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Sherwin-Williams Paints a Top Year

Friday, January 30, 2015

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Fueled by architectural paint sales, Sherwin-Williams set a record $11.13 billion in consolidated net sales for 2014.

Net sales in the Paint Stores Group increased 14.2 percent to $6.85 billion for the full year and by 8.0 percent to $1.58 billion for the fourth quarter, due primarily to higher architectural paint sales volume across all end market segments, the coatings maker reported Thursday (Jan. 29).

Sherwin Williams
The Sherwin-Williams Company

The company's 2014 and fourth-quarter performance was fueled by its Paint Stores Group. Sherwin-Williams opened its 4,000th store in the U.S., Canada, and Caribbean in December.

Full-year earnings also set a record, and the Cleveland, OH-based company increased its 2015 outlook.

The company's Latin American Coatings Group was the only segment to see sales declines.

Year-End Highlights

For full-year 2014, the company reported:

  • A 9.3 percent increase in consolidated net sales to $11.13 billion; 
  • A 20.9 percent increase in diluted net income per common share to a record $8.78 per share, including charges of $.22 per share related to environmental provisions and an $.18 per share EPS loss from Comex partially offset by a $.13 EPS increase from a $21 million titanium dioxide settlement; and
  • A record $1.52 billion in EBITDA (earnings before interest, taxes, depreciation and amortization).

“We are pleased to report another year of record performances in sales, earnings per share, and earnings before interest, taxes, depreciation and amortization,” said Chairman and CEO Christopher M. Connor.

The company anticipates a mid-single-digit increase in consolidated net sales for the first quarter of 2015 and a full-year 2015 diluted EPS in the range of $10.90 to $11.10 per share, compared to $8.78 earned in 2014.

The company is also well positioned for future acquisitions and other investments, Connor said.

Robust Paint Stores Group

“Over the past year, our Paint Stores Group grew architectural sales volume across every end market segment and delivered strong operating results,” said Connor.

The company added 95 net stores in 2014, bringing the total to 4,003.

Connor
Sherwin-Williams

Chairman and CEO Christopher M. Connor says the Paint Stores Group delivered strong operating results.

Additionally, “great progress” was made on the company’s integration of the U.S. and Canadian Comex stores, which performed “better than expected” for the year, according to Connor. The company completed the acquisition of Comex's North American paint businesses in September 2013. However, Sherwin-Williams was unsuccessful in attempts to acquire the entire Consorcio Comex business.

Acquisitions increased net sales by 4.5 percent in the year. Net sales from stores open for more than 12 calendar months increased 8.8 percent in the year and 7.5 percent in the quarter over last year's comparable periods.

Paint Stores Group segment profit increased to $1.20 billion in 2014 from $990.5 million in 2013, due primarily to higher paint sales volume partially offset by the loss from acquisitions.

Segment profit increased to $247.5 million in the quarter from $168.5 million last year, due primarily to higher paint sales volume. Acquisitions had an unfavorable impact on segment profit of $32.3 million in the year, the company reported.

Consumer Group Up for Year, Down for Quarter

Net sales in the Consumer Group increased 1.6 percent in the fourth quarter and 5.9 percent for the year, due primarily to acquisitions and higher volume sales to most retail customers.

Segment profit increased to $252.9 million for the year from $242.1 million last year, due to higher volume sales and operating efficiencies, the company reported.

“In December, our Consumer Group announced a new agreement to sell architectural paint under the HGTV HOME by Sherwin-Williams brand through Lowe's stores nationwide,” Connor noted.

The start-up costs of the program had an effect on operating costs and segment profit for the quarter, which  decreased by $5.7 million to $30.3 million.

HGTV
HGTV Home

“In December, our Consumer Group announced a new agreement to sell architectural paint under the HGTV HOME by Sherwin-Williams brand through Lowe's stores nationwide,” Connor noted.

Acquisitions increased net sales 3.4 percent in the year, but had no significant impact on the segment profit in the year.

The company’s Consumer Group sells private-label and branded products through retailers across North America and parts of Europe. It also operates the global supply chain for paints, coatings and other products.

Protective and Marine Post Gains

“The Global Finishes Group improved segment profit as a percent to sales through greater operating efficiencies and good cost control,” according to Connor.

The group produces OEM, protective, marine and automotive coatings and finishes for customers in more than 100 countries.

In U.S. dollars, the segment saw a slight net sales increase of 1.1 percent for the quarter and a 3.8 percent bump for the year, to $2.08 billion.

Segment profit for the year increased to $201.1 million from $170.6 million last year, due mainly to improved operating efficiencies, price hikes and the $6.3 million gain on the early termination of a customer agreement in the third quarter 2014.

Global finishes group
Sherwin-Williams

The Latin America Coatings Group was the only segment to see sales decline.

Segment profit for the quarter, meanwhile, increased to $39.0 million from $37.7 million last year.

Unfavorable currency translation rates shaved both sales and profit figures.

Latin America Coatings Group Dips

The Latin America Coatings Group sells architectural paints, industrial coatings and related products throughout Latin America.

Net sales for the group dipped 6.7 percent for the quarter and declined 7.3 percent to $771.4 million for the year. Connor attributed the declines to unfavorable currency translation rate changes partially offset by selling price increases.

Specifically, currency translation rate changes decreased net sales by 12.3 percent and 13.5 percent in the year and quarter, respectively.

Segment profit also declined to $13.0 million for the quarter from $17.9 million last year.

However, for the year, the segment profit increased to $40.5 million compared to $38.6 million last year, due primarily to the Brazil tax assessments incurred in the second and third quarters 2013 and to the 2014 selling price increases.

Still, Connor said the Latin America Coatings Group “minimized the impact of declining currency on its core operating margins through selling price increases and good cost control.”

Outlook

Connor expects consolidated net sales to increase in the mid-single-digit percentage range for the first quarter of 2015, compared to the prior-year period. That would put the share price at $1.30 to $1.45, compared to $1.14 per share earned in the first quarter of 2014.

For the full year 2015, Connor said, the company expects net sales to increase by a high single-digit percentage over 2014.

Connor added: “With annual sales at that level, we have raised our expectation for diluted net income per common share for 2015 to a range of $10.90 to $11.10, per share compared to $8.78 per share earned in 2014.”

Full details, including the fourth-quarter conference call webcast, are available on Sherwin-Williams’ Investor Relations page.

   

Tagged categories: Business matters; Coatings manufacturers; Earnings reports; Finance; Market; Paint and Coating Sales; Sherwin-Williams

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