The Sherwin-Williams Company Reports 2023 Third Quarter Financial Results - 24.10.23 - News

CLEVELAND, Oct. 24, 2023

SUMMARY

Consolidated net sales increased 1.1% in the quarter to $6.12 billion
- Net sales from stores in the U.S. and Canada open more than twelve calendar months increased 3.0% in the quarter
Diluted net income per share increased 12.6% to $2.95 per share in the quarter compared to $2.62 per share in the third quarter 2022
- Adjusted diluted net income per share increased 13.1% to $3.20 per share in the quarter compared to $2.83 per share in the third quarter 2022
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) in the quarter increased 12.6% to $1.27 billion, or 20.7% of net sales
Generated net operating cash of $2.60 billion, or 14.6% of net sales, during the first nine months of 2023
Increasing full year 2023 diluted net income per share guidance to a range of $9.21 to $9.41 per share, including acquisition-related amortization expense of $0.80 per share and restructuring-related net expense of $0.09 per share
- Increasing full year 2023 adjusted diluted net income per share guidance to a range of $10.10 to $10.30 per share

CEO REMARKS

"Sherwin-Williams delivered strong third quarter results in an environment where demand remained highly variable by end market and region, and against a challenging prior year comparison," said Chairman and Chief Executive Officer, John G. Morikis. "Consolidated net sales were within our guidance range, and consolidated gross margin of 47.7% expanded significantly both sequentially and year-over-year driven by pricing discipline and moderating raw material costs. As we previously indicated, we have deliberately chosen to continue investing at this time in multiple growth initiatives and solutions for our customers, which is reflected in higher SG&A costs in the quarter compared to a year ago. While we executed on these initiatives, we continued to create shareholder value as adjusted diluted net income per share and EBITDA grew by double digit percentages, and we returned $566 million to our shareholders through dividends and share repurchases during the quarter.

"From a segment perspective, sales growth in Paint Stores Group was led by protective and marine and commercial, with residential repaint and property maintenance also delivering growth. As expected, sales in new residential softened due to slowing completions, though we are confident in continuing share gains. Segment margin expanded, and we opened 16 new paint stores in the quarter. The sales decrease in our Consumer Brands Group was largely the result of the divestiture of the China architectural business and softer demand in North America, as the DIY consumer remained under pressure. Conversely, the Group's sales in Latin America and Europe increased by double digit percentages. In the Performance Coatings Group, the Industrial Wood and Automotive Refinish businesses delivered growth. Sales decreased in our General Industrial and Coil businesses and varied widely by region. As expected, industry-wide destocking continued to impact our Packaging business. Segment margin improved given pricing discipline and moderating costs."

THIRD QUARTER CONSOLIDATED RESULTS

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Sherwin-Williams Company

306,45 $

+0,54%

Three Months Ended September 30,

2023

2022

$ Change

% Change

Net sales

$ 6,116.7

$ 6,047.4

$ 69.3

1.1 %

Income before income taxes

$ 1,009.0

$ 877.2

$ 131.8

15.0 %

As a % of sales

16.5 %

14.5 %

Net income per share - diluted

$ 2.95

$ 2.62

$ 0.33

12.6 %

Adjusted net income per share - diluted

$ 3.20

$ 2.83

$ 0.37

13.1 %

Consolidated net sales increased primarily due to selling price increases in all segments, which impacted sales by a low-single digit percentage, and modest net benefit from acquisitions and divestitures and favorable currency translation rate changes. This growth was mostly offset by a low-single digit volume decrease primarily driven by the Consumer Brands and Performance Coatings Groups.

Income before income taxes increased primarily due to benefits from selling price increases in all segments and moderating raw material costs. These factors were partially offset by lower fixed cost absorption in Consumer Brands due to lower production volumes, lower sales volumes in the Consumer Brands and Performance Coatings Groups, continued investments in long-term growth strategies and higher employee-related expense. Increased costs within the Administrative Segment, including environmental expense and asset disposals, also reduced Income before income taxes.

Diluted net income per share included a charge of $0.19 per share for acquisition-related amortization expense and a charge of $0.06 per share related to discrete income tax expense associated with the divestiture of the China architectural business.

THIRD QUARTER SEGMENT RESULTS Paint Stores Group (PSG)
	Three Months Ended September 30,
	2023	2022	$ Change	% Change
Net sales	$ 3,537.1	$ 3,414.0	$ 123.1	3.6 %
Same-store sales ⁽¹⁾	3.0 %	20.7 %
Segment profit	$ 917.5	$ 741.3	$ 176.2	23.8 %
Reported segment margin	25.9 %	21.7 %

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

Net sales in PSG increased primarily due to benefits from selling price increases, which impacted sales by a low-single digit percentage. Sales volume was approximately flat year-over-year, driven by higher pro architectural sales volume, excluding new residential volume which decreased by a high-single digit percentage. PSG segment profit increased due primarily to 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 September 30,
	2023	2022	$ Change	% Change
Net sales	$ 854.8	$ 890.6	$ (35.8)	(4.0) %
Segment profit	$ 101.6	$ 117.7	$ (16.1)	(13.7) %
Reported segment margin	11.9 %	13.2 %
Adjusted segment profit ⁽¹⁾	$ 117.6	$ 136.6	$ (19.0)	(13.9) %
Adjusted segment margin	13.8 %	15.3 %

⁽¹⁾	Adjusted segment profit equals Segment profit excluding the impact of acquisition-related amortization expense. Acquisition-related amortization expense was $16.0 million and $18.9 million in the third quarter of 2023 and 2022, respectively.

Net sales in CBG decreased primarily due to the divestiture of the China architectural business, which reduced sales by approximately 3.0% in the quarter. Mid-single digit volume declines were partially offset by selling price increases, which impacted sales by a mid-single digit percentage. Lower sales volume growth in North America and Asia were partially offset by higher sales volume growth in Latin America and Europe. CBG segment profit decreased primarily due to lower sales volume and lower fixed cost absorption due to lower production volumes. This was partially offset by benefits from selling price increases and moderating raw material costs. Acquisition-related amortization expense reduced segment profit as a percent of net external sales by 190 basis points in the third quarter of 2023, compared to 210 basis points in the third quarter of 2022.

Performance Coatings Group (PCG)

Three Months Ended September 30,

2023

2022

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