Sherwin-Williams’s financial results for 2022 show strong fourth quarter performance helped the company achieve record full year consolidated net sales, which increased 11.1 per cent to US$22.1 billion. Earnings (EBITDA) increased 10.4 per cent in the year to US$3.61 billion or 16.3 per cent of consolidated net sales.
According to Sherwin-Williams, income before taxes increased mainly due to selling price increases in all segments and higher sales volume in The Americas Group. These factors were partially offset by higher raw material costs across all three segments, increased selling, general and administrative spending in The Americas Group and Performance Coatings Group, costs associated with its targeted restructuring actions including non-cash trademark impairment charges, and higher interest expenses.
The company generated US$1.92 billion in net operating cash during the year.
Fourth quarter consolidated net sales increased 9.8 per cent, mainly due to selling price increases in all segments and higher architectural sales volume in The Americas Group, partially offset by lower sales volumes outside of North America in the Consumer Brands and Performance Coatings groups. Acquisitions increased consolidated net sales by approximately 1.5 per cent, while currency translation rate changes decreased consolidated net sales by two per cent.
“Sherwin-Williams delivered strong fourth quarter results compared to the same period a year ago, including high single-digit percentage sales growth, significant year-over-year gross margin improvement, expanded adjusted operating margins in all three segments, strong double-digit adjusted diluted net income per share growth, and strong EBITDA growth,” said John Morikis, Chairman and CEO of Sherwin-Williams. “Our strong fourth quarter performance led to record full year sales, which increased 11.1 per cent to US$22.1 billion.
“Full year adjusted diluted net income per share also increased to a record level. Additionally, we generated strong net operating cash in the year, which enabled us to invest US$883 million in share repurchases, pay US$619 million in dividends, and deploy US$1 billion to complete five acquisitions that will add to our solutions and capabilities.
“Our more than 61,000 employees delivered these results in another year of difficult operating conditions including relentless cost inflation, less-than-optimal raw material availability, slowing economies, a war in Europe, and COVID lockdowns in China.”
Morikis said The Americas Group delivered double-digit sales growth in all customer segments, including the seventh consecutive year of double-digit growth in residential repaint.
“Consumer Brands Group faced extremely difficult conditions in Europe and Asia that impacted sales but continued to take actions that will drive enhanced future profitability. In Performance Coatings Group, sales increased in nearly all business units, and adjusted segment margin improved 250 basis points year-over-year,” he added.
“We enter 2023 with confidence and energy. We have clarity of mission, the right strategy, and a focus on solutions for our customers,” said Morikis. “Above all, we have the right people, and we expect to outperform the market in 2023 just as we have in the past.
“At the same time, we will not be immune from what we expect to be a very challenging demand environment in 2023. Visibility beyond our first half of the year is limited.”
Morikis said the industrial market has slowed in Europe, with signs the USA is beginning to slow across several sectors. In China, COVID-19 remains a factor and the trajectory of economic recovery is difficult to map.
Against this backdrop, Sherwin-Williams expects 2023 first quarter consolidated net sales growth to be “flat to up a mid-single digit percentage” compared to the first quarter of 2022.
For the full year 2023, relying on indicators it sees at this time, Sherwin-Williams expects consolidated net sales to be down “a mid-single digit percentage to flat” compared to 2022. Raw material costs are expected to decrease by a low to mid-single digit percentage, while other costs, including wages, are expected to increase by a mid-to-high single digit percentage.