Sherwin-Williams Reports Q3 2021 Decreases

TUESDAY, NOVEMBER 9, 2021


Global coatings firm The Sherwin-Williams Company released its financial earnings report for the 2021 third quarter on Oct. 26.

The company reported a year-over-year net sales increase of 0.5% to $5.15 billion. However, diluted net income per share; earnings before interest, taxes, depreciation and amortization; and net operating cash all decreased.

The company says that the decrease in the quarter was primarily due to raw material availability challenges combined with higher raw material costs, largely in the Americas Group.

Financial Report

“Demand remains strong across our pro architectural and industrial end markets; however, results in the quarter were significantly impacted by ongoing and industry-wide raw material supply chain challenges,” said Chairman, President and Chief Executive Officer, John G. Morikis.

“The raw material availability challenges combined with higher raw material costs significantly pressured gross margins in the quarter. We continue to implement price increases to offset higher raw material costs across the business and are confident margins will recover as inflation headwinds eventually subside. Despite the near-term margin pressure, cash flow generation remained strong during the quarter, enabling us to invest in long-term strategic growth initiatives, open 19 new stores, announce two acquisitions and purchase 1.675 million shares.”

In the Americas Group, net sales decreased 0.4% to $2.97 billion in the quarter, which was primarily due to lower sales volume of paint products as a result of raw material availability challenges, partially offset by selling price increases. Segment profit decreased $115.9 million to $631.5 million in the quarter.

In the Consumer Brands Group, net sales decreased 22.8% to $646.7 million in the quarter, which the company attributes to lower sales volumes as a result of raw material availability issues and the Wattyl divestiture. Segment profit decreased to $75.8 million in the quarter from $198.3 million last year.

The Performance Coatings Group increased with a 17.4% bump to $1.53 billion in the quarter. The increase was due to higher sales in all end markets and selling price increases, the company noted. Segment profit decreased in the third quarter to $110.4 million from $155.3 million.

“In The Americas Group, underlying demand in our professional architectural businesses remains robust. We expect delayed projects to be completed as raw material availability improves, and our team is aggressively pursuing additional business,” Morikis said.

“In the Consumer Brands Group, our sales remained down double-digits, driven by difficult comparisons to the prior year, consumers returning to the workplace, raw material availability issues and the divestiture of the Wattyl business. Growth in the Pros Who Paint category in this segment was not enough to offset the lower North America DIY demand and raw material availability challenges. In the Performance Coatings Group, all businesses and regions delivered growth, most by double digit percentages.”

In all, the company reports that it generated $2.1 billion in net operating cash during the first nine months of the year, a 17.67% decrease year over year.

“Our full year adjusted diluted net income per share guidance remains unchanged from our Sept. 28, 2021 range of $8.35-$8.55 per share. The pace of recovery in raw material availability remains highly fluid as the impacts of Hurricane Ida are more severe and longer lasting than initially thought, and we do not expect any moderation in raw material inflation any sooner than next year,” Morikis said.

“At the same time, we are encouraged by the demand environment, which remains strong across pro architectural and industrial end markets. Our teams remain highly engaged with customers, and we continue to invest in solutions that will drive long-term growth. We are focused on offsetting higher costs with the incremental price increases we have announced, and we are prepared to implement additional increases should they be necessary to offset higher raw material costs.

“We also continue to work closely with our suppliers to improve raw material availability, and we believe we are extremely well positioned as the situation improves, including by adding an incremental 50 million gallons of architectural production capacity through expansion of existing facilities by the end of the first quarter of 2022. We fully expect to emerge from current conditions as a stronger company with stronger customer relationships, and we remain undeterred in our long-term growth strategies.”

   

Tagged categories: Asia Pacific; Business management; Business matters; Business operations; Consumer Reports; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Latin America; North America; Paint and Coating Sales; Program/Project Management; Sherwin-Williams; Z-Continents

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