Dive Brief:

• PPG Industries diversified resin suppliers and increased its in-house manufacturing capability last quarter as it contended with rising utility costs and high raw material prices, Chairman and CEO Michael McGarry said on a Q4 earnings call Friday.
• The paint and coatings maker is raising its prices and adding production capacity for resin, an essential paint ingredient, in the U.S. and Mexico amid the difficult conditions, McGarry told analysts.
• Labor difficulties also hampered production, as omicron-related staffing shortages hit the company’s work sites. "Recently, some of our manufacturing facilities have had up to 40% of their workforce out," McGarry said.

Dive Insight:

Resin suppliers and the businesses relying on them faced supply shortages and high prices for much of 2021, in part because of severe weather closing factories. Prices dipped at the end of the year after surging since May 2020, according to the Producer Price Index, which measures monthly changes in commodities prices.

PPG’s raw materials costs rose by about 30% YoY in Q4. Transportation costs also spiked with a lack of available trucks and drivers, and the company experienced "manufacturing interruptions at both our facilities and our customers’ operations stemming from COVID," McGarry said on the call.

"In several businesses, we continue to face certain raw material shortages, with the biggest impacts in U.S. architectural coatings and traffic solutions," McGarry said on the call.

PPG's efforts this year will continue to expand its internal manufacturing capabilities, which helps shield the company from some of the issues facing the industry, McGarry said.

"PPG has in-house large-scale resin manufacturing in each major region, and we are expanding our capability in 2022 to mitigate future risks," the CEO said.

The company's prices are "getting close to raws or exceeding them, depending on the business," CFO Vincent Morales said on the call. It plans another price hike in Q1. "We expect some year-over-year recovery there."

But higher sales and increased prices last quarter did not sufficiently offset inflation, supply disruptions and "operational inefficiencies" McGarry attributed to a rapid increase in COVID-19 cases within PPG's workforce and those of its customers and suppliers. He said coronavirus-related absences have continued in January.

"Once we see some normalization, we are confident that we will quickly be able to return our legacy of strong manufacturing performance," he said.