Auto refinishes, aerospace among strongest near-term coatings sectors - PPG

Author: Larry Terry


HOUSTON (ICIS)--Although semiconductor chip shortages will continue to inhibit automotive OEM coatings demand for the near term, automotive refinishing and airliner builds will gradually improve in 2022 as driving and air travel continue to gain more momentum, according to US-based international paint and coatings producer PPG.

A rebuild in inventories is part of the recovery PPG expects over the next two years, chairman and CEO Michael H McGarry said during the company's Q3 conference call with analysts. Much of that improvement is anticipated next year, he added.

“Absent further [supply] disruptions,” he said, noting Hurricane Ida, "we expect the supply chain to normalise through the end of the year, with more typical supply returning in early 2022.”

Another part of that anticipated recovery is expected to include fleet-car restocking, McGarry added.

Two components of that outlook include the expectation that “the semiconductor issues will continue to rectify over the next two quarters, and then become more typical in the second half of 2022", he said.

In the architectural coatings sector, a seasonal Q4 slowdown should give customers a chance to rebuild inventories, McGarry said, although Q4 challenges will continue, including an expected 30% inflation rate and ongoing raw-material constraints.

On the US pricing front, Q4 increases are expected to exceed the 6% in sales-price gains during the third quarter. “The magnitude of the increases is historic,” McGarry said, “but so is the inflation.”

Although the company’s Q3 revenue increased significantly year on year, net income fell as costs rose more quickly than sales. McGarry said supply-chain constraints prevented the company from completely filling its strong orders amid robust demand.

As for demand in China, McGarry said PPG’s plants there are running two shifts per day in response to China’s electricity rationing.

“We’re in a very good position to run during off hours and consume cheaper energy,” he said. Its packaging business there is experiencing strong demand.

Thumbnail image shows paint. Photo by Shutterstock