As expected, Sherwin-Williams’ paint stores, protective and marine coatings and other segments all brought home a winning first quarter and sunny 2012 outlook for the world’s No. 3 paint and coatings company.
The best news: The gains were built in part on sales volume growth, not just price increases.
|Protective and Marine Coatings sales helped bring home the gold for Sherwin-Williams’ Global Finishes Group in its record first quarter.|
The first-quarter report, released Thursday (April 19), validated the Cleveland-based company’s April 9 prediction that its first quarter would beat analysts’ projections and its own yearly guidance, with strong sales and earnings.
On Thursday, the company reported a record $2.14 billion in consolidated net sales—a 15.1 percent increase over the year-ago period—and a 50.8 percent increase in share price, to a record $.95, for the period ending March 31. The company’s diluted net income per common share price was $.63 in the first quarter of 2011.
‘Record Sales and Earnings’
Chairman and CEO Christopher M. Connor reported gains from all of the company’s businesses: the Global Finishes Group, which includes Protective and Marine coatings; the Latin America Coatings Group; the Paint Stores Group; and the Consumer Group.
“We are pleased to report record sales and earnings per share in the first quarter on strong sales and operating results of our Paint Stores Group and operating profit increases across the remaining operating segments,” said Connor.
“All our operating segments grew sales volume and operating profit as a percent to sales in the quarter.”
Unfavorable currency translation rate changes nicked consolidated net sales by 1.2% in the quarter, but acquisitions added 0.9% to that figure.
In the end, Sherwin-Williams predicted more double-digit sales gains in its second quarter and increased its annual earnings-per-share price projection to $5.75 to $6.05, compared with just $4.14 per share earned in 2011.
Global Finishes, Latin America
First-quarter net sales in the Global Finishes Group, which includes Protective and Marine Coatings, increased by 11.0%, to $483.1 million, driven by higher volume, price increases and acquisitions.
The Global Finishes Group distributes a wide range of products, including automotive and OEM finishes, in more than 100 countries worldwide. In 2011, the group reported sales of $1.88 billion, a 32 percent increase over 2010. Group profit increased almost 40 percent, to $90.3 million.
|Profit in the Global Finishes Group increased by almost 40 percent in 2011 over 2010. The group sells liquid, powder and UV-curable coatings in more than 100 countries.|
In the first quarter of 2012, group acquisitions increased net sales by 3.9%, and segment profit increased to $28.6 million from $19.4 million last year. Raw material costs continued to pinch the bottom line.
As a percent to net external sales, segment profit was 5.9% in the quarter, versus 4.5% last year. Acquisitions and foreign currency translation rate changes did not have a significant impact on segment profit in the quarter.
The company’s Latin America Coatings Group, which sells architectural paints and industrial coatings throughout that region, saw a 7.1 percent increase in net sales to $208.6 million in the quarter.
Paint Stores, Consumer Group
Net sales in the Paint Stores Group increased 20.9% to $1.12 billion in the quarter, as the group saw sales volume and price increases across all end market segments.
Net sales from stores open for more than one year climbed 20.4% in Q1 over the year-ago period. First-quarter segment profit increased by $43.9 million to $112.7 million, from $68.9 million last year. Segment profit as a percent to net sales increased in the quarter to 10.0% from 7.4% last year.
The company opened five net new locations in the quarter and plans to open 60 to 65 new stores during all of 2012, Connor said. The company currently has more than 4,000 stores and facilities.
Net sales of the Consumer Group increased 8.6%, to $320.4 million for the quarter—fed, again, by both volume and price increases. Segment profit increased to $55.3 million from $41.1 million last year. As a percent to net external sales, segment profit increased in the quarter to 17.3% from 13.9% last year.
Buybacks and Outlook
The company repurchased 1.8 million shares of its common stock in the quarter and had remaining authorization on March 31 to buy an additional 19.25 million shares.
“Our balance sheet remains flexible and is positioned for future acquisitions and investments in our business,” said Connor.
Looking ahead, Connor projected that second-quarter consolidated net sales would increase by 10 to 15 percent over the same period in 2011. That should put diluted net income per common share in the range of $1.92 to $2.07, compared to $1.66 per share in Q2 of 2011.
For the full year 2012, Connor said, the company expects consolidated net sales to increase above 2011 levels by percentages in the high single digits or low teens. If that holds, he added, the company’s diluted net income per common share for 2012 could add $1.61 to $1.91 to the 2011 per-share price of $4.14.