Sherwin Reports Q4, 2022 Financial Results
Global coatings firm The Sherwin-Williams Company released its 2022 fourth-quarter and year-end financial results yesterday (Jan. 26), reporting consolidated net sales at a 9.8% increase for the quarter and an 11.1% increase for the year.
This brought the net sales for the quarter to $5.23 billion and net sales for the year to a record $22.15 billion.
The company attributes the fourth-quarter growth to increased selling prices in all segments, as well as higher architectural sales volumes in the Americas Group. This was partially offset by lower sales volumes outside of North America in the Consumer Brands and Performance Coatings Group.
Additionally, acquisitions increased consolidated net sales by approximately 1.5%, while currency translation rate changes reportedly decreased consolidated net sales by 2%.
“Sherwin-Williams delivered strong fourth quarter results compared to the same period a year ago, including high single-digit percentage sales growth, significant year-over-year gross margin improvement, expanded adjusted operating margins in all three segments, strong double-digit adjusted diluted net income per share growth and strong EBITDA growth,” said Chairman and Chief Executive Officer, John G. Morikis.
“Our more than 61,000 employees delivered these results in another year of difficult operating conditions, including relentless cost inflation, less than optimal raw material availability, slowing economies, a war in Europe and COVID lockdowns in China. We refused to be deterred by these challenges and continued to do what we do best—serve our customers.”
Q4 Earnings Breakdown
Net sales in The Americas Group increased 15.7% to $3.07 billion, primarily due to selling price increases and higher architectural sales volume in most end markets.
Profit for the segment also increased 31.6% to $526.7 million due to higher paint sales volume and selling price increases, partially offset by increased raw material costs and higher SG&A costs related to continued investments in long-term growth strategies.
In the Consumer Brands Group, net sales decreased 2.4% to $551.5 million for the quarter, due to lower sales volume, partially offset by selling price increases in all regions.
Segment profit decreased 85.1% to $2.4 million, primarily due to lower sales volume, increased raw material costs and supply chain inefficiencies, as well as the costs associated with targeted restructuring actions including non-cash trademark impairments.
Net sales in the Performance Coatings Group also increased 4.2% year-over-year to $1.61 billion. Sherwin attributes this increase to selling price increases in all end markets, in addition to acquisitions increasing this Group’s net sales by about 4.5% in the quarter.
Segment profit for the fourth quarter increased 80.4% to $157.3 million, again due to selling price increases, partially offset by increased raw material costs and higher costs to support increased sales levels.
In terms of a 2023 outlook, Morikis said that the company expects consolidated net sales to remain flat or have up to a mid-single digit percentage increase compared to the first quarter of 2022. For the full year, it is anticipated for consolidated net sales to be down a mid-single digit percentage to flat compared to 2022.
Sherwin also expects raw material costs to decrease by a low- to mid-single-digit percentage, while other costs, including wages, are expected to increase by a mid- to high-single-digit percentage.
“We enter 2023 with confidence and energy. We have clarity of mission, the right strategy and a focus on solutions for our customers,” said Morikis. “Above all, we have the right people, and we expect to outperform the market in 2023 just as we have in the past.
“At the same time, we will not be immune from what we expect to be a very challenging demand environment in 2023. Visibility beyond our first half of the year is limited. On the architectural side, U.S. housing will be under significant pressure this year. Slowing existing home sales and continued high inflation also will be headwinds.
“On the industrial side, we have already seen a slowdown in Europe, and the same is beginning to appear in the U.S. across several sectors. In China, COVID remains a factor and the trajectory of economic recovery is difficult to map. The U.S housing slowdown also will impact some of our industrial businesses, namely Industrial Wood and Coil.
“Our team is focused on winning new accounts and growing share of wallet in this challenging environment, while leveraging our exposure in more resilient end markets, including residential repaint, property maintenance, auto refinish, and packaging.”