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Sherwin-Williams Posts Gains in Q2

Friday, July 22, 2016

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Despite lower numbers in its Global Finishes Group and other divisions, The Sherwin-Williams Company announced overall gains in its second-quarter earnings report.

The U.S.-based paints and coatings manufacturer attributed the growth to stellar sales in its Paint Stores Group, bolstered by higher architectural paint sales.

Net sales for the company increased 2.8 percent, to $3.22 billion in the quarter, and jumped 3.8 percent to $5.79 billion for the first six months of the year, compared to the same periods in 2015, the Cleveland, OH, company announced Thursday (July 21). Unfavorable currency translation rate changes nicked consolidated net sales by 1.5 percent in the quarter and 2.0 percent in six months.

John G. Morikis
All photos: Sherwin-Williams

John G. Morikis assumed the CEO role on Jan. 1, 2016.

“We are pleased to report record sales and earnings per share from the continued positive sales volume and strong operating results of our Paint Stores Group and operating margin improvements in our Global Finishes Group,” said John G. Morikis, president and CEO.

The company reported that diluted net income per common share in the quarter increased to $3.99 per share from $3.70 in 2015, noting that costs associated with its anticipated acquisition of Valspar were partially offset by reduction in the income tax provision. In the first six months, diluted net income per share increased to $5.76 per share from $5.70, according to Sherwin-Williams.

Segment Results

The brightest spot in Sherwin-Williams’ earnings report was its Paint Stores Group, which increased sales by 6.2 percent to $2.11 billion in the second quarter, and gained 8 percent to reach $3.72 billion in six months.

The company attributed the success to higher architectural paint sales volume across all end market segments. The company also opened 31 net new locations in its Paint Stores Group in the first six months.

Net sales from stores open more than 12 calendar months increased 5.2 percent in the quarter and increased 7 percent in six months from last year’s comparable periods.

Sherwin-Williams Commercial

The company reported higher architectural paint sales volume across all end market segments.

Segment profit reached $509 million in the quarter from $433.4 million in the second quarter of 2015. Profit reached $762.5 million in six months, a jump of $152.6 million, compared to the first half of 2015, the company reported.

The company’s Consumer Group posted a 2.6 percent decline in sales in the quarter, to $477.5 million, due primarily to the initial shipments of the HGTV Home by Sherwin-Williams paint to Lowe’s stores in the second quarter last year.

However, net sales in the segment increased 1.6 percent to $855.6 million in six months, driven by higher volume sales to most of the Group’s retail customers.

Segment profit dipped to $108.3 million in the second quarter of 2016, from $114.2 million reported a year earlier. For the first six months, segment profit increased to $172.3 million from $169.7 million reported the same period a year ago.

Net sales in the company’s Global Finishes Group, which includes protective and marine coatings, decreased 1.3 percent to $499.2 million in the quarter and decreased 2.3 percent to $953.3 million in six months.

marine coatings

Morikis said the Global Finishes Group has improved its operating results through efficiencies and good cost control.

Unfavorable currency translation rate changes decreased net sales by 2.6 percent in the quarter and decreased net sales by 3.6 percent in six months.

The segment’s profit increased to $65.2 million in the quarter from $57.3 million last year. Profit increased in six months to $113.8 million from $96.2 million last year. The increases, the company says, were due to decreasing raw material costs and good cost control, partially offset by unfavorable currency translation rate changes.

Morikis said the group has improved its operating results through efficiencies and good cost control.

The Latin American Coatings Group’s net sales decreased 11.2 percent to $133.3 million in the quarter, and plunged 18.2 percent to $258.5 million in the first six months of 2016 due primarily to unfavorable currency translation rate changes and volume declines partially offset by selling price increases.

Currency translation rate changes decreased net sales in the quarter and six months by 16.4 percent and 19.4 percent, respectively.

The segment’s profit also declined in the quarter to a loss of $9.6 million from a profit of $4.0 million last year and decreased in six months to a loss of $10.6 million from a profit of $13.5 million last year.

“The Latin America Coatings Group continues to manage through the negative effects of currency devaluation and weak end market demand in some geographies,” said Morikis.

Looking to the Future

Looking ahead to the third quarter, Morikis said the company anticipates consolidated net sales to increase a low- to mid-single digit percentage compared to last year’s third quarter.

“At that anticipated sales level, we estimate diluted net income per common share in the third quarter of 2016 to be in the range of $4.10 to $4.20 per share, compared to $3.97 per share earned in the third quarter of 2015,” he said.

For the year, Sherwin-Williams expects net sales to increase by a low-single digit percentage compared to 2015.

Valspar shareholders have approved the sale of the consumer-focused paint company to Sherwin-Williams. If approved by federal antitrust regulators, Sherwin-Williams will close the $11.3 billion deal in the first quarter of 2017.

   

Tagged categories: Architectural coatings; Business matters; Earnings reports; Economy; Finance; Market; Sherwin-Williams; Valspar

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