PPG Industries (PPG) Q2 2025 earnings call transcript

Good morning, everyone. My name is Carly and I'll be the conference operator today and it's time I would like to welcome everyone to the second quarter PPG Addings Conference School. All lines been placed on mute against any background noise. After this week's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by one on your telephone keypad and to withdraw your question, be star followed by two.

It's all like everyone on opportunities to ask a question. The company requests that each analyst asks only one question and I'd like to turn the conference call over to Alex Lopez, Director of Investor Relations. Please go ahead, sir.

Thank you Carly and good morning, everyone. This is Alex Lopez. We appreciate your continuous interest in PPG and welcome you to our second quarter 2025 earnings conference call. Joining me today from PPG are Tim Kanavich, Chairman and Chief Executive Officer and Dean Morales, Senior Vice President and Chief Financial Officer. Our comments relate to the financial information released after U. S. equity markets close on Tuesday, July 29, 2025. We have posted detailed commentary and the accompanying presentation slides which are being shown on these web tests. On the investor center of our website PPG. com, following management's perspective on the company's results, we will move to a Q&A session. Both the prepared commentary and discussion during this call may contain forward-looking statements, reflect the company's current view of future events and their potential effect on PPG's operating and financial performance.

This statement involves uncertainties and risks, which may cause actual results to the firm. The company is under no obligation to provide subsequent updates to these forward-looking statements.

The presentation also contains certain known gas financial measures. The company has provided in the appendix of the presentation materials which are available on our website because reconciliation of these known gas financial measures to the most directly comparable gas financial measures. For additional information, please refer to PPG filing with the SEC.

Now let me introduce PPG Chairman and CEO Tim Kanavich.

Thank you, Alex, and welcome everyone. I'll start by providing a few highlights from our second quarter 2025 financial performance, and then I'll move to our outlook. Our results demonstrate the strength of PPG's global business portfolio in an increasingly dynamic macro environment. We delivered net sales of $4.2 billion with an increase in organic sales of 2%. Our momentum in organic sales growth was led by our aerospace coatings, protective of rain coatings, and packaging coatings businesses. In addition, sales volumes in our industrial coating segment outpace the industry, reflecting the initial benefits from share gains in our packaging, industrial, and automotive OEM businesses. We expect the benefits from these share gains to accelerate in the second half of 2025.

Regionally, we delivered organic growth in both the United States and Latin America with tepid demand in Europe, and some softening in Asia. We delivered a quarterly segment EBITDA margin of 20.3%, and our adjusted earnings per diluted share was $2.22. Our balance sheet remains strong, and we are committed to using this balance sheet for shareholder value creation. During the company repurchased approximately $150 million of stock, bringing our year to date total to $540 million. Additionally, in July, we raised our quarterly dividend per share by 4%, demonstrating our confidence in the resiliency of our business and the strength and future growth of our company.

Looking at each of our segments in the global architectural coating segment, positive selling prices in both regions were offset by lower volumes and the impact of a divestiture. In architectural coatings, AMIA, organic sales growth in a Nordic region and in the United Kingdom were offset by lower demand in Eastern Europe. While volumes remained lower in the quarter, we saw evidence of improvement in certain countries, albeit inconsistent.

In architectural coatings, Latin America and Asia Pacific, we delivered organic sales growth in Mexico, aided by solid retail sales while results were impacted by the pause in project related spending that we discussed in April. It is important to note that while project related spending was down year over year, we did recognize improvement versus the first quarter of 2025, and we expect continued improvement of project related spending to progress during the second half of 2025. Segment EBITDA margin decreased, driven by the business divestiture, lower sales volumes, and unfavorable currency translation, partially offset by strong cost control actions. The performance coding segment delivered record net sales and earnings with a 6% increase in organic sales, driven by both higher selling prices and sales volumes.

Within the segment, aerospace delivered high single digit percentage organic sales growth with record quarterly sales and earnings. Customer order backlogs were stable at about $300 million, even with growth related investments that improved our manufacturing output in the quarter. Our unique technology position remains a strong growth engine for PPG. We are investing both OPEX and CAPEX in aerospace to deliver continued solid growth well into the future. In automotive brief initial, organic sales decreased by a low single digit percentage versus the prior year. In the US, organic sales were flat despite lower industry collision claims as we benefited from both share gains and customer order patterns. Organic sales outside the US were down with modest sales volumes declines in Asia and Europe.

In the second quarter, the company grew the number of PPG link subscriptions as well as moonwalk installations. And I'm proud to say that in July, we're installing our 3000th moonwalk, further supporting customer productivity and customer partnerships. We do anticipate lower volumes in the third quarter in refinished due to normalization of customer order patterns. Protective and rain coatings delivered double-digit percentage organic sales growth supported by increasing global demand for our technologies and our recent share gains. This was the ninth consecutive quarter with positive year-over-year sales volume growth in this business. And we are continuing to increase our growth related investments to support the demand for our leading products. Traffic solutions delivered mid-single digit percentage organic growth in the quarter, driven by share gains and strong demand outpacing industry growth rates.

Segment EBITDA was up 8% year-over-year reflecting the organic sales growth as our various growth investments in the segment are yielding initial benefits.

In the industrial coding segment, second quarter sales volumes for the segment were flat, which is an improvement versus recent quarters and demonstrates the initial benefits of our share gains. Selling prices declined 1% due to carry over of certain index-based customer contracts. From a business unit standpoint, our automotive OEM business delivered volume growth in Asia and Latin America, which was offset by lower volumes in the US and Europe, reflecting industry production declines in those regions. In the third quarter, we expect to grow above industry levels driven by the conversion of already awarded customer share gains.

Our industrial coding's business unit sales volumes were flat as share gains were offset by lower demand in Asia-Pacific in the United States. Selling prices declined in industrial coding due to lower index-based prices. Packaging coding's organic sales increased pay high single digit percentage year-over-year driven by share gains growing significantly above industry rates. We expect additional benefits from customers converting to our technologies due to expanding BPA regulations in Europe. Segment EBITDA margin declined year-over-year due to the silica's divestiture, as well as lower selling prices, which were partially offset by strong cost-control and productivity actions.

Looking ahead for the segment, growing benefits from share gains are expected to drive low single digit per sales volume growth in the third and fourth quarter. And this combined with improved manufacturing performance will drive earnings and margin expansion.

Now, let me talk about our balance sheet and cash. During the quarter, we completed about $150 million in share repurchases and paid approximately $150 million in dividends. Year to date, we have purchased $540 million in stock and paid approximately $310 million in dividends. We retired 300 million euro of debt during the quarter, and we have another $600 million of euro debt maturing in the fourth quarter.

Our balance sheet remains strong, which continues to provide us with financial flexibility, and we remain committed to driving shareholder value. Looking ahead, I am genuinely excited about our sales and earnings growth momentum for the second half of the year and beyond. Even though the current macro environment remains highly dynamic, we have proven that our well-positioned portfolio is navigates well and performs during periods of uncertainty. Of course, we're monitoring the tariff situation and we'll react accordingly with pricing actions and or further self-help actions in order to mitigate any financial impacts. We have not experienced any significant change to our raw material pricing, and we expect low single digit inflation for the year as our suppliers continue to favor volume over pricing.

We expect growing benefits from our aggressive self-help and discretionary cost management programs as we move forward through 2025 and beyond.

We see structural strength in our performance coding segment driven by our technology advantage products and aerospace and protective and marine, which we partially offset by lower automotive automotive refinished sales volumes in the third quarter driven by customer order patterns.

We expect European architectural coding volumes trends to remain tepid and anticipate project related spending in Mexico to improve as we move through the second half of the year.

We expect increased momentum in the coming quarters for our industrial coding segment. While second half automotive OEM industry demand forecasts are below prior year, our share gains are beginning to yield benefits and we expect to outperform the market. We sized our annual share gains in the industrial segment at $100 million and we are attracting to that annualized figure.

Finally, with the acceleration and volume growth, we anticipate driving high single digit percentage year over year earnings growth for the company in the second half of the year. This will accelerate through both quarters, resulting in a mid single digit percentage increase in EPS for the third quarter and a low double digit percentage increase for the fourth quarter. We are reiterating our four year guidance per share range of $7.75 to $8.05 and we have a clear path to achieve it.

In closing, we're benefiting from our sharpened portfolio with technology differentiated products and services that will deliver growth above industry levels. Additionally, we are aggressively managing the bottom line, including decisive self-help combined with our disciplined capital allocation and strong balance sheet will enable us to deliver sustainable top line and bottom line growth and shareholder value creation. Thank you to our PPG team around the world who make it happen and deliver on our purpose every day. And we appreciate your continued confidence in PPG. This concludes our prepared marks and now would you please open the line for questions.

Thank you very much. We now open the lines for Q&A. As a reminder, if you would like to raise a question, please press star full up by one and go to the phone keypad. And if you'd like to remove yourself a line of questioning, be star full up by two. Tell everyone an opportunity to ask the question the company requests to each analyst ask only one question. As a reminder to raise a question, be star full up by one.

Yeah, thanks for the question, John. Yeah, I'll start with Europe. So we saw what we thought was the start of momentum at the end of Q1. And we expected that to continue to improve in Q2. And frankly, it didn't largely driven by Eastern Europe. We did see that positive momentum from late Q1 continue into the Nordics, which of course is our legacy ticker real of business. And that's doing well now. We saw positive momentum in UK and Ireland. We saw positive momentum in the Benelux France, I would say it was OK. But the negative that we weren't expecting at the end of Q1 was Eastern Europe. So with architectural Europe, we're really expecting combined more of the same.

But as that happens, John, we continue to take more and more cost out. And we're positioned well. We track the share very closely and we're confident in our share position and we're gaining share in our larger markets. So any little stimulus of any kind will bode very well for us in margin and leverage.

Moving on to Mexico, we did see retail recover, which was promising. I remind you that we were in Mexico for architecture. We were actually down in sales in Q1 minus low single digits. We're up in Q2, positive low single digits. So we're starting to see that led by retail. Project work is sequentially improving and we expect that to play out through the rest of the year.

Now, on the margin side, of course, there's some effect by what I just described on volume. A couple other things that impacted our margin for the architectural coding segment for Q2. First of all, the effects, the imbalance in effects improvement in Europe versus Mexico led to a net negative for us in margin. The Mexico B2B volume still being down. That's very good margin business for us. You may have seen in this slide, we talked about a supply chain disruption that was an internal disruption in Australia that hit us for the quarter. That's transitory in behind us.

Finally, that divestiture was above segment margin. So it's a combination of all those things that led to a lower than expected margin for the quarter across architectural, John. Got it.

Thank you very much. Next question, constant David Belletta. David, your line is not open.

Is that good cadence for volume growth you're looking at in the back half of the year? Hey, David. We're proud of what we did in volume for the first half of this year, particularly as we see a bunch of other reports coming out. We expect that to accelerate in the second half of the year. Let's call it low single digits and moving up that low single digit ladder. How's that as we move through the second half of the year? We feel quite confident on that, and that's why you may hear a little kick in our step this morning is because we finally reached. If you remember back, I think we started this at the end of Q3 last year talking about share wins that we had, and we were expecting the second half of 25 to be much better for us, and it's here.

We feel really good about both volume and frankly EPS growth as we move through the second half of the year.

Our next question comes from Michael Sizzent from Wells Fargo.

That seems to be pretty impressive. Thanks, Mike. Refinished. It was down low single digits, but I think we're flat for the year through the first half of the year, and everybody on the first half of the year. We're pretty proud of being flat at the midway point. Now, as we move forward, I did say that we're expecting Q3 to be soft because our strength in the first half of the year was driven by share game and some distributor order patterns, and we expect the share games to continue, but we do expect swinging of that distributor order pattern for Q3. So I would expect Q3 to be a bit soft, Q4 to be more normalized, but really we're not expecting industry recovery of claim rates and body shop work likely until 2026.

There's a bunch of factors here on affordability of insurance, people not submitting claims, a number of other factors that we expect to play out through the remainder of 25, and we'll get it like a more normalized, like down low single digits on volume and claims up a couple of points on price as the normalized model, and we expect that to return in 2026.

Yeah, Mike, this has been in addition to the core paint volumes Tim's talking about, just a reminder, we do have a subscription model with our out of the can moonwalk link ecosystem, so that's helping us buffer the industry claims. So that subscription model certainly continues to grow as Tim alluded to in the prepared remarks, so that's a unique item for PPG that benefits us.

Yeah, look, at the end of the day, this is a world-class marquee business for PPG for the midterm, long-term, and even today in this challenged claims and body shop activity environment, it's still a marquee and outstanding business for us, and we'll continue to grow in it, even more so as things normalized next year. Now, a PMC business, nine straight quarters of solid growth, super strong in Amaya and Asia Pacific in particular, not weak in the United States, doing okay here too, but we see that continue to do well into the rest of this year, and at least through 26. We've got some really advantage technologies in that business that have really taken hold in the areas of marine aftermarket, in the dry dock space, some fire protection, and other technologies that we've been launching over the last couple of years.

So we're bullish on that business certainly for the foreseeable future when it comes to PMC.

Thank you very much. As a reminder, to raise a question, we start followed by one on your telephone keypad. Our next question comes from Jerry Fisher from Goldman Sachs. Stuffy, your line is not open.

Yep, thanks, Stuffy. Happy to take that question. I would point to two things. Number one is because of the size of our business in Mexico, we buy a lot more there than any of our peers, and the effects impact affects the raw material inflation because a lot of that is purchased in dollars, okay? So that's one. The second piece, depending on who you're talking about, if you're largely an architectural coding company, you don't buy a whole bunch of epoxy. And epoxy is one piece of the basket that's actually gone up, and this was pre-April 2nd. There were some tariffs already put in on epoxy that affected pricing, and we had that build into our guide from the beginning of the year.

So I would say, depending on who you're comparing us to, those would be the two big differentiators. If you end up in the Mexico situation, similar to other businesses in Latin America, our business is able to price through that inflation, so it's not as impactful on the bottom line. So again, if you're comparing us price and raw materials, we feel we're certainly holding our own.

Thank you very much. Our next question comes from John Roberts, John, the line is not open.

Hey, John, on the buybacks, I've been pretty consistent since I took the job, and I hope I've gotten some credibility there that we're not going to let cash build on the balance sheet. I said that when I took over, we repaid some debt, and now for seven straight quarters, we've been doing buybacks. There was a bit of a step down in Q1, only because Q1, we had to divestiture cash, so that changed the calculus a bit as far as how much we would buy in that quarter. So that's what drove the step down. We assessed it at the end of every month, frankly, and to the extent I don't have a better use of cash to drive shareholder value, you should expect me to continue to behave as I have over the last seven quarters.

Now, M&A, the only super hot one out there is the one we all know about coming out of Germany, and we're only interested in one piece of that, and that's not consistent with their playbook on how they want to move forward with a transaction. Beyond that, we're looking at very small things as they come along, but nothing material that would affect our cash playbook here on the foreseeable, at least short-term horizon, John. You should expect to see the same behavior on me that you've seen since I took the job. Thank you.

Thank you very much. On the next question comes from Kevin McCarthy from High School Research Partners. Kevin, your line is not open.

I think on the industrial side, you quantified the gains as 100 million, and just trying to level set or benchmark against that figure on the performance side of the house. Sure. Well, 100 million, I said most of it is automotive OEM, second place would be industrial coatings, and as you know, packaging is in industrial, so packaging would be third place. Packaging specifically, there was some share shift that we knew coming into the year in the U. S. would be in the opposite direction for us, because we picked up some temporary business over last year. So we had that built in that was known, but we've more than offset that. We share gains in Europe, and some share gains here with some of our new BPA and I technology.

So the net net is what we've been net winning despite that known share shift that would happen here in the U. S. On the protective and marine, I mentioned a little bit about it. That is really being driven by a couple of new technologies that we've launched in the last few quarters. You probably saw one of them at the investor day in Sigma Glide, another one, another marine dry dock product called sale advance, which is copper free. It's starting to take off. We've got some really great fire protection products that we've launched in the last year or so, Kevin. So that is much more technology driven, and those things are really starting to get some momentum.

So hopefully that's given you enough insight there.

Yeah, and I'll pick up the rest of the performance that Kevin has been. We're well above traffic, you know, U. S. , Canada, industry volumes. We're probably 2x what we're seeing in the industry. It's a very strong industry right now as infrastructure continues to take place. No question in aerospace. We're continuing to serve a very hot market, but our performance there, including some of our debodelneking, is allowing us to outperform that market. And as Tim alluded to earlier, we've outperformed and refinished very clearly. So we talked about that. So if you look at our performance segment in Q2, all four of our businesses out through their market, and as we said in the prepareder marks in Q3, we expect in our industrial segment all three of those businesses to outperform market.

Thank you very much. Our next question comes from John Sean Punjabi from Bed. John Sean, your line is not open.

Yeah, thanks, Gosh. And of course, of course, it's a very uncertain market. It does that uncertainty probably hits outside of Mexico. The issue's there. It probably hits the industrial segment, the hardest. So that confidence that you're hearing from us for the second half is entirely share gain driven. You know, the actual segment demand, and it does change every day, as you as we all know, but the actual segment demand, I would say, is, you know, flat to stable in most of our end markets. Some of them being a little bit depressed, of course, like auto builds in in US and Europe. You know, some consumer products in the industrial space coming from Asia, they were exported to the US.

Of course, those are a bit, a bit depressed, you know, heavy duty equipment, a bit depressed. But you know, the aggregate, I'd say, is flat to slightly down from an industry standpoint. But it's our share gains that are already launching. Some of them launched and some of them launching as we speak that give us the confidence across all three cities. Okay, gosh, if I could just add that to that, in most of these businesses we're talking about here, we do not see a stacking of inventory in the chain.

So we're certainly not, we're certainly beholden to the global macro and the tariff discussion.

But there's not a, there's not a big inventory reaction that we would expect either way, regardless of what happens with Thank you very much. Our next question comes from Frank Mitch from Ferriam Research LLC. Frank, your line is now open.

Thank you. Yeah, Frank, as we look again, the most sensitive segment for us as it relates to the global macro in the near term is that industrial segment. We did, obviously in early April, we talked about this on our April call. We did see some customer concerns around the tariffs. As we, as we progressed through the quarter, we saw a normal order pattern return. We didn't see it. It wasn't jagged, etc. I think most people most people absorbed psychologically the impact of the tariffs and we moved forward.

And again, no, no significant changes throughout the quarter in order patterns. Tim talked about it earlier, a little softer in Europe than we wanted, some softening in Asia, again, to be expected. But beyond that, no significant impacts. On a currency basis, we were negative, franking in Q1 on a translation basis that reverted to much less than negative in Q2. We expect the back half of the year to offset what happened in Q1 on a year to eight basis. We're closer to zero.

But as we acted at the quarter on volumes, we didn't see any pull forward into Q2.

Thank you very much. Our next question comes from James Hooper from Bernstein. James, your line is not open.

Thanks, James. I think the way to think about it is the share gains that we've had, you should expect them to be at segment average from a gross margin standpoint. But the volume element of it, as we launch them, will improve our net margin, obviously with the fixed cost leverage that we'll get from them, the manufacturing efficiencies.

So that share gain launch, as we move through the second half of the year, you'll see not only the top line growth from that, but you'll see the net margin expansion as we move through the next two oars.

Thank you very much. As a reminder, if you would like to raise a question, please press star flip by one on your telephone keypad to remove your staff and line of questioning. We'll be star flip by two.

Patrick, so we are anticipating high single digits and double digits, depending on what quarter you're lapping, high single digits and double digit growth, frankly, for the foreseeable future. I meet with a lot of the CEOs of these companies and every one of them, whether it's military, general aviation or commercial aviation, is, you know, their forecasts are extremely strong. And when you combine those through, you kind of get this exponential impact on us because we get the top line margin and the leverage across the whole business. So, you know, that's why we are, you see us investing both off-x and capex so much. You know, we just announced a new aerospace factory in the United States, this past quarter at about $380 million capex cost and we continue to invest in de-bottle-necking.

So, you know, I don't see an end to this high single digits, low double digits kind of growth trajectory for at least as many quarters as we're projecting.

Thank you very much. Our next question comes from Vincent Andrews from Morgan Stanley. Vincent, your line is not open.

So, what we're hearing, as you would expect, given the reach of our business down there, we're pretty well connected, you know, not only to the key, you know, government entities, but to the large project owners, the project managers, the contractors. And as far as the sequential improvement, Vincent, there's a lot of these projects that are already in flight. And so, they're kind of dialing back rather than complete stop on the spending. And then as we move forward here, the initial pause from April, you know, they're starting to complete and move forward with completion of some of those projects that were already in flight. Beyond that, there's a high degree of confidence from the folks that we talked to on the ground in Mexico that once our two presidents come to some kind of agreement that that will open the flood gates, and you know, there'll be some tariff, I'm sure.

I don't have no idea any more so than anyone else does or what that end game will be. But the advantage that Mexico has and will always have is proximity. So, even if there's some tariff that adds costs to goods coming from Mexico to the United States, relative to all the other alternatives who are also getting tariff, it's still in a significantly advantaged position. It's got a strong workforce, a well-educated workforce, a highly productive workforce, and proximity. And, you know, tariffs can't put a notion between us and Mexico. So, I guess the combination of projects and flights starting to restart, and this pretty high level of confidence that wherever the two governments end up, Mexico will still be in an advantaged position.

You know, just to get to your second question, what's built into our guide, we look at Q2, organic growth in Mexico with low single digits, again retail up, our project business down, and we look at the second half holistically, we have that business up modestly to mid-single digits. So, it's not a significant step up in terms of total PPG, but again, a step up sequentially from first half to second half for the project work and continued growth in retail.

Thank you very much. Our next question comes from Aaron Viswanathan from RBC. Aaron, your line is not open.

It's a number of the things that you mentioned. I'll try to talk about each one of them. Clearly, we have the share gain momentum that's kicking in now. That's one piece. You know, the longer term fundamentals for this industry and growth are still there. There's still a deficit in new vehicles. You've got fleet age, you've got car park per capita in places like India and China. So, the fundamentals are still there, especially given that the whole world has been pretty much underproducing since COVID. So, longer term, the fundamentals are there. So, you've got this short term share gains, and we do expect to start to see stabilization and increase in builds as tariff dynamics and inflation and other there's just a, you know, until we get through some of this period of uncertainty, there's an overall lack of confidence that's holding back auto purchases.

Yeah, and we said in our root incidents, we said in our prepared remarks, you know, we're at industry in terms of volume demand, and we certainly expect in the second half of the year continuing into 26 us to outperform the industry. Share gain, part of that, a couple customer specific issues that we're seeing that were negative to us. The back half of last year will be beneficial to us in the back half of this year. So, those, and we still have very good positioning in China where retail sales were out double digits in the second half and production didn't match that.

Thank you very much. Our next question comes from Masjidio from Bank of America.

Yeah, just so clarification, the restructuring benefits we earmarked for this year were 75 million full year growing throughout the quarter or going to the growing throughout the year. We're about a 30 million dollar clip through the first half. So, we'll still grow incrementally in the second half beyond what we saw in the first half, but if it's not an incremental 75 million dollars. Again, as we look at price costs, we still expect the same inflation, raw material inflation rate. We do expect some incremental pricing to benefit us in the second half versus the first half as we put some price increases in in the second quarter in certain businesses.

Thank you very much. Our next question comes from Alexey from from Keyport.

Yeah, I think Ryan, I think that it's certainly doing better than the rest of the world as far as production outlook. That drives, given the lack of volume in the rest of the world, that drives a competitive dynamic. And you know, our technologies are really productivity focused. And so we do get an appreciation of that from our customers in the automotive OEM space. You know, EVs are doing better in China and one company in particular who we are number one with is doing better than the rest of industry. And you know, about one out of every three cars produced in the world, it comes from China. So you add all those up and China is actually acting as a buffer to us in auto OEM relative to what's happening in US and Europe.

Yeah, one other thing I would add Ryan is if you look at exports from China, they're up about 10% through the first half of the year on a year over your basis. That's another growth element coming out of China, which is driving you out of production.

Thank you very much. Our next question comes from Josh Spector, UBS.

Again, as we talked about earlier, Josh, a couple factors at play here. Most meaningful was the mixed difference between Mexico and our non-Mexico business. So with Mexico B2B down, there's a mixed impact. As we talked throughout the call today, we expect that to become less of an issue as we progress through the year. The FX impact normalizes in the back half of the year. So both on raw materials, as well as there's an FX impact between just Europe and the Mexican peso.

We did have a tree inventory issue in Australia to put that in order of magnitude that heard our volume on a year over year basis by half a turn. So 50 basis points. So it was impactful on our bottom line as well. As Tim alluded to earlier, that was primarily contained in Q2. And then so those are the big impacts. I think you'll see us return to a normal incremental margin in the some of these FX and one-time events fall by the way.

Thank you very much. As a reminder to raise a question, be starful if I want.

You know, we're out performing and we'll continue to outperform in aerospace. Refinish, you know, you didn't mention that when I'm guessing that's because it's, you know, you were focused on the chemistry related innovations, but refinish, we will continue to launch innovations outside the can, some of which you would have seen when you were here that drive shop productivity and digital tools, et cetera. We expect to continue to outperform there. You know, our traffic business, now that we've got it cleaned up and it's only focused on the country where we have a super strong position, we'll continue to perform and outperform there as, you know, as highway projects and infrastructure are invested in. Protective and marine, you know, as I said earlier, no land in sight to particularly our outperformance in the areas of fire protection and marine aftermarket.

This packaging dynamic in Europe, of Europe increasing BPA regulations, that plays to our advantage and that'll play out in the next couple of years, 26 and 27. You know, COMEX, PPG, Mexico, will, you know, once we get through this transitory issue with projects, spending being paused, that that'll continue to be an area of outperformance for us. I think share gains in industrial coatings where we, frankly, across many of our segments where we have a strong product and service offering that are underrepresented and share, as we focus more acutely on the areas where we have a strongest right to win, you'll see that business outperforming. And look, at the end of the day, Chris, you know, our algorithm for growth, you know, combination of our talented people, are much more focused and sharper, the kind of future facing portfolio, much more disciplined around our enterprise growth strategy and where we invest and where we have the strongest right to win.

Our three new, crisply defined operating segments that drive, you know, distinct missions, distinct value propositions, distinct investment criteria. The three-pronged innovation approach that you heard about when you were here between chemistry inside the can, digital productivities outside the can, and then the use of AI, not only for productivity internally, but also customer facing use cases. And the key enablers of a lot of work that we're doing on op-ex and commercial excellence, the, the outcoming of that is what we are committed to what I laid out two years ago, which was ongoing a two to four percent organic growth company that delivers an eight to 10 percent EPS growth every year and a billion dollars of adjusted free cash flow.

So that's, that's kind of our growth algorithm. When you take everything I described in each of the businesses, plus what we're doing to build this organic growth in margin machine, we're comfortable that those commitments that we've made to the investment community are in fact what we'll deliver.

Yeah, and that's pretty casual number, you know, everybody recalls it, it includes the, the deduction for capital spending.

Thank you very much. Our next question comes from Jessica Corgas from JP Morgan.

Your incrementals were in the low. Yeah, Jeff, this is Vince. We are tracking ahead of per our year in cash from operations. Certainly, as you're well aware, most of our cash flow because of the seasonality of our businesses is back half-weighted. We still have, you know, we still have our normal blocking and tackling to do as it relates to inventory management as we come out of the peak seasons with collections from our customers. But our expectation is for our cash to grow on a year of your basis or cash them off to grow on a year of your basis.

Yeah, Jeff, on the margin question, of course, I would have wanted the net margin for performance coatings to drop more, you know, even die in cash to the bottom line. But we made a conscious decision coming into the year. I mean, this segment is 25.7% EBITDA segment, strong growth of mid-single digits in a very difficult operating environment. It is a shining star right now, and we want to capture as much of that value as we can for the future for our shareholders. So we made a conscious decision to make some fairly significant investments, particularly in aerospace and protective and marine and some digital investments in refinished, so that we can keep this thing running like it is and growing into the future, Jeff.

So we made a conscious decision to spend more on on op-ex growth focused op-ex for things like de-bottle-necking in aerospace, digital initiatives in refinished and, you know, feed on the street and penetration initiatives in protective and marine.

Thank you very much. As a reminder to raise a question, we'll be start followed by one.

Yeah, so I'll take the first part of it on architectural. We did adjust down our outlook, particularly for Europe. We were disappointed in Europe that the momentum that we saw in late Q1 didn't continue in the Q2.

So we thought the prudent thing to do going forward was to assume that it would be current state plus our share gains that would drive and did not count on any market recovery. So the flip side of that, Aaron, is that any stimulus, any catalyst, whether it be the impact of a tariff agreement, whether we see some progress in Ukraine, whether we see some progress in the Middle East, anything that would give a little bit of consumer confidence in Europe would be a positive to what we have guided in our revised guide for architectural Europe, because actually the household balance sheets are pretty strong, generally speaking. So it's much more about consumer confidence. Yeah, you know, an industrial, very modest decrement to our prior guide, really relating to what we saw in Q2 in China, just carrying forward, again, I would call it more rounding in terms of percentages.

Thank you very much. We currently have no further questions, so I'd like to hand back to Alex Lopez for any further remarks.

Thank you, Kathleen. We appreciate your interest and confidence in PPE. These concludes our second-order earnings call. As we conclude today's call, we'd like to thank everyone for joining, even our disconnectual lines.