Stronger protective and marine sales, higher selling prices, strategic acquisitions and favorable currency rates all helped reap a record $1.86 billion in first-quarter net sales—an 18.5% year-over-year increase—for The Sherwin-Williams Co.
The Cleveland-based paint and coatings giant more than doubled its income per common share and boosted its outlook for the second quarter, in releasing its first-quarter 2011 report Thursday (April 21).
Part of the improved showing was due to a one-time $11.4 million tax expense related to the Health Care and Education Reconciliation Act, which was passed in the first quarter of 2010, Sherwin-Williams noted.
Still, the 145-year-old company had numbers to boast about, especially in its Global Finishes Group.
|Stimulus money “is starting to wind its way into paint portions” of infrastructure projects worldwide, said CEO Christopher Connor.|
“Although domestic demand remains soft, we are encouraged by the improvement in domestic DIY and protective and marine sales in the Paint Stores Group and continued growth in architectural, protective and marine, OEM and automotive finishes sales in the Global Group,” said chairman and CEO Christopher M. Connor.
For the period ended March 31, the company reported:
• Increasing demand for protective and marine coatings;
• A 110% increase in diluted net income per common share, to $.63 from $.30 in 2010;
• A 9.2% increase in first-quarter net sales in the Paint Stores Group, to $929.3 million; and
• A quarterly increase in Paint Stores Group segment profit to $68.9 million, from $47.8 million last year.
Protective and Marine: ‘A Nice Lift’
“Our protective and marine business has been performing nicely over the last several quarters,” with demand increasing in many markets, Connor noted in a conference call to discuss the report.
The company has been emphasizing with investors that “this is an area that maintenance really can't be deferred for long periods of time,” Connor said. “A lot of the stimulus money that went into our country and other countries around the world is starting to wind its way into paint portions of those projects.
“And so we're seeing a nice lift in that business literally around the globe, both in the U.S. businesses as well as our Global Group segment.”
The improvement is mainly coming from the protective side, with coatings for steel and concrete in corrosive environments, he added.
Global Finishes Group
Overall, first-quarter net sales in the Global Finishes Group increased a whopping 49.6% to $630.2 million, due to acquisitions, higher paint sales volume, selling price increases, and favorable currency rates.
Segment profit increased in the quarter to $36.8 million from $23 million year over year, largely due to increased paint sales volume and good expense control, the company said.
As a percent to net external sales, segment profit was 5.8% in the quarter versus 5.5% last year.
The group acquired three companies over the last year, Connor noted: Acroma and Sayerlack in Europe and Pinturas Condor in Ecuador. The acquisitions “had a small impact on our first quarter consolidated net income” but “expand our global reach and provide important assets to support our worldwide business,” he said.
First-quarter net sales of the Consumer Group inched up 1% to $294.9 million, due primarily to higher selling prices. Connor reported “essentially flat” store volumes, “continuing strains” in the residential repaint market, and “year-over-year declines” in demand related to new construction.
The group has also been stung by the loss of its contract with Walmart. The world’s largest retailer announced in September that it was dropping Sherwin-Williams’ Dutch Boy brand in favor of Akzo Nobel’s Glidden beginning early this year.
Nevertheless, company said, segment profit increased to $41.1 million in the quarter from $37.5 million last year. Cost controls and higher prices also increased segment profit as a percent of net external sales to 13.9% from 12.8% last year.
The company opened seven net new locations last year and expects to open 50 to 60 net new stores this year, Connor said. The company operates more than 3,900 stores worldwide.
The company is forecasting a strong second quarter, with an 8% to 13% consolidated net sales increase over last year’s second quarter. Connor said the company expected diluted net income per common share of $1.65 to $1.75 for the second quarter of 2011, compared to $1.64 in 2010.
For the full year 2011, the company expects consolidated net sales to increase above 2010 levels “by a high single-digit percentage,” Connor said, with diluted net income per common share in the range of $4.65 to $5.05, compared to $4.21 in 2010.