The hardest job at PPG today is being a plant manager.
“They wake up in the morning, check their phone to see how many people called off sick,” said Michael McGarry, PPG’s chairman and CEO, speaking to analysts during the company’s fourth quarter earnings call Friday morning.
“They get to work, they go through the dock area (to) see how many trucks didn't get picked up and then they go to the receiving areas and find out what didn't come in that was supposed to.”
Inside the plant, they must to decide what products will get made in smaller batches because of a lack of raw materials.
“And then the sales team is telling them, ‘If we don’t get paint out the door, here’s how many customers we’re going to impact.’”
All this before they sit down at their desk in the morning.
This, in a nutshell, is what Downtown-based coatings maker PPG is facing across its footprint.
The company reported net income of $1.4 billion, or $6.01 per share, for the full 2021 year. That’s an increase from the first year of the pandemic when PPG posted $1.1 billion in profit, or $4.45 per share, but less than the recovery expected based on demand for PPG’s products. Revenue was a record $16.8 billion in 2021, boosted by recent acquisitions including the $1.8 billion deal for Finnish paints-maker Tikkurila, which closed in June.
The virus continued to wreak havoc on manufacturing, with some plants reporting up to 40% of workers out at one time. Omicron increased COVID-related absenteeism four fold, Mr. McGarry said.
“What we’re really worried about is if omicron gets to China,” he said.
The world’s most populated country has had a restrictive zero-COVID policy since the beginning of the pandemic. During a recent small outbreak in Tianjin, the site of PPG’s largest manufacturing plant, China tested 14 million people in a matter of days, Mr. McGarry said. The country imposes severe restrictions on places with even a handful of cases.
“So if omicron were to get to China and they continue with their zero-COVID policy that could have a pretty disruptive effect,” he said.
But COVID isn’t the only thing disrupting the bottom line. Raw materials prices were up by 20% during in 2021 and up to 30% this quarter, PPG said, as the company raced to raise its own prices to offset them. Labor and utilities costs have also increased, with transportation being disrupted by a shortage of trucks and drivers, according to Mr. McGarry.
“Freight is the single biggest challenge we have right now — truck drivers not showing up,” he said.
These difficulties, which prompted PPG to pull its financial forecast in September, will continue in the first quarter this year, company leaders predicted. But they are expected to ease as 2022 rolls on and the coatings giant stands to benefit from a substantial order backlog, the ramp up of auto manufacturing, a return to the skies in the post-omicron period, and a push towards more sustainable, metal packaging products.
“If we could make product, we could sell product,” Vincent Morales, PPG’s CFO told analysts.
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