Operator: Our next question comes from John Roberts with Mizuho. Your line is open, please go ahead.
John Roberts: Morning. Is your China strength primarily China for China? Or is it the strong exports of cars that we’re seeing out of China?
TimKnavish: Yes, hi John, it’s both. But I mean the vast majority of the vehicles that we paint in China stay in China. The exciting part on the export side is the largest producer EVs now in the world, a Chinese producer is beginning to export. So, that will just be incremental upside but the vast majority of the cars that we paint in China stay in China.
Vince Morales: Yes. And John, I think for our book of business, again, 2023, especially at the beginning part of 2023, it was a tougher year. We’re starting to see industrial and some of our other businesses kind of turned the corner in the fourth quarter and now heading into 2024.
John Bruno: One more John from John Bruno, outside of auto OEM, a very high percentage of the coatings we sell in China or for products that stay in China.
Operator: Our next question comes from Josh Spector with UBS. Your line is open, please go ahead.
Josh Spector: Yes, hi. Thanks. So, I wanted to follow-up on industrial pricing. So, when you’re talking about down modestly for the first quarter year-on-year, maybe it’s 50, 100 basis points, I guess, in the frame of that, does that is it stabilized at that level through the year? Or do you expect it to decline? So, kind of, separating the energy give back from maybe some of the index pricing. And I guess when you look at this longer term then, what does this mean for margin potential for the Industrial segment? Are we looking at more normal incrementals from here to price raw still play into that? Or what are the factors that maybe move the margins up from the current level beyond this year? Thanks.
Vince Morales: Yes, Josh, let me start, and I’ll let Tim add some color here. But we did — I just want to remind people — and again, we talked about this in opening comments in our prepared remarks we released last evening. Just a reminder, Q1 last year in Europe, there was exceedingly high. Energy costs, natural gas costs were $30 to $40 per MMBtu depending on the day. Most companies, PPG included invoked surcharges to pass those through that. We’re lapping that in Q1 of this year. That is a third to half of our price decline in the first quarter in the Industrial Coatings segment. And the remainder is organic based on the indices that Tim was talking about. Tim you have some color here?
TimKnavish: Yes, I think the question about margin expansion beyond what Vince described in pricing is the volume leverage will be significant on the industrial segment because that’s the segment that really got hit the hardest during COVID and COVID recovery and so we’ve still got significant margin upside driven by volume leverage. The other side, if you go back to our CEO Day in May in New York, we pointed to about $150 million to $200 million of manufacturing productivity gains that we had line of sight to in the coming years, really, not just to get back to where we were pre-COVID, but also as we modernize, automate, digitize our operations. So those will really be the two levers that get us to the next horizon on margin largely across the industrial segment, but somewhat also in the Performance Coatings side.
Operator: Our next question comes from Kevin McCarthy with VRP. Your line is open. Please go ahead.
Kevin McCarthy: Thanks and good morning, everyone. Tim, would you elaborate on your volume outlook that’s embedded in your 2024 guide? Would you expect volumes to be flat or up a little bit? Part of the reason I ask is we’ve seen many chemical companies suffer from volumes that are trending well-below real GDP. And so as you look across your portfolio and survey and forecast, do you think we’ll see convergence in 2024? Or are there pockets of residual destocking or other headwinds that might make that more ambitious?
TimKnavish: Yes. Hi, Kevin. So first of all, we’re going to have positive volume in 2024 for the year. I would – our sales, we said, are going to be up low single digits, we might have to start putting a fourth letter there because I think the – I’m sorry, the volume will be a little higher on the low single-digit side and the price will be a little lower on the low single-digit side. But we have volume momentum for really five quarters now, minus three, minus two, a little lighter, minus two, our fourth quarter. We rounded it up to minus one. It was actually less than minus one. We’re looking at a zero for Q1. And that includes the impact of the Walmart load in. It includes the shift from of Easter from one quarter to the next.
So we have momentum on volume, some of it just because of the diversity of our portfolio and where we participate, but some of it because of the growth initiatives that we’ve worked on throughout 2023, where we’ve picked up share that will start to kick in this year. I think about our packaging coatings business, our Industrial Coatings business, our refinish coatings business. So it’s really the positivity on volume is one even though they’ve had negative numbers in front of them for much of 2023, we do have volume momentum. We see it flipping in early 2024. And it’s a combination of strength of our portfolio positioning and execution on our growth initiatives.
