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Sherwin Reports Sales Increases for Q2, Midyear

Wednesday, July 24, 2019

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Global coatings firm The Sherwin-Williams Company (Cleveland) released its second-quarter financial report for 2019 on Tuesday (July 23), announcing an increase in consolidated net sales, diluted net income per share and net sales from stores in the U.S. and Canada.

Consolidated net sales reportedly increased 2.2%, or $104.1 million, to $4.88 billion. Sherwin attributes that increase to higher paint sales volume in North America, and sales from U.S. and Canada stores (open more than 12 months) increased 4.3% in the quarter.

Diluted net income per share increased to $5.03 per share compared to $4.25 per share this time last year, and EBITDA increased 8.5% in the quarter to $921.5 million.

Q2 2019 Report

 “All three of our segments increased profit and margin year-over-year,” said John G. Morikis, Chairman and Chief Executive Officer.

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

Global coatings firm The Sherwin-Williams Company (Cleveland) released its second-quarter financial report for 2019 on Tuesday (July 23), announcing an increase in consolidated net sales, diluted net income per share and net sales from stores in the U.S. and Canada.

“In The Americas Group, we generated sales growth in all end markets in our North American paint stores, led by high single digit growth in residential repaint. We leveraged the sales growth to expand segment margin by 50 basis points to 22.2%. We've opened 20 net new stores year to date, and our professional painting contractor customers continue to report solid backlogs and project pipelines going forward.

“In our Consumer Brands Group, our growth initiatives with our largest partners in North America are performing well and more than offset softer demand in some international markets. Adjusted segment margin improved 90 basis points to 20.3%, driven by sales growth and good cost control. Performance Coatings Group sales declined in the quarter mainly related to softer demand in some end markets in Asia and Europe. Despite the sales decline, adjusted segment margin increased 150 basis points to 15.5%—evidence of our good cost control and that our recent pricing actions are gaining traction to offset raw material inflation.”

For The Americas Group, Sherwin reported an increase of 5%, to $2.76 billion in the quarter and an increase of 4.4% to $4.91 billion in six months. The company also credits this to higher paint sales across all end markets in North American stores. Net sales from stores in the U.S. and Canada increased 4.3% and 4% in the first six months. Although segment profit was negatively impacted by increased raw material costs, it still saw an increase to 22.2% from 21.7%.

Net sales in The Consumer Brands Group increased 3.4% to $804.5 million and 1.7% to $1.46 billion in six months. This increase was attributed to a new customer program that was launched in 2018 as well as selling price increases. Sherwin notes that currency translation rate changes led to a decrease in group net sales by 1.6% in both the quarter and six months, however.

In the quarter, segment profit as a percent of net external sales increased to 17.5% from 11.7%, but total segment profit decreased by $1.9 million. In the first six months, however, segment profit increased to $228.6 million from $165.1 million—primarily due to selling price increases, good cost control and reduced impacts of purchase accounting—while segment profit as a percent of net external sales increased to 15.7% from 11.5%

The Performance Coatings Group’s net sales decreased 3.8% to $1.32 billion in the quarter and also decreased 1.9% to $2.55 billion in six months. Sherwin says this decrease was primarily due to soft sales outside North America, as well as unfavorable currency translation changes.

Sherwin-Williams

Net sales in The Consumer Brands Group increased 3.4% to $804.5 million and 1.7% to $1.46 billion in six months.

In this segment, quarterly profit as a percent of net external sales increased to 11.4% from 10.5%, and in the first six months increased to 9.8% from 9%. Segment profit as a whole increased in the quarter to $150.3 million from $144.2 million, which Sherwin says was primarily because of selling price increases and good cost control. Segment profit increased in the first six months to $249 million from $235 million.

Looking Ahead

“For the third quarter, we anticipate our consolidated net sales will increase by a low single digit percentage compared to last year's third quarter,” Morikis said.

“For the full year 2019, we expect our consolidated net sales will increase [2% to 4%] compared to the full year 2018. We are updating our full year 2019 diluted net income per share guidance to be in the range of $16.14 to $17.14 per share as a result of the $.79 per share charge related to the tax credit investment loss. Diluted net income per share in 2018 was $11.67 per share, including a charge of $4.15 per share for acquisition-related costs and charges for non-operating expenses of $2.71 per share.

“We are reaffirming our full year 2019 adjusted diluted net income per share guidance to be in the range of $20.40 to $21.40 per share, excluding acquisition-related costs and charges for non-operating expenses, compared to $18.53 per share for the full year 2018 on a comparable basis."

   

Tagged categories: Asia Pacific; Business matters; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Good Technical Practice; Latin America; North America; Sherwin-Williams; Z-Continents

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