01—Abstract
Summary
Summary of the 10-K filed February 22, 2023. Cited figures are marked; the original filing is the authoritative source.
The Sherwin-Williams Company reported a strong financial year in 2022, with consolidated net sales reaching a record $22.149 billiona, an increase of 11.1% year-over-year.
This growth was primarily driven by selling price increases across all segments and higher product sales volume in The Americas Group, partially offset by lower volumes in the Consumer Brands and Performance Coatings Groups. Despite facing macroeconomic challenges such as raw material inflation and supply chain disruptions, the company generated robust net operating cash of $1.920 billionb. The company demonstrated a balanced approach to capital deployment, investing $1.003 billion in strategic acquisitions to enhance its product offerings and capabilities, while also returning significant value to shareholders through $883.2 million in share repurchases and $618.5 million in dividends.
Looking ahead to 2023, Sherwin-Williams anticipates a challenging demand environment due to inflationary pressures impacting consumer behavior and elevated mortgage rates, particularly in housing markets. However, the company remains confident in its long-term strategy, focusing on gaining market share in resilient end markets and leveraging previously implemented price increases. Management expects to realize significant savings from ongoing restructuring actions and anticipates gross margin expansion driven by cost control initiatives and anticipated raw material cost deflation.
02—Key points
Key Highlights
- Consolidated net sales reached a record $22.149 billion in 2022, an 11.1% increase from the prior year.
- The Americas Group saw a significant 12.9% increase in net sales, driven by price increases and volume growth, particularly in residential repaint.
- The company generated strong net operating cash of $1.920 billion, enabling investments in acquisitions and returns to shareholders.
- Sherwin-Williams invested $1.003 billion in five acquisitions during 2022, expanding its product offerings and capabilities.
- Shareholder returns included $883.2 million in share repurchases and $618.5 million in dividends.
- The company faces challenges in 2023, including anticipated inflationary pressures impacting consumer behavior and higher costs for wages, energy, and transportation.
- A business restructuring plan was approved in Q4 2022 to simplify the operating model within the Consumer Brands Group and reduce costs across various segments, with expected annual savings of $50-$70 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Sherwin Williams Co kept $0.09.
- Revenue$22.15B100.0%
- Cost of revenue−$12.82B57.9%
- Gross profit$9.33B42.1%
- Operating costs−$5.93B26.8%
- Operating income$3.40B15.3%
- Interest, other & tax−$1.38B6.2%
- Net income$2.02B9.1%
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 22, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $22.15B$19.94B | +11.1% |
| Cost of Revenue | $12.82B$11.40B | +12.5% |
| Gross Profit | $9.33B$8.54B | +9.2% |
| SG&A Expenses | $6.33B$5.88B | +7.6% |
| Operating Income | $3.40B$3.08B | +10.2% |
| Interest Expense | $390.80M$334.70M | +16.8% |
| Net Income | $2.02B$1.86B | +8.4% |
| EPS (Basic) | $7.83$7.10 | +10.3% |
| EPS (Diluted) | $7.72$6.98 | +10.6% |
| Shares Outstanding (Basic) | 258.00M262.50M | −1.7% |
| Shares Outstanding (Diluted) | 261.80M267.10M | −2.0% |
05—Questions
Frequently Asked Questions
What were the main drivers of Sherwin-Williams' sales growth in 2022?
Sherwin-Williams' sales growth in 2022 was primarily driven by selling price increases implemented across all reportable segments and higher product sales volume, especially within The Americas Group, notably in the residential repaint market. Acquisitions also contributed to sales growth.
How did the company manage costs and profitability in the face of inflation?
The company experienced higher raw material costs which impacted gross margins. However, effective cost control measures helped to improve SG&A as a percentage of net sales. Looking forward, Sherwin-Williams expects gross margin expansion in 2023 through cost control, continuous improvement initiatives, and anticipated raw material cost deflation.
What is the company's outlook and strategy for 2023?
Sherwin-Williams anticipates a challenging demand environment in 2023 due to macroeconomic factors like inflation and rising interest rates. The company's strategy focuses on gaining market share in resilient end markets, leveraging price increases from prior years, and realizing savings from restructuring actions. Investments in new store openings and potential acquisitions are also part of the long-term growth plan.
How is the company returning value to shareholders?
The company is returning value to shareholders through a balanced capital deployment strategy that includes paying dividends and repurchasing its own stock. In 2022, $618.5 million was paid in dividends, and $883.2 million was used for share repurchases.
06—Continue