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Sherwin-Williams Posts Record Sales in 2017

Friday, January 26, 2018

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The Sherwin-Williams Company (Cleveland) achieved record sales in 2017 on the heels of its blockbuster acquisition of Valspar, according to its fourth-quarter and year-end earnings reports, released Thursday (Jan. 25).

The Ohio paints and coatings firm reported $14.98 billion in consolidated net sales in 2017, a record for the company and the highest sales number of any coatings company that has reported its 2017 fiscal year to date. That represents a year-over-year increase of 26.4 percent, owed largely to the June acquisition of Valspar, which the company says contributed a 20.8 percent increase in net sales on the year.

Sherwin-Williams store
M.O. Stevens, CC BY-SA 3.0, via Wikimedia Commons

Net sales for Sherwin-Williams paint stores open more than 12 months increased year-over-year 8.2 percent for the quarter.

Without accounting for the Valspar acquisition, net sales from core Sherwin-Williams operations still increased for the company, however, up 5.6 percent on the year.

Fourth-Quarter Results

In the fourth quarter of 2017, Sherwin-Williams reported an increase in net sales of $1.2 billion, or about 43 percent, to $3.98 billion, growth that the company attributes both to the Valspar acquisition and higher paint sales volume in its Americas Group.

According to the company’s current organizational model, instituted midyear in the wake of the Valspar buy, the Americas Group includes Sherwin-Williams paint stores and the company’s Latin American business. The Consumer Brands Group comprises what had been Sherwin-Williams’ Consumer Group (brands like Krylon and Dutch Boy), along with Valspar’s Paint Segment (Valspar Paint, Cabot Stains). The Performance Coatings Group includes protective and marine coatings, automotive finishes, product finishes, coil and extrusion coatings and other industrial coatings.

Sherwin-Williams aluminum extrusion coating
Images: Sherwin-Williams unless noted

The Performance Coatings Group includes coil and extrusion coatings as well as protective and marine and other industrial coatings.

The Americas Group reported an 8.9 percent increase in net sales in Q4 as compared with the same quarter in 2016; net sales for the segment in the 2017 fourth quarter were $2.19 billion. Net sales for paint stores open more than 12 months increased year-over-year 8.2 percent for the quarter. Profit as a percent of net sales increased for the segment, from 16.6 percent in the fourth quarter of 2016 to 18.5 percent for the fourth quarter of 2017.

The Consumer Brands Group saw a net sales increase of 89.1 percent for the fourth quarter, owing mainly to the addition of Valspar products, which offset a slight decrease in volumes to retail customers. Segment profit was down for the quarter, from $50.8 million in Q4 2016 to $23.6 million in Q4 2017, which the company attributes to acquisition-related accounting adjustments, increased amortization costs and increased raw materials costs.

The Performance Coatings Group saw a 159.9 percent increase on the quarter, to $1.22 billion, largely due to both the Valspar buy and selling price increases. Profit for the segment increased from $66.1 million in Q4 2016 to $119.4 million in Q4 2017. Currency translation also increased profits to the tune of 9.6 percent.

Fiscal Year 2017

On the year as a whole, the record net sales Sherwin-Williams reported translated to a 14.5 percent increase in gross profits, from $5.92 billion to $6.78 billion. In 2017, profits as a percentage of net sales were 45.3 percent, down from 50 percent in 2016.

The company reported net income of $1.77 billion in 2017, up from $1.13 billion in 2016.

Floor coating

The Performance Coatings Group saw a 90.4 percent increase in net sales on the year, with the segment accounting for $3.71 billion in sales in 2017. 

The Americas Group saw an increase of 8.8 percent in net sales, to $9.12 billion on the year in 2017; Sherwin-Williams notes that increased architectural paint sales volumes across all end markets contributed to that growth, as did selling price increases. On the year, profits increased about 10 percent, to $1.77 billion in 2017.

The Consumer Brands Group reported an increase of 41.1 percent in net sales for the whole of 2017 in comparison with the previous year; the group’s sales totaled $2.15 billion. Profits decreased about 25 percent to $226 million on the year, owing to the same acquisition-related adjustments that affected fourth-quarter profits for the group.

The Performance Coatings Group saw a 90.4 percent increase in net sales on the year, with the segment accounting for $3.71 billion in sales in 2017. Performance Coatings profits increased from $257.2 million 2016 to $298.5 million in 2017.

Looking Ahead

Sherwin-Williams chairman, president and CEO John G. Morikis said 2017 will primarily be remembered at the company as the year the firm welcomed Valspar, in a deal valued at $11.3 billion that catapulted the company to the top of the global coatings industry in terms of size.

John G. Morikis

Chairman, president and CEO John G. Morikis expects further growth in sales in 2018.

Morikis said in a statement that the company expects further growth in 2018, forecasting mid- to high-single-digit growth in net sales overall for the coming year. The firm also expects financial benefits from the recently passed tax-reform legislation, which should reduce the overall tax rate for the global giant from mid- to high 20 percent range to the low-to-mid 20 percent range.

“The enormous amount of effort and energy invested over the past seven months in bringing these two great companies together, strengthening our customer relationships, defining the right organizational structure and building momentum in every line of business is transforming Sherwin-Williams into a faster growing, financially stronger and more profitable enterprise,” Morikis said. “These efforts will continue throughout 2018 with similar effect.”

   

Tagged categories: Asia Pacific; Coatings manufacturers; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Latin America; North America; Paint and Coating Sales; Program/Project Management; Sherwin-Williams; Valspar; Z-Continents

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