Sherwin-Williams Reports First-Quarter Profit Increase
Coatings giant The Sherwin-Williams Company (Cleveland) released its first-quarter financial report for 2018 on Tuesday (April 24), marking a consolidated sales increase of $1.20 billion—or 43.6 percent—to $3.97 billion. The company primarily attributes the growth to the acquisition of Valspar sales, selling-price increases and higher paint sale volume for the Americas Group.
Omitting sales from Valspar, net sales from Sherwin-Williams’ core operations increased 4.9 percent this past quarter.
First-Quarter Financial Report
According to Sherwin, new revenue standard ASC 606 dictates that certain elements of advertising support—namely classified as selling, general and administrative expenses—is now classified as a reduction of revenue, which had no material impact on consolidated net sales.
Sherwin reported an increase in net sales for The Americas Group of 6.6 percent (totaling $2.08 billion), which can be attributed to higher architectural paint sales volume across most end market segments, as well as selling price increases. Compared to the same quarter last year, there was also a 5.2 percent uptick in sales for stores in the U.S. and Canada that have been open for longer than 12 months. The Group segment profit increased $32.2 million to $337.4 million, partially due to the aforementioned reasons, along with a partial offset caused by the increased cost of raw materials.
Net sales for the Consumer Brands Group increased 103 percent to $656.4 million due to the inclusion of Valspar sales, but was partially lowered due to a decrease in volume sales to some retailers; Valspar sales increased Group net sales 108.3 percent for the quarter. Segment profit increased to $74.2 million in the quarter from $55.9 million last year, but acquisition impacts decreased net external sales from 17.3 percent last year to 11.3 percent this year. This quarter saw a segment profit increase from Valspar operations profit of $56.7 million. This was offset by a purchase accounting amortization expense of $31.8 million.
Performance Coating Group's net sales increased 153.4 percent to $1.23 billion, with Valspar sales contributing 148.1 percent to Group net sales. Segment profit was up thanks to Valspar’s operations profit of $98.1 million, which was partially offset by purchase accounting amortization expense of $57.5 million, but with an overall decrease from 11.8 percent to 7.4 percent
The Year Ahead
“For the second quarter, we anticipate our Sherwin-Williams' core net sales will increase a mid-to-high single digit percentage compared to last year's second quarter,” said John G. Morikis, Chairman, President and Chief Executive Officer for Sherwin-Williams.
“In addition, we expect incremental sales from the Valspar acquisition to be approximately $600 million for April and May in the second quarter. For the full year 2018, we expect Sherwin-Williams' core net sales to increase by a mid-to-high single digit percentage compared to full year 2017.”
Morikis went on to note that Sherwin expects incremental sales from Valspar for the first five months to roughly break down to $1.7 billion in 2018.