The Sherwin-Williams Co. announced its financial results for the second quarter and six months ended June 30, 2011. The company reported an increase in net sales, due in part to price increases, acquisitions and growth in the Global Finishes Group. However, the challenge of rising raw material costs cut into the company’s net income, which dropped for the three months ended June 30, 2011.
CLEVELAND - The Sherwin-Williams Co. announced its financial results for the second quarter and six months ended June 30, 2011. The company reported an increase in net sales, due in part to price increases, acquisitions and growth in the Global Finishes Group. However, the challenge of rising raw material costs cut into the company’s net income, which dropped for the three months ended June 30, 2011.
Compared to the same periods in 2010, consolidated net sales increased $211.7 million, or 9.9 percent, to $2.36 billion in the quarter and increased $501.8 million, or 13.5 percent, to $4.21 billion in six months. The sales increases are due to selling price increases, acquisitions and strong organic sales growth by the Global Finishes Group. The company reported net income of $179.1 million, or $1.66 per share, for the three months ended June 30, down from $181.7 million, or $1.64 per share, a year earlier. The per-share amount was higher in the current quarter due to fewer shares outstanding.
Net sales in the Paint Stores Group increased 4.3 percent to $1.30 billion in the quarter and 6.3 percent to $2.23 billion in six months due primarily to selling price increases and improving domestic architectural paint sales to DIY and residential repaint customers. Paint Stores Group segment profit decreased to $206.6 million in the quarter from $212.0 million last year due primarily to continuing raw material cost increases only partially offset by selling price increases. Segment profit increased to $275.5 million in six months from $259.7 million last year due primarily to sales driven by selling price increases partially offset by raw material cost increases and increases in selling, general and administrative expenses to maintain customer service. Segment profit as a percent to net sales decreased in the quarter to 15.9 percent from 17.0 percent last year and remained flat at 12.4 percent in six months.
Net sales of the Consumer Group decreased 8.4 percent to $375.6 million in the quarter and decreased 4.5 percent to $670.6 million in six months due primarily to the elimination of a portion of a paint program with a large retail customer partially offset by selling price increases. Segment profit decreased to $61.4 million in the quarter from $80.7 million last year and decreased to $102.5 million in six months from $118.2 million last year. Segment profit in the quarter decreased as a percent to net external sales to 16.3 percent from 19.7 percent last year and decreased in six months to 15.3 percent from 16.8 percent due primarily to increasing raw material costs partially offset by selling price increases.
The Global Finishes Group’s net sales stated in U.S. dollars increased 39.5 percent to $678.9 million in the quarter and increased 44.2 percent to $1.31 billion in six months due primarily to acquisitions, selling price increases, higher paint sales volume and favorable currency translation rate changes. As a percent to net external sales, segment profit declined to 6.8 percent in the quarter versus 8.2 percent last year and 6.3 percent in six months compared to 6.9 percent in 2010 due primarily to acquisitions diluting the segment’s profit as a percent to net external sales and higher raw material costs.
Commenting on the second quarter and six months financial results, Christopher M. Connor, Chairman and Chief Executive Officer, said, “Earnings in the quarter were at the low end of our guidance range due to high raw material costs versus the timing of our price increases. Although domestic demand remains soft, we continue to invest in selling, general and administrative expenses to maintain customer service and are encouraged by the improvement in domestic DIY and protective and marine sales in the Paint Stores Group. We are pleased with the continued growth of our architectural, protective and marine, OEM, and automotive finishes sales in the Global Finishes Group. Our operating segments continue to control costs and implement price increases in an effort to keep pace with rising raw material costs.
“For the third quarter, we anticipate our consolidated net sales will increase 10 to 15 percent compared to last year’s third quarter. We expect diluted net income per common share for the third quarter to be in the range of $1.65 to $1.75 per share compared to $1.60 per share in 2010. For the full year 2011, we expect consolidated net sales to increase above 2010 levels by a high single digit to low teen percentage. With annual sales at that level, we are updating our full-year guidance for diluted net income per common share for 2011 to be in the range of $4.65 to $4.85 per share, compared to $4.21 per share earned in 2010.”
Sherwin-Williams Hit by Increased Raw Material Costs
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