Automotive refinish sales up high-single digit percentage.
The Sherwin-Williams Company (NYSE:SHW) announced consolidated net sales increased 6.3% in the second quarter to a record $6.24 billion. Net sales from stores in U.S. and Canada open more than twelve calendar months increased 9.5% in the quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 31.4% to $1.28 billion in the quarter and was 20.6% of net sales.
The company announced increasing full year 2023 diluted net income per share guidance to a range of $8.46 to $8.86 per share, including acquisition-related amortization expense of $0.81 per share and restructuring expense of $0.03 per share. The company also increased full year 2023 adjusted diluted net income per share guidance to a range of $9.30 to $9.70 per share.
“Our team delivered very strong results in the second quarter, as sales exceeded expectations in all three segments,” said Chairman and Chief Executive Officer, John G. Morikis. “My thanks goes to our 64,000 employees, who continue to execute on our strategy of providing unique and differentiated value, service and solutions for our customers. Gross margin improved sequentially and year-over-year to 46%, driven by strong sales volume in our Paint Stores Group as well as moderating raw material costs. We leveraged the strong sales growth to drive solid margin expansion across all our segments, while also investing in growth initiatives that will propel sustained future performance. In addition, we delivered strong double digit percentage growth in earnings per share and EBITDA. We generated strong cash flow and continued our disciplined approach to capital allocation, including returning $849 million to shareholders through dividends and share repurchases year to date.
“In our reportable segments, growth in our Paint Stores Group was led by double digit percentage growth in protective and marine, commercial and property maintenance. Residential repaint sales were up a high-single digit percentage. New residential sales were flat, as completions slowed as expected. Sales in our Consumer Brands Group increased by a low-single digit percentage in North America and a strong double digit percentage in Latin America and Europe. In the Performance Coatings Group, our Automotive Refinish business grew by a high-single digit percentage. We also generated growth in our General Industrial and Industrial Wood businesses. Coil and Packaging sales were down against very difficult comparisons.”
Consolidated net sales increased primarily due to selling price increases, which impacted sales by a mid-single digit percentage, and mid-single digit volume growth due to higher architectural sales volume in the Paint Stores Group. This growth was offset by lower volume in industrial businesses. Acquisitions increased consolidated net sales by 1.4%.
Income before income taxes increased primarily due to selling price increases in all segments and higher sales volume in the Paint Stores Group, as well as moderating raw material costs. These factors were partially offset by lower sales volume in the Performance Coatings Group, increased investments in long-term growth initiatives, and higher employee-related costs.
Performance Coatings Group
Net sales in Sherwin-William’s Performance Coatings Group (PCG), that includes automotive refinish, were $1.7949 billion, up 0.3% compared to the second quarter of 2022. Reported segment profit was $272.7 million, up 38.6% from 2022. Adjusted segment profit, that excludes the impact of acquisition-related amortization expense, was $322.3 million, up 30.4% from the second quarter of 2022.
Growth was strongest in automotive refinish that increased by high-single digit percentage during the quarter.
“In Performance Coatings, many of our customers continue to report a high level of uncertainty regarding demand. Auto Refinish demand remains an exception and is solid in most regions with shortages in parts and technicians increasing shop backlogs,” said Morikis in a conference call discussing the earnings with the financial community. “Installations of our systems in North America are up strong double digits year-to-date. This continues to bode well for future sales in this business.”
PCG group sales increased primarily due to selling price increases in all end markets, which increased net sales by a mid-single digit percentage, and incremental sales from acquisitions, largely offset by lower sales volumes in most regions.
Acquisitions increased PCG’s net sales by 4.5% in the quarter. PCG segment profit increased primarily as a result of selling price increases, moderating raw material costs and effective cost control, partially offset by higher employee-related costs. Acquisition-related amortization expense reduced segment profit as a percent of net external sales by 280 basis points in both the second quarter of 2023 and 2022.