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PPG Industries (PPG -1%) slips after management kickstarts a strategic review of its architectural coatings business in the U.S. and Canada. The paints and coatings manufacturer will still retain its architectural coatings business across other global markets, including Latin America, Europe, and Asia Pacific.

The review follows PPG's strategic review of its silica products business from early January. However, this business comprises just 1-2% of PPG's annual sales, making the announcement relatively minor. Conversely, PPG's architectural coatings business is substantial, being the primary division within its Performance Coatings segment, which totaled 61% of FY23 revenue. Meanwhile, the U.S. and Canada makes up 41% of consolidated FY23 sales.

Despite today's price action, PPG's decision may prove to be ultimately what reenergizes quarterly performances.

• PPG's U.S. and Canada architectural coatings division has been weighing on the company's overall growth. CEO Tim Knavish remarked today that on a three-year pro forma basis, if not for this business, consolidated sales volume would have improved cumulatively by over 200 bps. A similar scenario materializes regarding segment margins in FY23. If not for the U.S. and Canada architectural coasting business, operating margins would have been 300 bps higher.
• Soft architectural demand across the U.S. has prevailed for several quarters, especially in DIY-related products, a theme prevalent within the home improvement retailing industry, as touched on repeatedly by Lowe's (LOW) and Home Depot (HD). With interest rates still at decade highs, keeping existing homeowners from exploring upgrade options, weak architectural coatings will likely linger throughout FY24. Several companies, from Louisiana-Pacific (LPX) to Stanley Black & Decker (SWK), discussed an unfavorable repair and remodel backdrop in FY24.
• Still, PPG noticed some encouraging developments in Q4, pointing to potential volume stabilization. As a result, it is leveraging this upward momentum to garner a compelling price for its U.S. and Canada architecture coatings business, which could be a lucrative addition for some of its peers, such as Axalta Coating Systems (AXTA) or RPM Inc (RPM).

PPG is determining that now may be the best time to let go of its relatively underperforming but still firmly established architectural coatings businesses in the U.S. and Canada. By divesting this unit, PPG can shift its focus toward its international brands, where it commands a top position in several key countries.