PPG Industries, Inc. (PPG) Earnings Call Transcript

Good morning. My name is Warren and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2026 PPG Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Alex Lopez, Vice President of Investor Relations and Operational Finance. Please go ahead, sir.

Thank you, Warren, and good morning, everyone. This is Alex Lopez. Joining me today from PPG are Tim Knavish, Chairman and CEO; and Jamie Beggs, Senior Vice President and CFO. Our remarks relate to the financial information released on October 27, 2026. Supporting materials are available in the investor center at ppg.com, and we will take questions following our prepared remarks. Both the prepared commentary and the discussion during this call may include forward-looking statements and non-GAAP financial measures. Forward-looking statements involve uncertainties and risks that may cause actual results to differ. Please read our cautionary statement on Slide 2 of the presentation materials. Please refer to our presentation materials and SEC filings available on the Investor Center website for additional information and reconciliations of non-GAAP financial measures. Tim, over to you.

Thank you, Alex. Good morning, everyone. Welcome to our third quarter 2026 earnings call. I will begin with highlights from our record third quarter, and then we'll share our outlook for the remainder of the year. Before reviewing our results, I'd like to once again thank our employees for their dedication and resilience during this challenging period in many regions of the world. Please continue to prioritize your safety and the safety of your families above all else. This was an outstanding quarter for PPG. We delivered record third quarter earnings, and our teams around the world executed with exceptional discipline, driving a 5% increase in organic sales, including 2% volume growth. This marks our seventh consecutive quarter of organic sales growth. We outpaced the industry by 300 basis points, clear evidence of the quality of our businesses, our innovation, our technology and the value that we deliver to our customers. As we discussed over the past several quarters, we have been systematically building our organic growth muscle, and the results are now clearly visible. Our strategy to deliver product innovation and productivity solutions for our customers is accelerating our momentum. Third quarter net sales grew 7% year-over-year to $4.4 billion. Adjusted earnings per share increased 6% to $2.25 a third quarter record. And total company adjusted EBITDA margin was above 18%. Exceptional results in our differentiated Aerospace and Architectural Coatings Latin America businesses led this performance. Importantly, our commercial actions fully offset cost of goods sold inflation during the quarter, a significant milestone for us. We achieved this in just 6 months, half the time it took in the 2021 inflation cycle and 1/3 the time it took in the 2016 cycle. We remain focused on achieving appropriate value for our unique products and solutions with targeted actions where necessary to address inflation and market dynamics, all enabled by the innovative solutions that we provide to our customers. We also repurchased approximately $150 million worth of shares during the quarter, and our year-to-date operating cash flow is approximately $1.2 billion, about $100 million higher than last year. Jamie will provide more detail on our balance sheet and cash shortly. Turning to our segment performance. Global Architectural Coatings grew net sales 4% year-over-year to approximately $1.1 billion. Organic sales increased 2%, driven by higher selling prices in all regions. Lower sales volumes in Europe were offset by solid growth in Mexico. Organic sales for Architectural Coatings Latin America and Asia Pacific increased by a mid-single-digit percentage, driven by higher selling prices and volume growth in Latin America. In Mexico, retail sales were robust, and project-related sales grew at a moderate pace as foreign direct investment sequentially recovers. In EMEA, organic sales increased by a low single-digit percentage as higher selling prices more than offset lower sales volumes. Our European architectural business continues to benefit from strong execution of our strategy, productivity enhancements, footprint optimization and structural cost actions are improving efficiency and are driving year-to-date earnings and margin expansion. Segment EBITDAC grew 19% and EBITDA margin expanded 300 basis points to 24%. Looking ahead, we expect fourth quarter organic sales to range from flat to a growth of low single-digit percentage year-over-year, along with EBITDA margin expansion versus prior year. Our Performance Coatings segment delivered net sales growth of 10% to $1.6 billion. Organic sales increased an outstanding 8% led by 5% sales volume growth. Aerospace delivered another exceptional quarter with double-digit organic sales growth, and our order backlog remained at near $300 million. Demand for our unique aerospace products remains robust, and shortly, I'll go into more detail about the investments we are making to support this outstanding growth for today and well into the future. Automotive Refinish organic sales increased by a mid-single-digit percentage, driven by both higher selling prices and higher sales volumes. In the U.S., collision claims versus prior improved sequentially from negative 6% in the second quarter to negative 4% in the third quarter. Protective & Marine Coatings organic sales increased by a high single-digit percentage extending this business' streak to 14 consecutive quarters of sales volume growth. This included above-market marine volume growth in Asia Pacific, driven by our innovative technologies. Segment EBITDAC grew 21% and EBITDA margin expanded 220 basis points to 23.9%. In the quarter. In the fourth quarter, we expect organic sales growth in the range of low to mid-single-digit percentage year-over-year with further EBITDA margin expansion versus prior year. Now turning to Aerospace. This business is a significant growth engine for PPG, delivering its 22nd consecutive quarter of organic sales growth with quarterly year-over-year growth during that period, averaging above 10%. This year, we expect to generate more than $2 billion in sales in aerospace, making it one of our larger businesses. We are investing more than $500 million to expand capacity and improve productivity across the business. This includes a recently announced $70 million expansion of our aerospace transparencies operations in Huntsville, Alabama. This project will increase operational efficiency and create additional manufacturing capacity to support growing customer demand for aircraft cockpit and passenger windows. In addition to this CapEx, we continue to invest in aerospace R&D to further expand our technology offering. These ongoing investments, combined with our broad portfolio of highly specified products, technology leadership and global footprint and deep customer relationships reinforce our confidence in the long-term growth outlook for this unique business. In the Industrial Coatings segment, third quarter net sales grew 5% to approximately $1.7 billion. Organic sales increased 4% with equal contributions from higher selling prices and sales volumes, reflecting the benefits of new business wins and successful launches. In automotive OEM coatings, organic sales declined by a low single-digit percentage as a result of lower industry builds. Importantly, our team drove a sales volume performance that outpaced global automotive industry production. Industrial Coatings delivered strong organic sales growth of high single-digit percentage, driven by sales volume and selling price growth in all regions. This marks the second consecutive quarter of growth for this business with strength in heavy-duty equipment and general finishes, including electrical infrastructure for data centers. Packaging Coatings delivered outstanding double-digit organic sales growth with sales volumes now up more than 20% on a 2-year stack basis. PPG is benefiting from share gains driven by our advantaged BPA non-intent technologies, our global manufacturing footprint and our long-standing technical partnerships with our customers. Industrial segment EBITDAC declined 11% and EBITDA margin decreased 260 basis points to 14.4% as cost of goods sold inflation outpaced the timing of index-based pricing. Higher selling prices and volumes partially offset that pressure, and we are now beginning to realize the benefits of index pricing. In the fourth quarter, we expect segment organic sales essentially flat year-over-year. We expect the pace of EBITDA margin compression to moderate sequentially as index-based pricing and our productivity initiatives take hold. In our Industrial segment, our team continues to win additional business driven by our technology solutions that enable our customers' success. With that, I'll turn the call over to Jamie Beggs, our Senior Vice President and Chief Financial Officer, to discuss our balance sheet and cash flow as well as our fourth quarter and full year financial outlook. Jamie?

Thank you, Tim, and good morning, everyone. Our robust balance sheet continues to provide financial flexibility to invest in our businesses and return cash to shareholders. We ended the quarter with cash and short-term investments of $1.6 billion. Net debt was $5.2 billion, a decrease of approximately $200 million from the third quarter of last year. Year-to-date cash from operating activities was approximately $1.2 billion, about $100 million higher year-over-year. As a result, our net leverage moved lower to 1.8x net debt to adjusted EBITDA. We repurchased approximately $150 million of shares during the quarter, bringing year-to-date repurchases to $320 million. We also paid more than $480 million in dividends through the first 9 months of the year. Our cash deployment remains focused on maximizing shareholder value creation and maintaining a strong balance sheet. Looking ahead, our organic growth momentum and commercial actions position us well for the remainder of the year. For the fourth quarter, we expect organic sales growth of a low single-digit percentage, led by Aerospace, Architectural Coatings in Latin America and Packaging Coatings. We expect total company adjusted EBITDA margin to range from a flat to an increase of 100 basis points year-over-year. Within the segment, we expect Global Architectural Coatings organic sales to be in the range of a flat to up a low single-digit percentage. Performance Coatings organic sales are expected to grow by a low to mid-single-digit percentage while Industrial Coatings organic sales are expected to be in the range of down to up a low single-digit percentage. We expect cost of goods sold inflation to be in the high single-digit range in the fourth quarter. We plan to offset this pressure through our pricing actions as we realize appropriate value for the unique products and productivity solutions we provide to our customers. Considering our strong growth momentum and the execution of productivity programs, we are raising the midpoint of our full year adjusted earnings per share outlook and narrowing the guidance range to $7.90 to $8.10 per share. With that, let me turn it back to Tim for closing remarks.

Thank you, Jamie. In closing, we delivered record third quarter earnings, which reinforces our confidence in PPG's strategy and the strength of our business model. We delivered outstanding organic sales growth driven by both volume and price, fully offset cost of goods sold inflation, expanded earnings, delivered adjusted company EBITDA margin above 18% and generated robust cash flow through disciplined execution across our portfolio. Additionally, our outside-the-can productivity solutions for PPG's customers are growing at 3x faster than the average growth rate of our portfolio and with a higher margin profile and now represent a solid double-digit percentage of our total sales. Our customers greatly value the innovative solutions that we provide. Our investments in technology, brands, customer relationship ships differentiate us and enable us to solve some of our customers' hardest problems. Our field service capabilities and installed base keeps us close to those customers. while our channel access and global reach provide a strong foundation to serve them with world-class effectiveness. Combined with our flexible cost structure and solid financial position, these capabilities give us the capacity to invest and win. We see meaningful opportunities to drive further organic growth through innovation, share gains and continued investment in our differentiated businesses. We will also selectively consider portfolio actions to accelerate our strategy and drive shareholder returns. We are focused on creating long-term shareholder value by both investing organically and by evaluating opportunities to enhance our mix of high-growth and high-margin businesses. We will continue to allocate capital with discipline, balancing investments in growth with maintaining a strong financial position and returning cash to our shareholders. Thank you to our PPG team around the world for their focus and execution. Their dedication enables us to serve our customers and deliver on our purpose every day we protect and beautify the world. And we appreciate your continued confidence in PPG. That concludes our prepared remarks. Warren, we are now ready to begin the question-and-answer session. Please open the line for our first question.

[Operator Instructions] Your first question comes from the line of David Begleiter with Deutsche Bank.

Tim, on Industrial Coatings, two things. Can you talk to when you expect the index-based price to catch up to the COGS inflation. In terms of your Q4 guide of roughly flat organic sales growth versus up 4% in Q3. Can you talk to what's driving that more modest assumption in Q4?

Sure, David. Thank you. So on Industrial Coatings, index pricing, we started to see a little bit of that benefit in Q3 and Q4, but most of that benefit will come in Q1 and Q2 of next year just because of the structure of our contracts across our businesses. That said, we expect the margin compression to moderate as we move through Q4. And beyond that, as far as when it exactly matches neutrality in that segment, while we have neutrality across company. We'll have to see what our 2027 guide is and what happens to inflation in Q1 and Q2. But right now, our Q4 outlook is -- margin compression to be slightly better than it was in Q3. As for volumes, most of that is based on automotive builds. And as you know, we use S&P's IHS, and they have reduced their builds in Q4 and in particular, in China. And most of what you see, the delta between Q3 and Q4 growth for that segment comes from that factor.

Your next question comes from the line of John McNulty with BMO Capital Markets.

So I wanted to unpack the Refinish business a little bit. You did largely, as you had called out, I think you'd said you expected to kind of see an inflection, but clearly, the industry didn't. I mean, I think you cited claims were down 4% still, and yet you were up. That seems like a bigger outperformance than what we normally see even from your Refinish business. So I guess, can you help us to understand what drove that on the volume front, if there were any kind of major account wins or if it was just some of the -- maybe some of the inventory timing, maybe just a little perspective on what drove that kind of significant -- looks like mid-single-digit outperformance.

Yes, John, first of all, you're right, this has played out -- it's been a painful 4 quarters for us since we first raised this issue last year that we would see 4 quarters' worth of destocking, and that's behind us now. And I would say that internally here, the quarter played out a little bit better than we expected, but not a huge amount better than we expected. It's a couple of things. One, the destocking is behind us. So you do have some more normalization of purchase orders. Body shop activity, while still below where it was pre-COVID, incrementally sequentially improving a bit. From a share shift standpoint, this business always has share shift. We track net body shop wins. And while we can't really point to anything huge for us, I know there's some other stuff happening out there, we still win a couple of hundred net body shops a month. But more than anything, it's the normalization of both the inventory patterns and slight normalization of the industry. In a way I would summarize Refinish going forward right now, clearly, activity levels at the end user are not back to where they were pre-COVID. We had, throughout 2025, U.S. collision claims down like an average of 10% every single quarter. Q1 and Q2 of this year, it's been minus 6%, Q3 minus 4%. So it's still an industry that is below 2019 activities. But some signs of normalization, the destocking is behind us. We've got Net Body Shop share wins, positive price. We -- this is one of our business where we have a lot of outside the can solutions that drive additional revenue for us. The other thing that's normalized, John, and then I'll move on is another factor that was really impacting 2025 was high auto insurance rates. And you've started to see those come down a bit. So a number of factors point to modest sequential normalization, our inventory issues behind us and net-net, we're winning. And -- but all in all, this was a little bit better than we expected, but not a ton.

Your next question comes from the line of Kevin McCarthy with Vertical Research Partners.

Tim, I was wondering if you could elaborate on the Industrial subsegment within your Industrial Coatings segment. As I look at Slide 8, you flagged that Industrial posted high single-digit growth at the subsegment level there. And if I'm not mistaken, I think that's probably the best in 4 years or so. So just wondering if you could kind of unpack how much of that is price acceleration versus volume acceleration and what your outlook is for that piece of the company?

Yes. First, Kevin, you just made the day of Juliana Happel, who runs that business for us by calling out the best in 4 years. So thank you for that. Yes, this -- I'm really proud of this team for sequential improvement here in Q1, minus low single digits, Q2, up mid-single digits and Q3 up high single digits, and we feel really good about new business wins and pipeline going forward. So as far as the blend of how the team achieved that organic sales, it's almost exactly half volume and price. So we've got good momentum in the various pieces that of that sub -- or I'm sorry, on that business. Think about powder, for example, we had double-digit growth in powder. We called out heavy-duty equipment, mostly in the non-ag area, transportation. We've got a nice little specialty business in there that's doing well. all regions grew, and we did get some nice bumps from data center-related electrical infrastructure. So it's it's very widespread, and it's not like we've seen, as you know, any big hockey stick improvement in industrial production. I would say a lot of this is just execution of the selling machine, the commercial excellence that this team has been working on for a number of years, and now we're starting to see it on the P&L.

Your next question comes from the line of Mike Harrison with Seaport Research Partners.

I have kind of a two-part question on the Global Architectural Coatings business. First of all, the strength in margin there, just wondering if the 24% EBITDA margin is something that you feel like you can sustain going forward in the seasonally stronger Q2 and Q3 quarters, or was there something unusual that helped to drive the margin strength and maybe suggest this is a high watermark? And then just digging in on architectural EMEA curious on how the situation in France is potentially going to affect volumes and demand into Q4?

Yes. Hi, Mike. On the first one, we have said, and I've consistently said that our Global Architectural business should be consistently 20% plus EBITDA business. And I believe that strongly. Q3 was a combination of two things. Yes, we had great execution by the team, we've got really strong brands, really strong innovative products, great relationships with our distribution partners, and that helped us from a mix standpoint as well as a price standpoint. So that definitely helped, and that was the biggest contributor to the strong margin you saw. Full transparency, if you look at our Mexico business here, we buy in dollars, and we sell in pesos. So we did get some help in Q3 from the stronger peso. So going forward, and I don't like to say high watermark because that implies that there's a cap on what we can do. But what I will say is we -- our aspiration is this, in total, is 20% plus-plus EBITDA business, but we did have a bit of help in Q3 that you just watch the peso, and that will give you a little indication of how much headwind or tailwind we'll have in our Mexico margin. Now as far as France, obviously, it's terrible to watch on television and see the violence and destruction. So far, fortunately, none of our stores have been affected. Obviously, it's not likely to be a boost to consumer confidence or to construction activity. But so far, we have not seen a demand impact, but we're watching that closely. We are seeing logistics impacts, some ability to move product around. So I'd say in the short term, Mike, that's all we're seeing. But obviously, longer term, it's not great for first of all, the safety of the people on the ground there, but it's also not great for consumer confidence.

Your next question comes from the line of James Hooper with Bernstein.

I wanted to ask a little bit about industry consolidation. So clearly, the merger going on your space has a couple of disposals being announced, how are you thinking about those in M&A? And just maybe as a follow-on, are you see seeing any changes to the competitive dynamics on the ground as we move towards these mergers completing?

Okay. James. So the first part, there's -- what's happened in Brazil. I think it was last year. Obviously, what's happened with Surventis in the legacy BSF business, and then you've got the the pending merger of Akzo, Axalta. So far -- and again, we're not -- we don't have a deco business in Brazil. We have a tiny little boutique business basically in one state in the South. But naturally, we don't have a presence. So we're not really involved in whatever is going on there. And from Surventis so far, we really haven't seen any change in behavior in the marketplace. And then, of course, it's still early days on Akzo, Axalta because they're not officially together yet. So we haven't really seen any change there. It's obviously we'll do what we can to take advantage of any distraction. We've been through those acquisitions ourselves in the past. So we'll do what we can to help customers that may be looking for opportunities. But I'd say so far, not much changing on the ground. As for dispositions, I think the Surventis just is still fairly recent. So we'll see how that plays out over time, nothing active now. With Akzo, we really weren't interested in their India business, weren't interested in their Deco Southeast Asia business. And the only thing that's we're aware of kind of officially is wood here in the U.S., and frankly, doesn't fit our enterprise growth strategy. I know there's some rumors that bought another part of their business in Europe if and when those rumors become a reality, we'll take a look at it. But it's not what I think about every night or every morning.

Your next question comes from the line of Ghansham Panjabi with Baird.

And first off, congrats on a strong 3Q. So Tim, as you zoom out a little bit and think about 2027, how are you thinking about the trend line for volumes across your major end markets? Because obviously, interest rates have gone up significantly since you last reported, and growth in some of the international geographies seem a bit more challenged from a macroeconomic perspective, including in markets like China. So how does that net out for PPG at this point is the way you see it at this point, in context of some of the advantaged growth verticals you have, including in Aerospace?

Ghansham, first of all, thank you for the comment. I'm sure my team we'll appreciate it because they worked really hard not only in the quarter, but the last couple of years building up this muscle, so I appreciate that. Look, it's early for us to give our 2027 guide. You'll hear that from me and Jamie at the end of January. But what you should -- first of all, we're not -- you're not going to hear from us that we're expecting any significant hockey stick recovery across any of our markets. So from an end market standpoint, sitting here today, China more or the same. But on the positive side, you should expect our organic growth momentum to continue, and we see that in our pipelines, you should expect our margin expansion to continue, as we continue to execute the commercial actions, continue to drive a richer mix. And we're confident in not only the technology that's out there today, but the technologies that are in our R&D pipeline. So while we are not going to count on anything any macro help unless something changes between now and mid-January. The key themes will be organic growth momentum will continue margin expansion momentum will continue. The rest of it will depend on what we learn in the next couple of months regarding inflation.

Your next question comes from the line of Aleksey Yefremov with Barclays.

Tim, could you just provide us an update on what has been achieved in terms of cost actions and architectural EMEA overall? And what do you expect to happen for remainder of this year and in '27?

Yes. So first, I'll talk overall. I'll start there. At a high level, what you should expect in '26 and '27 is about $100 million combined between restructuring and productivity actions. And the mix between restructuring and productivity may shift a little bit, but that's how I think of it, Aleksey, is about $100 million total between those two, for '26 and '27. Now Architectural EMEA specifically, we've been working on productivity throughout most of this year, and that's what's delivered some of our year-to-date margin expansion, but the bigger step change for us will be execution of the 4 plant closures that we talked about earlier this year. You won't see much of that benefit in 2026. But as you're modeling out 2027, you should expect a significant portion of that restructuring benefit that I just mentioned to come out of that business in the first half of '27.

Your next question comes from the line of John Roberts with Mizuho.

Congrats as well on a nice quarter. Could I ask what your highest-priced house pain is in Europe currently? And I ask that because before the pandemic, I think we went a couple of decades without volumes in the DIY business moving up or down more than a low single-digit percent. All the cyclicality was in the Pro business because it's new construction and high labor costs. But maybe it's not just this pull forward, maybe prices are now high enough that we've got some demand elasticity?

Yes. I wouldn't say we have demand elasticity. I don't feel that's what's driven, and I think it's more the underlying macro, John, that's driving the volume challenges. As far as price point on the shelf, and this is not just for PPG for industry, you know, haven't traveled over there and looked at the products on the shelves in different countries that the -- first of all, the formulation costs and the preference of the local painters varies country to country, surprisingly enough. Even in the Benelux, if you look at the difference between what a painter in the Netherlands prefers versus a painter in Belgium is different. And as a result, without going through all of the countries we operate in, off the top of my head, the highest price point would probably be in the Netherlands. And it's based on the -- frankly, the higher formulation cost in the Netherlands.

John, this is Alex. Just an additional data point, if you look at the savings rates of European consumers today versus pre-COVID level, 2.5x, 3x higher. So really, the issue that Tim is mentioning not that much the elasticity, it's the consumer confidence.

Your next question comes from the line of Matthew DeYoe with Bank of America.

I'm going to be a bit annoying and ask a three-parter. But I think it's kind of gets at what most investors were talking with, and I guess myself are maybe struggling with or want to know for the quarter. So Architectural EBIT up $40 million year-over-year. I know you mentioned the peso benefit, right? But like -- so if you have $1 billion of sales and prices 4%, that's $40 million. So that kind of covers the growth, but you also had higher raw material costs, which is maybe most of that $40 million and a 2% drop in revenues. So it's almost like back to Square One. I would almost look at that and say the peso benefit in and of itself could be $40 million. And I don't know if that's right or not, but that's kind of the whole I'm looking at filling. And I can almost run the same math on performance. But there, you have good volumes, right? So I can think of incremental margins of almost 80%. And I know Refinish is a big incremental margin business, and that's growing again. But is that -- am I in the right ballpark? And then last one. I know you talked about volumes in auto builds decelerating in 4Q, but you have implied volumes decelerating basically across the board in your business for like how should we read this? Is this more conservatism given the macro crosscurrents? I mean it's particularly interesting in performance because some of these markets are conceptually more durable, right? But you're going from high single digit to low mid on the guidance. And so I think clarity on all these topics would be helpful

Okay. Matthew, let me do my best at that. And I'll look for my teammates to help me here. But first of all, Architectural Coatings EBIT, the walk you described, the $40 million was not the benefit of the peso. It would be significantly lower than that, right? And so that plug, I think, would be a bit off. I'd say it's a couple -- the big drivers there are volume in Mexico, mix in Mexico, price in Mexico, price in Europe and cost out in Europe. Those would be the biggest drivers and then we got a little bit of help from the Mexico peso. On performance, two things I'd say, first of all, your thesis on kind of refinish being a very rich business dropping good EBIT to the bottom, yes, you're correct there. Aerospace is also a very good business for us. So their growth drops at a good margin for us. But to your point on volume being a bit softer there, remember, we have 2 businesses there that are lapping multiple double-digit quarters, multiple double-digit Q4. So just by the laws of big denominators it starts to get a little more high-single digits and mid-single digits. Volumes overall in Q4, it's largely 2 things: Automotive builds pretty significant reduction. If you look at just China alone, Matthew, China roughly builds 1/3 of all the new cars in the world, and S&P has reduced their builds projection to China for something like minus 8%. And you might have seen the journal article this morning. And while export China is helping us pretty significantly domestic China is a true headwind. That's the biggest. And then the second one is contributing to overall volumes, just uncertainty in Europe. The European to the previous question, the problem is not only in France. There's problems across the continent, affecting consumer confidence. And so we built some of that concern into our Q4 guide. So hopefully -- team did I miss anything that -- Jamie?

Sure. Yes. Let me just go back to architectural for just a moment. I think Tim highlighted a couple of the great things that, that business is doing between both Europe and Mexico. Part of it is pricing appropriately to cover inflation, the other part of it is about more than 50% of our productivity initiatives and restructuring actions are actually happening in the architectural business. So that's another reason for the uplift. And Tim mentioned earlier of getting that to that sustained 20% EBITDA margin, which I do think based on what we're trying to do with the cost structure also allows us to be able to maintain those types of margins. He also mentioned that the peso dynamic was a benefit to the quarter. That's about $15 million to $20 million of that bridge that we're talking about. So it definitely did impact the quarter. But like I said, the majority of that had to do with other pricing initiatives as well as some of those productivity initiatives. And if I just touch real quickly on the Performance segment, how that sales increase was related to volume, the other half related to price. And as you've seen and heard us talk about Aerospace and also the impact of our Refinish business is a really nice healthy mix associated with that. that's another reason why those margins continue to improve on a year-over-year basis. And then lastly, what I would say with those 2 segments, in particular, we were able to cover net cost of goods sold inflation with our pricing initiatives, which I think is really important. The one that's slower based on index dynamics and pricing of a contract is industrial, and that's the only segment that hasn't yet covered at this point.

Great. Thanks, Jamie. Look, just to put a bow on it, Matthew, because I can read with all your questions a bit concerned over Q4. Our Q4 guide, while not as strong as our Q3 performance is not a weak guide. It is -- in a world of difficult macro, we're going to deliver organic growth. We'll deliver EBITDA margin expansion, and we will deliver at our midpoint double-digit EPS growth. So despite some of these comp challenges and auto builds and a little anxiety over Europe, it's still a good quarter for us.

Your next question comes from the line of Jeff Zekauska with JPMorgan.

I have a two-part question. You talked about strength in the industrial coatings subcategory. So if what we did is we excluded the performance of the Auto OEM business in Industrial Coatings, where you have constraints because of index-based pricing, would Industrial Coatings operating income, would it have been up year-over-year in the quarter or down? And secondly, various companies seem to want to buy Architectural Coatings businesses in Europe. Is that a business that you would consider monetizing at the right price? Or is it strategic? And it holds a particular strong position within the overall PPG portfolio. How do you regard that business in the world we're in now?

Yes. Thanks, Jeff. I'll take it, and then if anyone -- if Jamie or Alex wants to fill in gaps, fine. But look, on -- yes, Industrial Coatings subcategories I've already talked about. Your question around if it weren't for the challenges in automotive OEM, would EBITDA have grown in that segment? The answer is yes, okay? But I will caution a little bit because auto OEM isn't the only one that has index pricing there. Packaging does as well. Packaging started to see some of their indices kick in, Jeff, where autos really will come in, in Q1 and Q2. And even while we had positive price in both packaging and industrial because of the structure of those contracts even those two, still have more work to do relative to the rest of our portfolio. So a high level answer is, yes, you're correct, but I want to give you a little more color there. And on Architectural Europe, so we like this business, and here's why it's in our portfolio. It delivers really good earnings for us, really good cash for us. Clearly not a growth driver for us, Jeff, and you know that, and it's been the case for years. But the role in the portfolio is get the margin to where we believe it should be, and get us great earnings and great cash like we did just not that long ago, I think 2023 in a pretty difficult macro, we were spitting out records. And so the role in the portfolio is while it isn't a great growth business for us, it is -- it should be. It's a good margin business. It should be a great margin business. It's a good cash generator for us, it should be a great cash generator for us. And that helps us fund a lot of what we need to do in our high-growth, high-margin businesses like Aerospace. We're spending a lot of cash there. I got to get it from somewhere. That said, every day, our job is to maximize long-term shareholder value. And I think you saw with what we did with architectural U.S. There's nothing that's sacred if we believe that we can maximize shareholder value some other way. Now earlier this year, I lose track of time, there was talk of another architectural Europe business and the implied multiple that was being thrown around at that time would not have added long-term shareholder value vis-a-vis our organic strategy there. So every business has to earn its right to stay in the portfolio every day. And -- but every business also at the right price, if it makes sense for long-term shareholder view, that's certainly a path we'll consider like we did with architectural [indiscernible].