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Sherwin-Williams Finishes Fine in 2013

Friday, January 31, 2014

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Paint stores popped and protective and marine sales held to wrap Sherwin-Williams’ 2013 fiscal year with a record $10.19 billion in consolidated net sales.

Net sales in the Paint Stores Group increased by 10.9 percent to $6.0 billion for the full year 2013 and by 17.6 percent to $1.46 billion for the fourth quarter, driven mainly by higher architectural paint sales volumes across all end market segments, the company reported Thursday (Jan. 30).

Sherwin-Williams Paint Stores
Photos: Sherwin-Williams / SEC.gov

The Paint Stores Group reported sales volume increases across all end market segments.

Full-year earnings also set a record, although fourth-quarter earnings fell slightly short of analyst projections, due in part to the derailed acquisition of much of the Comex Group.

Sherwin-Williams' Latin America Coatings Group also saw declines.

Year-End Highlights

For full-year 2013, the Cleveland-based company reported:

  • A 6.8 percent increase in consolidated net sales to $10.19 billion;
  • A 20.6 percent increase in diluted net income per common share to a record $7.26, including a charge of $.21 per share related to Brazilian tax assessments and a $.13 per share EPS loss from Comex; and
  • A record $1.34 billion in EBITDA (earnings before interest, taxes, depreciation and amortization).
S-W Lighthouse

2013 was "another year of record highs," said Chairman and CEO Christopher M. Connor.

"We are pleased to report another year of record highs for multiple financial measures in 2013," including sales, net operated cash, EPS and EBITDA, said Chairman and CEO Christopher M. Connor.

The company anticipates a 7-12 percent bump in first-quarter 2014 consolidated net sales and a full-year 2014 diluted EPS in the range of $8.12 to $8.32, including a Comex loss of $.45 to $.55 per share.

Paint Stores Group: On a Roll

“Over the past year, our Paint Stores Group had positive sales volume across all end-market segments and drove strong operating results," said Connor.

The acquisition of Comex's North American assets "performed as expected," Connor said, although Sherwin-Williams was ultimately unable to complete the much larger acquisition of Comex's business in Mexico.

Acquisitions increased net sales by 7.5 percent for the fourth quarter and 2.2 percent for the year. Net sales from stores open for more than 12 calendar months increased by 9.2 percent in the quarter and by 7.8 percent in the year, compared to the prior year's periods.

Segment profit decreased for the fourth quarter, mainly due to the loss from acquisitions, but segment profit for the year rose to $990.5 million from $861.8 million in 2012—built mostly on higher paint sales volume.

Net sales in the Consumer Group remained relatively flat, increasing by 1.5 percent. However, the Consumer business improved its operation margins "through better-than-expected second-half sales and improved operating efficiencies," said Connor.

Protective and Marine: Holding Steady

Net sales in the Global Finishes Group—encompassing protective and marine, OEM product finishes and automotive finishes—increased by 2.2 percent to $2.0 billion for the year and by 2.0 percent to $496.9 million for the quarter.

S-W Global Finishes

Sales in Global Finishes inched up in 2013, boosted by cost controls, to increase segment profit.

"The Global Finishes Group continued improving segment profit as a percent to sales through
improved operating efficiencies and good cost control," said Connor.

Gains from selling price increases and acquisitions were partly offset by unfavorable currency translation rate changes.

However, segment profit increased to $170.6 million from $147.2 million for the full year and to $37.7 million from $34.1 million for the fourth quarter, due to "improved operating efficiencies" and price increases, the company said.

Latin America: Currency Crunch

Net sales in the Latin America Coatings Group, which encompasses architectural paints, industrial coatings and related products, decreased by 4.0 percent to $222.2 million in the fourth quarter and by 0.4 percent to $832.5 million for the year. Higher selling prices partly offset unfavorable currency translation rate changes.

In U.S. dollars, segment profit for the year plummeted to $38.6 million from $81.2 million last year, with Brazilian tax charges consuming $31.6 million for the 12-month period.

S-W Billionth Gallon S-W archive

Founded in 1866, Sherwin-Williams rolled out its one billionth gallon of paint in 2009 and topped $10 billion in sales last year.

For the quarter, segment profit decreased to $17.9 million from $30.1 million in the prior-year period, due to lower sales volume and currency rate changes.

Nevertheless, Connor said, the Latin America group "minimized the impact on its core operating margins through selling price increases and good cost control, despite the continued difficult economic environment in the region."

Looking Ahead

Sherwin-Williams expects the Comex business in North America to complete $97 million to $107 milion in net sales in the first quarter of 2014, negatively impacting its diluted net income per common share by $.15 to $.25 for the first quarter.

For the year, the company expects the Comex business to increase net sales "by a low single-digit percentage" and "negatively impact diluted net income per common share $.45 to $.55 per share."

For the full year 2014, the company expects consolidated net sales to increase by eight to 13 percent over 2013. That would deliver $8.12 to $8.32 per share in 2014, compared with $7.26 in 2013.

Sherwin-Williams' webcast of its earnings conference call is available here until 5 p.m. ET Feb. 19.

   

Tagged categories: Architectural coatings; Automotive coatings; Comex; Earnings reports; Marine Coatings; Market; OEM (Original Equipment Manufacturers); Paint and Coating Sales; Protective coatings; Sherwin-Williams

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