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Sherwin-Williams Reports Positive Q2 Earnings
Global coatings firm The Sherwin-Williams Company announced its 2021 second-quarter financial results on Wednesday (July 27), highlighting a 16.9% net sales increase year over year to $5.38 billion.
In addition to the net sales increase, diluted net income per share also increased to $2.65 per share, or 11.8% within the quarter.
“We delivered solid performance in the second quarter driven by robust architectural paint demand in The Americas Group and strong demand across our industrial end markets, which more than offset the return to more normal DIY end market demand levels,” said Chairman, President and Chief Executive Officer, John G. Morikis.
“Along with the strong demand, we also implemented pricing actions to offset the significant, sustained raw material inflation that pressured our gross margin in the quarter. Despite the near-term gross margin compression, we delivered 11.8% adjusted diluted net income per share growth and 7.4% EBITDA growth in the quarter. Our cash generation remained strong, which enabled us to continue investing in long-term strategic growth initiatives, repurchase 3.1 million shares in the second quarter, and open 25 new stores.”
Results by Segment
In the Americas Group, net sales increased to $3.1 billion from $2.5 billion in Q2 of last year. The company attributes this primarily to higher architectural sales across all professional end markets, led by residential repaint, commercial and property maintenance that more than offset the decrease in DIY, and selling price increases. Segment profit also increased due primarily to higher sales volumes and selling price increases, which were partially offset by increased raw material costs.
“In The Americas Group, sales in all of our end markets, except DIY, were up double-digit percentages in the quarter, led by residential repaint. As expected, sales to our DIY customers were down double-digits, driven by difficult comparisons to the prior year as consumer demand returned to more normal levels,” Morikis said.
Net sales in the Consumer Brands Group, however, reported a decrease—from $980 million in 2020 to $731.5 million in the second quarter of 2021. This downfall was primarily due to lower volume sales to most of the group's retail customers and the Wattyl divestiture, partially offset by selling price increases.
“These lower North America DIY demand trends also impacted our Consumer Brands Group in the quarter. Supply chain constraints in the quarter impacted our architectural businesses similarly in The Americas and Consumer Brands Groups,” Morikis noted.
Segment profit also decreased primarily due to lower sales volume and increased raw material costs, partially offset by selling price increases and good cost control.
In the Performance Coatings Group, net sales increased—from $1.1 billion to $1.55 billion, due to higher sales volumes in all end markets and selling price increases, according to Sherwin. Adjusted segment profit also increased from $150 million to $201 million, primarily due higher sales and selling price increases, partially offset by increased raw material costs.
“In Performance Coatings Group, all divisions delivered strong double-digit growth, led by industrial wood and general industrial,” Morikis added.
To note on Sherwin’s liquidity and cash flow, the company has been reported to have generated $1.20 billion in net operating cash during the first six months of 2021, an increase of 11.8% compared to the same period last year. This cash generation, in addition to seasonal increases in Sherwin’s short-term borrowings, allowed the company to return cash of approximately $1.94 billion to shareholders in the form of dividends and share repurchases.
Looking ahead, Morikis noted that while demand remains robust across nearly all of the company’s end markets, industry raw material inflation was more significant and had sustained more than anticipated, inspiring a positive outlook.
“We continue to have great confidence we will offset these higher costs with the incremental price increases we have announced, and we are prepared to implement additional increases should they become necessary. While our industry is operating in a challenging environment, our team has repeatedly demonstrated its ability to manage through these types of pressures just as we have done in many past cycles. We will continue to manage through disruptions in the supply chain and focus on controlling what we can control while providing differentiated solutions and excellent service to our customers.”
