The Sherwin-Williams Company Reports 2023 Second Quarter Financial Results - 25.07.23 - News

CLEVELAND, July 25, 2023

SUMMARY

Consolidated net sales increased 6.3% in the quarter to a record $6.24 billion

Net sales from stores in U.S. and Canada open more than twelve calendar months increased 9.5% in the quarter

Diluted net income per share increased 38.9% to $3.07 per share in the quarter compared to $2.21 per share in the second quarter 2022

Adjusted diluted net income per share increased 36.5% to $3.29 per share in the quarter compared to $2.41 per share in the second quarter 2022

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) increased 31.4% to $1.28 billion in the quarter and was 20.6% of net sales
Increasing full year 2023 diluted net income per share guidance to a range of $8.46 to $8.86 per share, including acquisition-related amortization expense of $0.81 per share and restructuring expense of $0.03 per share

Increasing full year 2023 adjusted diluted net income per share guidance to a range of $9.30 to $9.70 per share

CEO REMARKS

"Our team delivered very strong results in the second quarter, as sales exceeded expectations in all three segments," said Chairman and Chief Executive Officer, John G. Morikis. "My thanks goes to our 64,000 employees, who continue to execute on our strategy of providing unique and differentiated value, service and solutions for our customers. Gross margin improved sequentially and year-over-year to 46%, driven by strong sales volume in our Paint Stores Group as well as moderating raw material costs. We leveraged the strong sales growth to drive solid margin expansion across all our segments, while also investing in growth initiatives that will propel sustained future performance. In addition, we delivered strong double digit percentage growth in earnings per share and EBITDA. We generated strong cash flow and continued our disciplined approach to capital allocation, including returning $849 million to shareholders through dividends and share repurchases year to date.

"In our reportable segments, growth in our Paint Stores Group was led by double digit percentage growth in protective and marine, commercial and property maintenance. Residential repaint sales were up a high-single digit percentage. New residential sales were flat, as completions slowed as expected. Sales in our Consumer Brands Group increased by a low-single digit percentage in North America and a strong double digit percentage in Latin America and Europe. In the Performance Coatings Group, our Automotive Refinish business grew by a high-single digit percentage. We also generated growth in our General Industrial and Industrial Wood businesses. Coil and Packaging sales were down against very difficult comparisons."

SECOND QUARTER CONSOLIDATED RESULTS

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Sherwin-Williams Company

306,45 $

+0,54%

Three Months Ended June 30,

2023

2022

$ Change

% Change

Net sales

$ 6,240.6

$ 5,872.3

$ 368.3

6.3 %

Income before income taxes

$ 1,012.1

$ 739.9

$ 272.2

36.8 %

As a % of sales

16.2 %

12.6 %

Net income per share - diluted

$ 3.07

$ 2.21

$ 0.86

38.9 %

Adjusted net income per share - diluted

$ 3.29

$ 2.41

$ 0.88

36.5 %

Consolidated net sales increased primarily due to selling price increases, which impacted sales by a mid-single digit percentage, and mid-single digit volume growth due to higher architectural sales volume in the Paint Stores Group. This growth was offset by lower volume in industrial businesses. Acquisitions increased consolidated net sales by 1.4%.

Income before income taxes increased primarily due to selling price increases in all segments and higher sales volume in the Paint Stores Group, as well as moderating raw material costs. These factors were partially offset by lower sales volume in the Performance Coatings Group, increased investments in long-term growth initiatives, and higher employee-related costs.

As part of a previously announced restructuring plan (Restructuring Plan) to simplify the Company's operating model and reduce costs, the Company completed the divestiture of a non-core domestic aerosol business and announced it had signed a definitive agreement to divest the China architectural business within the Consumer Brands Group during the second quarter of 2023. Diluted net income per share in the quarter included a $0.05 per share impairment charge related to the pending divestiture of the China architectural business, as well as severance and other charges totaling $0.03 per share, offset by a $0.06 per share gain from the divestiture of the non-core domestic aerosol business. In addition, diluted net income per share included a charge of $0.20 per share for acquisition-related amortization expense.

SECOND QUARTER SEGMENT RESULTS Paint Stores Group (PSG)
	Three Months Ended June 30,
	2023	2022	$ Change	% Change
Net sales	$ 3,498.7	$ 3,181.0	$ 317.7	10.0 %
Same-store sales ⁽¹⁾	9.5 %	6.4 %
Segment profit	$ 849.3	$ 684.0	$ 165.3	24.2 %
Reported segment margin	24.3 %	21.5 %

⁽¹⁾	Same-store sales represents net sales from stores open more than twelve calendar months.

Net sales in PSG increased primarily due to mid-single digit volume growth across most end markets, as well as selling price increases, which impacted sales by a mid-single digit percentage. PSG segment profit increased due primarily to higher paint sales volume, selling price increases and moderating raw material costs, partially offset by continued investments in long-term growth strategies and higher employee-related costs.

Consumer Brands Group (CBG)
	Three Months Ended June 30,
	2023	2022	$ Change	% Change
Net sales	$ 945.8	$ 900.0	$ 45.8	5.1 %
Segment profit	$ 110.3	$ 79.9	$ 30.4	38.0 %
Reported segment margin	11.7 %	8.9 %
Adjusted segment profit ⁽¹⁾	$ 148.3	$ 99.0	$ 49.3	49.8 %
Adjusted segment margin	15.7 %	11.0 %

⁽¹⁾

Adjusted segment profit equals Segment profit excluding the impact of restructuring costs, impairment charges, and acquisition-related amortization expense. Restructuring costs were approximately $13.2 million and impairment charges were $6.9 million in the second quarter of 2023. Acquisition-related amortization expense was $17.9 million and $19.1 million in the second quarter of 2023 and 2022, respectively.

Net sales in CBG increased primarily due to selling price increases, which impacted sales by a mid-single digit percentage. Higher sales volume growth in Latin America and Europe was offset by lower sales volume in North America and Asia. CBG segment profit increased primarily due to selling price increases and moderating raw material costs and good cost control, partially offset by inflation in wages and other employee-related costs. Acquisition-related amortization expense reduced segment profit as a percent of net external sales by 190 basis points in the second quarter of 2023, compared to 210 basis points in the second quarter of 2022. Restructuring expense and impairment charges reduced segment profit as a percent of net external sales by 210 basis points in the second quarter of 2023.

Performance Coatings Group (PCG)

Three Months Ended June 30,

2023

2022

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