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Sherwin-Williams Report Q3 Results with Higher Results Delivered by Paint Segment

Published on 2014-10-30. Author : SpecialChem

 CLEVELAND, OHIO -- The Sherwin-Williams Company announced its financial results for the third quarter and nine months ended September 30, 2014. Compared to the same periods in 2013, consolidated net sales increased USD303.2 million, or 10.6%, to USD3.15 billion in the quarter and increased USD831.6 million, or 10.8%, to USD8.56 billion in nine months due primarily to higher paint sales volume in our Paint Stores Group and acquisitions. Acquisitions increased consolidated net sales 3.3% in the quarter and 4.1% in nine months. Unfavorable currency translation rate changes decreased consolidated net sales 0.7% in the quarter and 1.1% in nine months.

Diluted net income per common share in the quarter increased to USD3.35 per share from USD2.55 per share in 2013, and increased in nine months to USD7.39 per share from USD6.11 per share last year. The quarter and nine months 2013 diluted net income per common share included charges of USD.13 and USD.21 per share, respectively, related to Brazil tax assessments. The increases in third quarter and nine month diluted net income per common share were due primarily to improved operating results of the Paint Stores, Global Finishes and Consumer Groups. Acquisitions decreased diluted net income per common share by USD.01 per share and USD.18 per share in the quarter and nine months, respectively. Currency translation rate changes decreased diluted net income per common share by USD.03 per share in the quarter and USD.08 per share in nine months.

Net sales in the Paint Stores Group increased 15.0% to USD2.03 billion in the quarter and increased 16.1% to USD5.27 billion in nine months due primarily to higher architectural paint sales volume across all end market segments. Acquisitions increased net sales 4.6% in the quarter and 5.9% in nine months. Net sales from stores open for more than twelve calendar months increased 9.6% in the quarter and increased 9.2% in nine months over last year's comparable periods. Paint Stores Group segment profit increased USD72.4 million to USD431.8 million in the quarter from USD359.4 million last year and increased USD132.0 million to USD954.0 million in nine months from USD822.0 million last year due primarily to higher paint sales volume partially offset by the loss from acquisitions and increases in selling, general and administrative expenses. Acquisitions had an unfavorable impact on segment profit of USD5.4 million in the quarter and USD32.3 million in nine months. Segment profit as a percent to net sales increased in the quarter to 21.3% from 20.4% last year due primarily to higher paint sales volume partially offset by the impact of acquisitions. Segment profit as a percent to sales was flat at 18.1% in nine months compared to 2013 due to the impact of acquisitions.

Net sales of the Consumer Group increased 5.0% to USD385.2 million in the quarter and increased 7.0% to USD1.14 billion in nine months due primarily to the impact of acquisitions and higher volume sales to most of the Group's retail customers. Acquisitions increased net sales 3.9% and 4.3% in the quarter and nine months, respectively. Segment profit increased to USD79.0 million in the quarter from USD73.1 million last year and increased to USD222.5 million in nine months from USD206.1 million last year due primarily to higher volume sales, and improved operating efficiencies. Acquisitions decreased segment profit USD1.9 million in the quarter and had no significant impact on segment profit in nine months. As a percent to net external sales, segment profit increased in the quarter to 20.5% from 19.9% last year and increased in nine months to 19.5% from 19.3% last year.

The Global Finishes Group's net sales stated in U.S. dollars increased 5.7% to USD536.3 million in the quarter due primarily to higher paint sales volume and selling price increases. Nine month sales stated in U.S. dollars increased 4.7% to USD1.58 billion due primarily to selling price increases partially offset by unfavorable currency translation rate changes. Unfavorable currency translation rate changes decreased net sales by 0.4% in the quarter and 0.7% in nine months. Stated in U.S. dollars, segment profit increased in the quarter to USD60.8 million from USD44.5 million last year due primarily to higher paint sales volume, the USD6.3 million gain on the early termination of a customer agreement and selling price increases. Nine month segment profit increased to USD162.1 million from USD132.9 million last year due primarily to improved operating efficiencies, selling price increases, and the early termination of a customer agreement. Unfavorable currency translation rate changes decreased segment profit USD0.9 million in the quarter and USD3.3 million in nine months. As a percent to net external sales, segment profit was 11.3% in the quarter versus 8.8% last year and 10.3% in nine months compared to 8.8% in 2013.

The Latin America Coatings Group's net sales stated in U.S. dollars decreased 4.0% to USD200.4 million in the quarter and decreased 7.6% to USD564.0 million in nine months due primarily to unfavorable currency translation rate changes and lower paint sales volume partially offset by selling price increases. Unfavorable currency translation rate changes decreased net sales by 7.8% in the quarter and 11.8% in nine months. Stated in U.S. dollars, segment profit increased in the quarter to USD11.8 million from a loss of USD1.0 million last year and increased in nine months to USD27.4 million from USD20.7 million last year due primarily to charges recorded in the third quarter and nine months 2013 related to Brazil tax assessments and selling price increases partially offset by lower volume sales, increasing raw material costs and unfavorable currency translation rate changes. Charges of USD19.8 million and USD31.6 million in the quarter and nine months 2013, respectively, were related to Brazil tax assessments. Unfavorable currency translation rate changes decreased segment profit USD4.0 million in the quarter and USD10.7 million in nine months. As a percent to net external sales, segment profit improved in the quarter to 5.9% from negative 0.5% last year and increased in nine months to 4.9% from 3.4% in 2013.

The Company acquired 2.00 million shares of its common stock through open market purchases in the quarter and 5.33 million shares in nine months. The Company had remaining authorization at September 30, 2014 to purchase 6.83 million shares.

Commenting on the financial results, Christopher M. Connor, Chairman and Chief Executive Officer, said, "We are pleased to report record sales and earnings per share in the third quarter and first nine months of 2014 on the continued positive sales volume and strong operating results of our Paint Stores Group. The Paint Stores Group architectural volume growth was positive across all end market segments. The Comex acquisition continues to perform better than expected in the year. Our Consumer Group improved its operating results through higher volume sales and operating efficiencies. Our Global Finishes Group continues to improve its operating margins through improved operating efficiencies. The Latin America Coatings Group is minimizing the impact on its core operating margins through selling price increases and good cost control, although we are not satisfied with the results.

"We are continuing to invest in our business. In the first nine months, Paint Stores Group opened 51 net new stores. Our working capital ratio (accounts receivable plus inventories less accounts payable to sales) at September 30, 2014 was 10.8% compared to 12.5% last year. During the quarter, we continued to buy shares of our stock, and we increased the dividend rate toUSD.55 from USD.50 last year. Our balance sheet remains flexible and is positioned well for future acquisitions and other investments in our business. "For the fourth quarter, we anticipate our consolidated net sales will increase six to eight percent compared to last year's fourth quarter. At that anticipated sales level, we estimate diluted net income per common share in the fourth quarter of 2014 to be in the range of USD1.30 to USD1.40 per share compared to USD1.14 per share earned in the fourth quarter of 2013. This guidance includes our expectation that the Comex acquisition will reduce diluted net income per common share by approximately USD.10 per share in the fourth quarter. For the full year 2014, we expect consolidated net sales to increase nine to eleven percent compared to full year 2013. With annual sales at that level, we have raised our expectation for diluted net income per common share for 2014 to a range of USD8.70 to USD8.80 per share compared to USD7.26 per share earned in 2013. This annual guidance includes our expectation that the Comex acquisition will increase net sales by a low single digit percentage in the year and negatively impact diluted net income per common share USD.28 per share in 2014."

The Company conducted a conference call to discuss its financial results for the third quarter and first nine months, and its outlook for the fourth quarter and full year 2014.

Founded in 1866, The Sherwin-Williams Company is one of the global leaders in the manufacture, development, distribution, and sale of coatings and related products to professional, industrial, commercial, and retail customers. The company manufactures products under well-known brands such as Sherwin-Williams®, Dutch Boy®, Krylon®, Minwax®, Thompson's® Water Seal®, and many more. With global headquarters in Cleveland, Ohio, Sherwin-Williams® branded products are sold exclusively through a chain of more than 4,100 company-operated stores and facilities, while the company's other brands are sold through leading mass merchandisers, home centers, independent paint dealers, hardware stores, automotive retailers, and industrial distributors. The Sherwin-Williams Global Finishes Group distributes a wide range of products in more than 115 countries around the world.

About Sherwin-Williams


For nearly 150 years, Sherwin-Williams have been one of the industry leaders in the development of technologically advanced paint and coatings. As the nation's largest specialty retailer of paint and painting supplies, Sherwin-Williams is dedicated to supporting both do-it-yourselfers and painting professionals with exceptional products, resources to make confident color selections and expert, personalized service that's focused on unique project needs. Sherwin-Williams was ranked "Highest in Customer Satisfaction Among Paint Retailers" by the J.D. Power 2013 Paint Satisfaction Study. Sherwin-Williams products can only be found at its more than 3,500 neighborhood stores across North America.

Source: Sherwin-Williams


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