US PPG’s order patterns remain steady despite tariffs

HOUSTON (ICIS)–US based paints and coatings producer PPG has so far seen no changes in order patterns from its customers, and it has maintained its full-year guidance despite the tariffs imposed by the US.

PPG’s customers did not pull orders forward to the first quarter, and outside of Mexico, PPG did not see any significant changes in demand in the first quarter or in the first four months of the second quarter, said Tim Knavish, PPG CEO. He made his comments during an earnings conference call.

“We have not seen evidence of any curtailment of customer orders in our business,” he said.

While PPG makes paints and coatings, it sells products to many end markets that are key for many chemical products, such as automotive, marine and aerospace.

PPG’s Q1 organic sales rose by 1% year on year, volumes and pricing rose, and the company gained market share from competitors.

PPG shares rose by more than 4% while overall US stock markets fell.

LIMITED EXPOSURE TO TARIFFS
Most of PPG’s operations buy raw materials locally at a rate of more than 95%, Knavish said. This limits their exposure to tariffs.

The company has yet to see any significant changes to prices for its raw materials, he added.

For two commodity feedstocks, epoxy resins and titanium dioxide (TiO2), PPG already withstood disruptions because these raw materials have been subject to anti-dumping and countervailing duties.

Other upstream chemical products have excess supplies, Knavish said. For now, PPG’s suppliers are favoring volumes over pricing.

If suppliers begin raising prices because of tariffs, PPG will work with customers to reformulate products, substitute costly feedstock and pass through costs through surcharges and other measures.

In regards to the threat posed to sales by tariffs, PPG’s customers are spread around the world, and it is not heavily reliant on one country or region, Knavish said.

Unlike commodity chemical producers, PPG does not rely on a continuous manufacturing process to make its products. It is a batch manufacturer, which makes it easier to adjust production to meet demand.

PPG does not expect it will have to idle any of its lines, Knavish said.

PROPOSED US TARIFFS HIT PPG MEXICAN BUSINESS
In Mexico, while PPG’s store retail sales were solid, its project business weakened because of uncertainty about US trade policy.

In February, the US proposed 25% tariffs on imports from Mexico, and the threat caused a slowdown in projects from companies and government, said Tim Knavish. He made his comments during an earnings conference call.

That side of the Mexican business should remain soft in the second quarter, but PPG expects a recovery during the rest of the year. Many of the projects in question were already in flight, and PPG has not seen any cancellations.

Moreover, the US is limiting the 25% tariffs to imports that do not comply with the trade agreement with its North American neighbors, the US-Mexico-Canada Agreement (USMCA).

“We still believe Mexico remains a strong growth country for PPG,” Knavish said.

AEROSPACE YEARS-LONG BACKLOG
PPG’s sales to the aerospace industry are benefiting from a years-long backlog in orders caused by the COVID pandemic.

This has been a long-term trend, and in addition to coatings, aerospace consumes several plastics and chemicals including synthetic hydraulic fluids and their additives, polycarbonate (PC), fibres in seating, resins in wire and cable, adhesives and electronic chemicals used in avionics. They also use composites made with epoxy resins and polyurethanes for seat cushions.

PPG’s aerospace backlogs extend to commercial, general aviation, after market and military, Knavish said.

Vince Morales, chief financial officer, added that geopolitical turmoil is also increasing demand from the military.

EUROPE BEGINS STABILIZING
For the first time in several months, PPG is seeing some momentum in Europe, Knavish said. Industrial production is stabilizing and better order patterns are emerging in western Europe. Governments could increase spending, and Scandinavia is showing signs of recovery after two difficult years. Even the automobile sector is stabilizing.

If the stabilization trend continues and if volumes increase slightly, then the improvement should provide a meaningful boost to PPG’s earnings due to past cost cutting in Europe, Knavish said.

That said, Knavish stressed that PPG is not expecting a sharp recovery in Europe.

PAVEMENT COATINGS SUPPORTED BY INFRASTRUCTURE SPENDING
PPG sees no stop to government infrastructure projects, which are supporting demand for pavement coatings. Also, road crews have a backlog of projects because 2024 had a lot of rain and bad weather.

Demand should remain strong through the year, Knavish said.

Pavement coatings are made with methyl methacrylate (MMA).

AUTOS
PPG has gained market share among original equipment manufacturers in the automobile industry, and those share gains should allow the company to outperform the market, for which demand forecast are slightly down, Knavish said.

PPG auto refinish business is focusing on the entire system of applying the paints and coatings, which allows it to weather inherent bumpiness in the market.

Focus article by Al Greenwood

Thumbnail shows paint, one of the products made by PPG. Image by Shutterstock.