The Sherwin-Williams Company Reports 2022 Third Quarter Financial Results

Ein Geschäft von Sherwin-Williams. © RiverNorthPhotography / iStock Unreleased / Getty Images

PR Newswire

CLEVELAND, Oct. 25, 2022

CLEVELAND, Oct. 25, 2022 /PRNewswire/ -- The Sherwin-Williams Company (NYSE: SHW) announced its financial results for the third quarter ended September 30, 2022. All comparisons are to the third quarter of the prior year, unless otherwise noted.

SUMMARY

Consolidated net sales increased 17.5% in the quarter to a record $6.05 billion

Net sales from stores in U.S. and Canada open more than twelve calendar months increased 20.7% in the quarter

Diluted net income per share increased to $2.62 per share in the quarter compared to $1.88 per share in the third quarter 2021

Adjusted diluted net income per share increased 35.4% to $2.83 per share in the quarter compared to $2.09 per share in the third quarter 2021

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) increased to $1.12 billion, or 18.6% of sales, in the quarter
Reaffirming FY22 diluted net income per share guidance in the range of $7.65 to $7.95 per share, including acquisition-related amortization expense of $0.85 per share

Reaffirming adjusted diluted net income per share guidance in the range of $8.50 to $8.80 per share

CEO REMARKS

"Our team delivered record net sales results in the third quarter as we continued to focus on serving our customers with innovative solutions," said Chairman and Chief Executive Officer, John G. Morikis. "Sales grew to $6.05 billion, a 17.5% increase against a softer quarter comparison last year when raw material availability was highly challenged. Consolidated gross margin expanded 110 basis points sequentially and 120 basis points year-over-year to 42.8%. Our margins improved as a result of pricing actions across all businesses and volume increases in all architectural paint end markets in The Americas Group. We generated strong cash flow in the quarter, which enabled us to continue making strategic long-term investments across the business and pursue strategic, bolt-on acquisitions in the Performance Coatings Group, having closed three acquisitions since the beginning of the third quarter.

"In The Americas Group, we continued to capture strong demand across all professional architectural markets, as same-store sales increased 20.7% in the third quarter, and we are seeing strong realization from our September 6th 10% price increase. In the Consumer Brands Group, double-digit growth in North America was partially offset by continued tightness in supply of alkyd resins and headwinds in Europe and Asia, while segment margin improved significantly sequentially and year-over-year. Momentum continues in the Pros Who Paint category with our North American retail partners. In the Performance Coatings Group, sales grew in every division as a result of pricing actions across all divisions and contributions from acquisitions. Regionally, sales were up strong double-digits in North America and Latin America, and high-single-digits in Asia, partially offset by a mid-single-digit decline in Europe. Segment margin in this group also meaningfully expanded sequentially and year-over-year."

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THIRD QUARTER CONSOLIDATED RESULTS

	Three Months Ended September 30,
	2022	2021	$ Change	% Change
Net sales	$ 6,047.4	$ 5,146.7	$ 900.7	17.5 %
Income before income taxes	$ 877.2	$ 611.5	$ 265.7	43.5 %
As a % of sales	14.5 %	11.9 %
Net income per share - diluted	$ 2.62	$ 1.88	$ 0.74	39.4 %
Adjusted net income per share - diluted	$ 2.83	$ 2.09	$ 0.74	35.4 %

Consolidated net sales increased primarily due to selling price increases in all segments and higher architectural sales volume in The Americas Group, partially offset by lower sales volume in the Consumer Brands Group. Acquisitions increased consolidated net sales by 1.6%, while currency translation rate changes decreased consolidated net sales by 2.1%.

Income before income taxes increased due to selling price increases in all segments and higher sales volume in The Americas Group. These factors were partially offset by an increase in raw material and other input costs, including higher supply chain costs to serve our customers, primarily in The Americas Group and the Consumer Brands Group, and lower sales volume in the Consumer Brands Group.

Diluted net income per share included a charge of $0.21 per share for acquisition-related amortization expense.

THIRD QUARTER SEGMENT RESULTS

The Americas Group ("TAG")

	Three Months Ended September 30,
	2022	2021	$ Change	% Change
Net sales	$ 3,602.7	$ 2,967.0	$ 635.7	21.4 %
Same-store sales ⁽¹⁾	20.7 %	(2.8) %
Segment profit	$ 764.1	$ 631.5	$ 132.6	21.0 %
Reported segment margin	21.2 %	21.3 %

⁽¹⁾Same-store sales represents net sales from stores in U.S. and Canada open more than twelve calendar months.

Net sales in TAG increased due primarily to higher architectural sales volume across all end markets and selling price increases. TAG segment profit increased due primarily 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 our long-term growth initiatives.

Consumer Brands Group ("CBG")

	Three Months Ended September 30,
	2022	2021	$ Change	% Change
Net sales	$ 701.9	$ 646.7	$ 55.2	8.5 %
Segment profit	$ 94.9	$ 75.8	$ 19.1	25.2 %
Reported segment margin	13.5 %	11.7 %
Adjusted segment profit ⁽¹⁾	$ 113.8	$ 95.2	$ 18.6	19.5 %
Adjusted segment margin	16.2 %	14.7 %

⁽¹⁾Adjusted segment profit excludes the impact of acquisition-related amortization expense. Acquisition-related amortization expense in CBG was $18.9 million and $19.4 million in the third quarter of 2022 and 2021, respectively.

Net sales in CBG increased due primarily to selling price increases in all regions, partially offset by lower sales volume primarily outside of North America. Currency translation rate changes decreased CBG's net sales by 1.6%. CBG segment profit increased primarily due to selling price increases and good cost control, partially offset by lower sales volume, increased raw material costs and higher supply chain costs. Acquisition-related amortization expense reduced segment profit as a percent of net external sales by 270 basis points compared to 300 basis points in the third quarter of 2021.

Performance Coatings Group ("PCG")

Three Months Ended September 30,

2022

2021

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