DEF 14A: PPG Industries Reports Record 2023 Financial Results, Advances Sustainability Goals

Sentiment:

Proxy Statement 7 March 2024 1:30 PM

PPG Industries achieved record full-year financial results in 2023, including net sales of $18.2 billion and adjusted earnings per share of $7.67, while also progressing its sustainability commitments.

Better than expectedThe company achieved record full-year adjusted earnings per share of $7.67.Operating cash flow from operations reached a record $2.4 billion, up $1.4 billion year-over-year.Adjusted net income increased by approximately 30% compared to 2022.

Summary

PPG Industries reported record full-year net sales of $18.2 billion in 2023, a 3% increase compared to the prior year.
Organic sales also increased by 3%, driven by higher selling prices.
The company achieved record full-year adjusted earnings per share of $7.67.
Operating cash flow from operations reached a record $2.4 billion, up $1.4 billion year-over-year.
Adjusted net income increased by approximately 30% compared to 2022, primarily due to higher selling prices, lower input costs, restructuring cost savings, and acquisition-related synergies.
PPG became the first U.S.-based coatings manufacturer to receive validation from the Science Based Targets initiative (SBTi) for its 2030 emissions reduction targets.
The company's global giving totaled more than $17.5 million in 2023, supporting community organizations worldwide.
PPG is asking shareholders to approve a proposal to provide shareholders holding 25% of PPG's voting power with the right to call a special meeting of shareholders.
The company is also asking shareholders to approve a proposal to amend the company's Articles of Incorporation to provide for the exculpation of officers of the company.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with record financial results and advancements in sustainability, indicating a strong and well-managed company.

Positives

Record financial performance in 2023 demonstrates the breadth, diversity, and resiliency of PPG's business portfolio.
The company is actively engaged in overseeing the initial progress of its enterprise growth strategy.
PPG is advancing its sustainability commitments, including validation from the Science Based Targets initiative (SBTi).
The company is investing in STEM education and workforce development initiatives.
PPG is committed to using resources efficiently and prioritizing decarbonization.
The company is recognized by external organizations for its leadership and progress in ESG areas.

Negatives

The global demand environment remained challenging in 2023.
Selling, general and administrative costs as a percentage of sales for 2023 increased by 130 basis points compared to 2022.
PPG's spill and release and injury and illness rates did not meet target for 2023.

Risks

The document includes forward-looking statements that involve risks and uncertainties.
Actual future results could differ materially from projected results due to changes in circumstances, assumptions not being realized, or other risks, uncertainties, and factors.
The company faces risks and uncertainties discussed in its most recently filed periodic reports on Form 10-K and Form 10-Q, current reports on Form 8-K, and subsequent filings.

Future Outlook

The Company looks forward to building upon last year's successes by focusing on the unwavering support of our customers by providing superior services and products that enhance productivity and sustainability.

Management Comments

Michael McGarry's leadership set the Company on a solid path for future growth and success.
The Board is grateful for Hugh and Steve's thoughtful guidance and their many years of dedicated service to PPG.
The Board believes that Mr. Knavish is the best person to serve as Chairman.

Industry Context

The announcement highlights PPG's strong performance in a challenging global demand environment, showcasing the resilience of its business portfolio and its ability to capitalize on growth opportunities in specific sectors like aerospace and automotive OEM coatings.

Comparison to Industry Standards

The comparator group used in 2022 to set 2023 compensation was: 3M Company, Eaton Corporation plc, International Paper Company, Textron Inc., Air Products and Chemicals, Inc., Ecolab Inc., Johnson Controls International Plc, The Sherwin-Williams Company, Celanese Corporation, Emerson Electric Co., Linde Plc, Trane Technologies Plc, Dow, Inc., Honeywell International Inc., Parker-Hannifin Corporation, DuPont de Nemours, Inc., Howmet Aerospace Inc., Rockwell Automation, Inc., Eastman Chemical Company, Illinois Tool Works Inc., Stanley Black & Decker, Inc.
The peer group consists of: 3M Co., Akzo Nobel N.V., Axalta Coatings Systems Ltd., Dow, Inc., Dupont de Nemours, Inc., Eastman Chemical Co., Masco Corp., RPM International Inc., and The Sherwin-Williams Co.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Executive Chairman of the Board and Director	Michael H. McGarry	Tim M. Knavish	October 1, 2023	Retirement
Director	Hugh Grant	N/A	December 31, 2023	Retirement
Director	Stephen F. Angel	N/A	February 15, 2024	Retirement
Director	N/A	Christopher N. Roberts III	October 18, 2023	Election to the Board

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Board Declassification	Shareholders voted in favor of a Board-sponsored proposal to declassify the Board of Directors. On May 13, 2022, PPGs Articles of Incorporation were amended to provide that all directors will be elected annually beginning at the 2025 Annual Meeting.	May 13, 2022	All directors will be elected annually beginning at PPGs 2025 Annual Meeting.
Compensation Recovery Policy	PPG's Board of Directors adopted a new Compensation Recovery Policy that complies with the New York Stock Exchanges recently-adopted listing standards.	July 20, 2023	The company will recoup incentive compensation received by any executive officer or the chief accounting officer serving during the prior three completed fiscal years where the payment was predicated upon the achievement of one or more financial reporting measures that were subsequently the subject of a material accounting restatement.

Related Party Transactions

During 2023, PPG and its subsidiaries sold approximately $1.2 million of products and services to Linde plc and purchased approximately $1.0 million of industrial gases from Linde plc.
During 2023, PPG and its subsidiaries sold approximately $200,000 of products and services to Ashland Inc. and purchased approximately $18.8 million of products and services from Ashland Inc.
During 2023, PPG and its subsidiaries purchased approximately $1.1 million of products and services from Ecolab Inc.

Stakeholder Impact

The company's performance and initiatives impact shareholders, customers, employees, retirees, suppliers, the communities it serves, and the environment.

Next Steps

Shareholders are encouraged to vote on the included proposals.
The Board will continue its refreshment process in 2024, seeking directors with skills and experience that dovetail with the enterprise growth strategy.
The company will continue the integration of recent acquisitions and realize acquisition-related synergies.
The company will continue to focus on cost savings from restructuring actions.
The latest ESG Report will be available in May with updates on the progress made in 2023.

Key Dates

Date	Description
1883	PPG was founded as The Pittsburgh Plate Glass Company.
1995	Reference to the Private Securities Litigation Reform Act of 1995.
2005	Stock ownership guidelines for non-employee directors effective January 1, 2005.
2010	Reference to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
2021	The Board conducted a comprehensive review of its oversight of the Company's ESG programs and practices.
May 13, 2022	PPG's Articles of Incorporation were amended to provide that all directors will be elected annually beginning at the 2025 Annual Meeting.
July 20, 2023	The Board of Directors elected Christopher N. Roberts III as a director of PPG, effective October 18, 2023.
October 1, 2023	Michael H. McGarry retired as PPG's Executive Chairman of the Board and as a director.
December 31, 2023	Hugh Grant retired from our Board of Directors.
February 15, 2024	Stephen F. Angel retired from our Board of Directors at the conclusion of the Boards February 15, 2024 meeting.
February 16, 2024	Record date for the Annual Meeting.
March 7, 2024	Date of the Proxy Statement.
April 17, 2024	Deadline to pre-register for the virtual Annual Meeting by 5:00 p.m. Eastern Time.
April 18, 2024	Date of the Annual Meeting of Shareholders at 11:00 a.m. Eastern Time.
October 8, 2024	Earliest date for receipt of director nominations submitted pursuant to PPG's proxy access Bylaw for consideration at the 2025 Annual Meeting of shareholders.
November 7, 2024	Latest date for receipt of director nominations submitted pursuant to PPG's proxy access Bylaw for consideration at the 2025 Annual Meeting of shareholders.
November 7, 2024	Deadline for shareholder proposals to be included in the Proxy Statement for the 2025 Annual Meeting.
January 17, 2025	Deadline for shareholder notice of intent to present business for consideration at the 2025 Annual Meeting.
April 17, 2025	Expected date of the 2025 Annual Meeting of Shareholders.

Keywords

financial results, sustainability, corporate governance, executive compensation, net sales, earnings per share, operating cash flow, ESG, board of directors, proxy statement, PPG Industries

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