10-QPeriod: Q2 FY2023

SHERWIN WILLIAMS CO Quarterly Report for Q2 Ended Jun 30, 2023

Filed July 25, 2023For Securities:SHW

Summary

The Sherwin-Williams Company (SHW) reported a strong second quarter for 2023, with consolidated net sales increasing by 6.3% to $6.24 billion, driven by a combination of pricing actions and volume growth, particularly in the Paint Stores Group. Diluted earnings per share saw a significant increase of 38.9% to $3.07, reflecting improved operational performance and gross margins. The company's financial health remains robust, with a substantial increase in net operating cash flow and a strong liquidity position characterized by significant unused capacity under its credit facilities. While facing some macroeconomic headwinds and regional demand variations, SHW demonstrated effective cost management and benefited from moderating raw material costs. The company reiterates its commitment to its growth strategies, including strategic acquisitions and returning value to shareholders through dividends and share repurchases.

Financial Highlights

53 data points
Beta

Revenue

$6.24B

46.0% Gross Margin

Net Income

$793.70M

12.7% Net Margin

EPS (Diluted)

$3.07

Total Assets

$23.17B

Cash & Equivalents

$209.40M

Free Cash Flow

$1.21B

Financial Statements
Beta
Revenue$6.24B
Cost of Revenue$3.37B
Gross Profit$2.87B
SG&A Expenses$1.76B
Operating Income$1.23B
Interest Expense$111.70M
Net Income$793.70M
EPS (Basic)$3.10
EPS (Diluted)$3.07
Shares Outstanding (Basic)256.00M
Shares Outstanding (Diluted)258.90M

Key Highlights

  • 1Consolidated net sales increased 6.3% year-over-year to $6.24 billion.
  • 2Diluted earnings per share (EPS) rose significantly by 38.9% to $3.07.
  • 3Gross profit margin improved to 46.0% from 41.7% in the prior year's quarter.
  • 4Paint Stores Group showed robust growth with net sales up 10.0% and comparable store sales increasing 9.5%.
  • 5Net operating cash flow for the first six months increased significantly to $1.295 billion.
  • 6The company maintains a strong liquidity position with $209.4 million in cash and $2.874 billion in unused credit capacity.
  • 7The company announced an increase in its quarterly cash dividend from $0.60 to $0.605 per share.

Frequently Asked Questions

Consolidated net sales increased by 6.3% in the second quarter of 2023 primarily driven by selling price increases across all segments, mid-single digit volume growth from higher architectural sales in the Paint Stores Group, and contributions from acquisitions. This was partially offset by a sales volume decrease in the Performance Coatings Group.

Profitability improved significantly. Consolidated gross profit increased by $423.3 million, and the gross profit margin expanded to 46.0% from 41.7% in the prior year's quarter. This improvement was attributed to selling price increases, higher sales volume in the Paint Stores Group, and moderating raw material costs.

The company's financial condition and liquidity remain strong. At June 30, 2023, Sherwin-Williams had $209.4 million in cash and cash equivalents and $2.874 billion in unused capacity under its credit agreements. Net operating cash flow for the first six months of 2023 was $1.295 billion, allowing for significant returns to shareholders.

The company is involved in ongoing litigation related to lead pigment and lead-based paint, which carries inherent uncertainties and potential for material impact. However, the company believes these claims are without merit and is vigorously defending them. Environmental liabilities are also being managed, with significant accruals for major sites, and the company believes these matters, while complex, will not have a material adverse effect on its overall financial condition, liquidity, or cash flow due to the long resolution timeframe.