics costs and higher natural gascosts in the Glass segment. Aggregatecurrency translation impacts were minimal,with translation impacts varying by currency.

Year-over-year adjusted diluted earnings per share from continuing operations increased by 22percent, establishing a new third quarter record of $2.82 aided by higher sales volumes, improvedbusiness mix and continued aggressive cost management. Earnings improved in each majorregion led by Europe which was up 17 percent versus the prior year.

PPG continued to execute on a variety of strategic and earnings-accretive cash deploymentactions. Strategically in the quarter, work continued on customary actions relating to the pendingComex acquisition. The original anticipated timeline for the acquisition was 4 -to- 6 months afterthe June 30, 2014 announcement date, and we continue to expect that this acquisition will closein the fourth quarter.

We continue to have financial flexibility as our balance sheet remains strong with cash and short-term investments of $3 billion. We have a very active acquisition pipeline and expect sharerepurchases to remain an integral part of our cash deployment in the fourth quarter. Thecompany completed $150 million of share repurchases in the third quarter, bringing the year-to-date total to $450 million.

Including the pending Comex acquisition, we will likely spend at or above the top-end of ourpreviously communicated range of $3 -to- $4 billion of cash deployment in 2014 and 2015, on a

combination of acquisitions and sharerepurchases.

PPG Third Quarter Net Sales Total third quarter net sales from continuingoperations of $3.94 billion were up 4 percentversus the previous years $3.77 billion.Pricing improved almost 1 percent, with afocus on countering wage, transportation andenergy cost inflation.

Currency translation was a slight negative,with results remaining mixed by currency.


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Versus the prior year, the 3-month average Euro conversion rate weakened slightly against theU.S. dollar, with weakening more pronounced in the month of September. Other currencies weremixed against the dollar. Based on current exchange rates, foreign currency translation will havea larger impact on sales in the fourth quarter.

Volumes grew by about 3 percent versus the prior years third quarter. The pace of growth wassimilar to the previous quarter despite a more difficult comparison period due to solid sales

improvement in last years third quarter. Growth remained uneven by end-use market and region.PPGs growth was led by aerospace, automotive OEM and automotive refinish, with growth ratesin those businesses matching or exceeding prior quarters.

Net Sales Volume Trends - CoatingsSegments Global aggregate coatings segment volumegrowth continued and was led by a 4 percentgain in the United States and Canadareflecting ongoing, moderate economicexpansion in the region. The pace of growthwas generally consistent with the second

quarter, and both quarters grew despite moredifficult comparison periods. Regional growthwas most prominent in the automotive OEM,aerospace, and automotive refinishbusinesses, and was coupled with solidgrowth contributions in many of the generalindustrial coatings, specialty coatings and

materials end-use markets.

Year-over-year European volumes also advanced, but by less than 1 percent. The 2014 thirdquarter growth rate was lower than the second quarter growth rate of 3 percent, as Europeansales trends improved in each quarter during 2013 making the third quarter a more difficult

comparison. Overall demand in the region was mixed by country with some regions or end-usemarkets improving and others weakening. From an end-use market perspective, aerospace andautomotive OEM delivered the largest gains, while architectural coatings volumes were downabout 1 percent.

Emerging region volume growth accelerated slightly versus the prior quarter, with improvedperformance in both Asia and Latin America. Most businesses in Asia achieved volume growth,including marine new-build. In Latin America, growth occurred in automotive OEM despiteregional industry declines, but was partly offset by declines in other end-use markets in the

region.

PPG Earnings PPG pre-tax segment earnings improved in allregions. Earnings in Europe grew by 17percent reflecting benefits from improvedbusiness mix and a lower cost base stemmingfrom previous, aggressive cost reductionactions.

Earnings in the United States and Canadaadvanced 10 percent, aided by higher


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volumes, improved business mix and further realization of acquisition-related earnings synergies.Emerging regions also improved 10 percent, driven by higher volumes and strong costmanagement.

Third quarter adjusted diluted earnings per share from continuing operations of $2.82 establisheda new third quarter record for the company. The figure is up 50 cents, or 22 percent, versus theprior-year record. The 2014 adjusted figure excludes after-tax gains on asset dispositions of 52

cents, and charges of 61 cents for an increase to legacy environmental reserves, 2 cents foracquisition-related costs and 1 cent for certain pension settlement losses. The 2013 adjustedfigure excludes adjustments totaling 91 cents as detailed in the presentation materials appendix.

The tax rate on ongoing earnings was about 24 percent in both years. We expect the tax rate toremain at 24 percent for the balance of the year.

PPGs Earnings Trend Over the past two years, PPG has completedseveral significant portfolio changes, includingthe separation of the former commoditychemical business, the acquisition of

AkzoNobels North American architecturalcoatings business, and divestiture of our 51percent interest in the Transitions Optical jointventure and sunlens business. Thecompanys earnings growth rate hasaccelerated based on this revised businessportfolio.

Year-to-date, PPGs adjusted per shareearnings from continuing operations are up 27

percent versus the comparative year-to-date 2013 results. These strong growth results are inaddition to a 31 percent increase in full year 2013 adjusted earnings per share.

All the figures have been recast to reflect results from PPGs current business portfolio and alsoto reflect the benefits of our ongoing earnings-accretive cash deployment.

Performance Coatings Reviewing the Performance Coatings segmentresults for the third quarter, net sales were$2.26 billion, up 3 percent versus the prioryear. The net sales gains resulted fromimproved volumes, higher selling prices andmodest acquisition-related gains. Aggregatecurrency translation impacts were minimal.

Segment volumes advanced 1 percent withgains in North America and emerging regions,offsetting a 1 percent decline in Europe.

Third quarter segment earnings were $345million, up $20 million or 6 percent year-over-

year, driven by higher sales, improved business mix and the benefit from additional acquisition-related synergies. These gains were partly offset by cost inflation, including increasedtransportation costs.


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From a business unit perspective, aerospace and automotive refinish both delivered mid-singledigit percentage sales growth globally. Aerospace continues to benefit from industry new-buildexpansion coupled with PPG specific new products. The automotive refinish business continuesto benefit from the expansion of the vehicle parc in Asia and higher North American demand.These trends are expected to continue for both businesses in the fourth quarter.

Architectural coatings EMEA volumes declined 1 percent in comparison with strengthening prior-year levels. Activity levels remained inconsistent within the region with several countriesexperiencing flat or reduced demand. Other regions, including Eastern Europe and the UnitedKingdom, had healthy demand growth. These uneven trends will likely continue in the fourthquarter.

North American architectural coatings net sales improved low single-digit percentages, includingbenefits from increased end-use market demand. As with previous quarters, sales resultsremained mixed by architectural distribution channel.

Low single-digit percentage growth occurred in the national DIY (Do-It-Yourself) retail channel,including initial benefit from several new PPG products that were introduced throughout the

quarter.Same store sales for PPGs legacy company-owned stores open for more than 12 months,improved mid-to-high single digit percentages, with results strengthening throughout the quarter.These gains were partly offset by reduced sales resulting from the planned redundant or non-profitable closures of stores acquired in 2013, most of which occurred in the second half of 2013.The improved profitability as a result of these planned store closures is a meaningful element ofthe achieved year-over-year acquisition-related synergies. Overall acquisition synergy captureremains ahead of schedule, with nearly all commercial actions expected to be completed by theend of 2014, which would be one year ahead of the original timeline.

Lastly, architectural coatings sales to independent distributors declined by low single-digit

percentages, primarily due to weaker Canadian demand.In the fourth quarter modest North American architectural coatings market demand growth isexpected, with growth in both residential and non-residential end-markets. Additionally, we willreach the anniversary of the majority of the acquired company-owned store closures during thefourth quarter, resulting in a reduced negative year-over-year sales impact.

Aggregate protective and marine coatings net sales were up slightly in the quarter, includinghigher North American volumes aided by increased building and maintenance for infrastructureand energy-related demand growth. Additionally, we achieved modest growth in the marine new-build end-use market, following several quarters of negative activity trends in that industry. Thisbusiness is expected to deliver comparable volume growth in the fourth quarter.

Looking forward, this segment has the most pronounced sales and earnings seasonality, giventhe nature of the businesses that comprise the segment. We expect traditional seasonal salesdeclines in the fourth quarter. Additionally, based on current exchange rates, foreign currencytranslation is expected to be a large factor in sequential and year-over-year sales comparisons.In fourth quarter 2013, the dollar weakened versus the Euro when compared with the third quarter2013. The dollar has strengthened against the Euro when compared with the fourth quarter of2013 and the third quarter of 2014.


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Industrial Coatings Industrial Coatings segment net sales for thethird quarter were $1.4 billion, up $89 million incomparison with the previous year. Thehigher net sales were due to 7 percent volumegrowth, led by North America and emergingregions, along with solid but more modest

growth in Europe. Third quarter segmentearnings grew 17 percent, to $240 million, asa result of increased net sales andmanufacturing cost improvements.

PPGs global automotive OEM business grewvolumes in all regions by high single-digitpercentages year-over-year in comparison

with global industry demand growth of about 3.5 percent in the quarter.

Industry growth occurred in all regions, highlighted by 10 percent growth in China. Europeanindustry production also grew against strengthening prior year comparable results. Growth in the

Americas was led by North America, primarily the United States and Mexico, which offset lowerSouth American production.

Year-over-year industry growth for auto production is forecasted to continue in the fourth quarterin all major regions, although growth rates are expected to moderate in comparison to recentquarters. We expect PPG to grow at an above-market pace including benefits from technology,service, customer mix and our global breadth which provides access to additional growthopportunities.

Global but uneven industry demand growth has continued in many general industrial andspecialty coatings and materials end-use markets. These markets include, among others,electronics, durable goods, coil extrusion, auto parts and accessories, and heavy duty equipment.

PPGs aggregate year-over-year sales into these markets grew mid-single digit percentages inthe third quarter, a pace at -or- above previous quarters. Results in each major region weresimilar to overall global results driven by several factors including increased middle-class durablegoods consumption in China and initial improvement in commercial construction in North Americawhich positively impacted coil extrusion demand. Looking ahead, these overall general industrialtrends are expected to continue, but growth rates will likely moderate based on strong prior yearglobal industrial growth and in certain end-use markets, such as auto parts and accessories dueto moderating global automotive production.

Finally, global packaging coatings volumes were down modestly due to continued softness inEurope. However, PPGs volume trend in this business improved versus the previous quarters in2014.

The packaging industry is beginning a shift to new interior can coatings technologies for beverageand food containers, with certain European markets shifting to these new technologies in January,2015. As a result of this technology change, PPG will have greater access to a much largerportion of the packaging coatings market as PPG previously had minimal sales for interiorpackaging coatings. PPG continues to complete significant development activities and trials withcustomers, and that work will continue into the fourth quarter as customers move from pilot trialsto commercial production.

Lastly, with regards to overall segment results, currency translation is expected to negativelyimpact fourth quarter year-over-year sales comparisons based on current exchange rates.


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Glass Third quarter net sales for the Glass segmentwere $283 million, up $5 million versus thethird quarter 2013. The 2 percent net salesgrowth was due primarily to higher volumesand pricing in flat glass stemming fromimprovement in residential and non-residential

end-market demand, partly countered bycurrency translation related to the Canadiandollar. Flat glass demand improvement wasmost prominent in our value-added andspecialty glass products, producing favorableproduct mix for the segment.

These volume gains were countered by lowerfiber glass volumes due to reduced product availability stemming from weaker manufacturingperformance.

Segment earnings in the quarter were $33 million, up $12 million, as the benefit of the improved

flat glass product mix and manufacturing cost improvements offset moderate freight and naturalgas cost inflation.

Looking ahead, lower seasonal demand is anticipated in both businesses, and will also result inlower manufacturing utilization. Seasonally adjusted year-over-year demand growth is expectedto continue in flat glass, as is the favorable value-added product mix. Efforts are underway toimprove fiber glass manufacturing performance and related product availability.

As previously announced during the third quarter, PPG sold one of its flat glass facilities andrecognized a gain on that sale. We expect toincur some modest one-time expenses as weexit that facility in the fourth quarter.

Cash and Cash Deployment PPG ended the quarter with $3.0 billion incash and short-term investments. Cashgenerated from continuing operations was$732 million in the quarter and $1.24 billionyear-to-date. Traditionally, the fourth quarteris a large cash generation quarter due to theseasonality of our businesses.

Uses of cash during the third quarter andyear-to-date were as follows:

Capital expenditures were $126 million in the quarter and $358 million year-to-date. Anticipated 2014 capital spending remains in the range of 3.0 -to- 4.0 percent of sales.

Dividends paid were $92 million in the quarter and $269 million in the first nine months of2014.

Cash spending for acquisitions which have closed totaled $90 million in the quarter and$114 million year-to-date.

PPG announced on June 30 the agreement to acquire Comex, and expectations remainfor that transaction to close in the fourth quarter, within the originally anticipated 4 -to- 6month timeline.


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PPG stock repurchases totaled $150 million in the quarter and $450 million year-to-date.The company still has about $2.0 billion remaining under its current share repurchaseauthorization as of quarter-end, and share repurchases are expected to remain an integralpart of cash deployment in the fourth quarter.

The company remains focused on earnings-accretive cash deployment. Including the pendingComex acquisition, the company now expects to spend at or above the top end of its previously

announced $3 -to- $4 billion of cash in years 2014 and 2015 combined, on acquisitions and sharerepurchases.

Summary In summary, our strong financial performancecontinued in the third quarter. Year-over-yearsales growth was achieved in each region ledby gains in North America and Asia. Salesgrew 4 percent in aggregate, a rate consistentwith the previous quarter despite beingcompared against a more difficult, improving2013 third quarter sales level. Volume

advanced 3 percent and was the principalfactor in the sales growth. Continuedcustomer adoption of our leading technologiesin several businesses was a key contributingfactor to the higher volumes.

Adjusted earnings per share of $2.82 were a record for any third quarter surpassing the prior yearfigure by 22 percent. We once again delivered higher earnings in all major regions led by a 17percent gain in Europe. We continued to realize excellent earnings contributions from theimproved demand, coupled with improved business mix and ongoing, disciplined costmanagement. Acquisition-related synergies also positively impacted earnings, as we remainahead of our timeline to complete all the synergy actions from our 2013 North American

architectural coatings acquisition. We currently anticipate completing most of these actions by theend of this year, nearly one year ahead of schedule.

With regards to strategic actions, we have continued to work on actions relating to our pendingComex acquisition and expect that acquisition to close in the fourth quarter. Additionally, wecompleted the divestiture of a North American flat glass facility, and our automotive glass equityaffiliate sold one if its businesses. Both of these assets divestitures generated one-time gains inthe quarter.

We had strong cash generation of about $730 million, and the fourth quarter is historically ourstrongest cash generation period due to the seasonal nature of our businesses. We ended thethird quarter with increased cash and short-term investments which totaled $3 billion.

We remained focused on cash deployment for earnings accretion. Our acquisition pipeline is veryactive. Also in the quarter, we completed an additional $150 million in share repurchases bringingour year-to-date total to $450 million. We now anticipate spending at the top end of ourpreviously communicated range of $3 -to- $4 billion, in years 2014 and 2015 combined, foracquisitions and share repurchases.


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Forward-Looking Statements

Statements contained herein relating to matters that are not historical facts are forward-lookingstatements reflecting PPGs 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, andSection 21E of the Securities Exchange Act of 1934, as amended, involve risks and uncertaintiesthat may affect PPGs operations, as discussed in PPGs filings with the Securities and ExchangeCommission pursuant to Sections 13(a), 13(c) or 15(d) of the Exchange Act, and the rules andregulations promulgated thereunder. Accordingly, many factors could cause actual results to differmaterially from the forward-looking statements contained herein. Such factors include globaleconomic conditions, increasing price and product competition by foreign and domesticcompetitors, fluctuations in cost and availability of raw materials, the ability to maintain favorable

supplier relationships and arrangements, the realization of anticipated cost savings fromrestructuring initiatives, difficulties in integrating acquired businesses and achieving expectedsynergies therefrom, economic and political conditions in international markets, the ability topenetrate existing, developing and emerging foreign and domestic markets, foreign exchangerates and fluctuations in such rates, fluctuations in tax rates, the impact of future legislation, theimpact of environmental regulations, unexpected business disruptions, and the unpredictability ofexisting and possible future litigation, including litigation that could result if the asbestossettlement discussed in PPGs filings with the Securities and Exchange Commission does notbecome effective. The presentation also includes statements about the expected effects on PPGof the Comex acquisition (the Transaction), the anticipated timing and benefits of theTransaction, including expected synergies, the expected methods of financing the Transaction,PPGs expected financial flexibility, future cash deployment plans, and all other statements that

are not historical facts. Such risks, uncertainties and assumptions include: the satisfaction of theconditions to the Transaction and other risks related to the completion of the Transaction andactions related thereto; the parties ability to complete the Transaction on the anticipated termsand schedule, including the ability to obtain regulatory approvals; risks relating to any unforeseenliabilities, future capital expenditures, revenues, expenses, earnings, synergies, economicperformance, indebtedness, financial condition, losses and future prospects; business andmanagement strategies and the expansion and growth of PPGs operations; PPGs ability tointegrate the acquired business successfully after the closing of the Transaction and to achieveanticipated synergies; and the risk that disruptions from the Transaction will harm PPGsbusinesses. However, it is not possible to predict or identify all such factors. Consequently, whilethe list of factors presented here and in PPGs 2013 Form 10-K are considered representative, nosuch 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-lookingstatements. Consequences of material differences in results compared with those anticipated inthe forward-looking statements could include, among other things, business disruption,operational problems, financial loss, legal liability to third parties and similar risks, any of whichcould have a material adverse effect on PPGs consolidated financial condition, results ofoperations or liquidity. All information in this presentation speaks only as of October 16, 2014, andany distribution of this presentation after that date is not intended and will not be construed asupdating or confirming such information. PPG undertakes no obligation to update any forward-looking statement, except as otherwise required by applicable law.

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3Q14 Prepared Comments