10-QPeriod: Q2 FY2022

SHERWIN WILLIAMS CO Quarterly Report for Q2 Ended Jun 30, 2022

Filed July 27, 2022For Securities:SHW

Summary

Sherwin-Williams reported solid top-line growth in the second quarter of 2022, with consolidated net sales increasing 9.2% year-over-year to $5.87 billion. This growth was primarily driven by strategic pricing increases across all segments and increased sales volume in The Americas Group and Performance Coatings Group. However, diluted earnings per share saw a decline, falling to $2.21 from $2.42 in the prior year's quarter. This was attributed to higher raw material costs, supply chain inefficiencies, and inflationary pressures on labor and transportation, which negatively impacted gross margins despite sequential improvement. The company's financial position remains strong with ample liquidity, including $312.6 million in cash and $1.506 billion in unused credit capacity. Sherwin-Williams continues to prioritize capital allocation towards acquisitions and shareholder returns through share repurchases and an increased quarterly dividend. Despite some headwinds in the Consumer Brands Group due to softer DIY demand and macroeconomic challenges, the company is executing its strategy and managing through inflationary pressures.

Financial Highlights

53 data points
Beta

Revenue

$5.87B

41.7% Gross Margin

Net Income

$577.90M

9.8% Net Margin

EPS (Diluted)

$2.21

Total Assets

$22.05B

Cash & Equivalents

$312.60M

Free Cash Flow

$613.40M

Financial Statements
Beta
Revenue$5.87B
Cost of Revenue$3.42B
Gross Profit$2.45B
SG&A Expenses$1.60B
Operating Income$960.70M
Interest Expense$92.90M
Net Income$577.90M
EPS (Basic)$2.24
EPS (Diluted)$2.21
Shares Outstanding (Basic)258.10M
Shares Outstanding (Diluted)261.80M

Key Highlights

  • 1Consolidated net sales increased by 9.2% to $5.87 billion in Q2 2022 compared to Q2 2021.
  • 2Diluted earnings per share decreased to $2.21 in Q2 2022 from $2.42 in Q2 2021.
  • 3Gross profit margin declined to 41.7% from 44.8% year-over-year, primarily due to increased raw material and supply chain costs.
  • 4The Americas Group and Performance Coatings Group showed strong sales growth, driven by pricing and volume increases.
  • 5Consumer Brands Group sales showed minimal growth, impacted by softer DIY demand and economic challenges.
  • 6The company maintained strong liquidity with $312.6 million in cash and $1.506 billion in unused credit facilities.
  • 7Sherwin-Williams increased its quarterly cash dividend to $0.60 per share.

Frequently Asked Questions

Sales growth was primarily driven by strategic selling price increases across all segments, particularly in The Americas Group and Performance Coatings Group. Higher professional architectural sales volume in North America paint stores and increased sales volumes in the Packaging and Coil businesses within the Performance Coatings Group also contributed significantly.

Earnings per share declined due to several factors, including higher raw material, freight, and transportation costs. Supply chain inefficiencies and other inflationary pressures on labor also negatively impacted gross margins. Additionally, lower-than-expected sales in the Consumer Brands Group contributed to weaker overall earnings.

Sherwin-Williams maintained strong financial health and liquidity. As of June 30, 2022, the company had $312.6 million in cash and cash equivalents and $1.506 billion in unused capacity under its credit facilities. They are compliant with bank covenants and have sufficient resources to fund ongoing operations.

The outlook is mixed. The Americas Group and Performance Coatings Group are expected to continue strong performance, driven by professional demand and industrial markets. However, the Consumer Brands Group is facing challenges due to softer DIY demand, inflation, and economic uncertainty in Europe and COVID-related lockdowns in China.