CLEVELAND, Ohio – Paint and coatings specialist Sherwin –Williams reported record consolidated net sales of $17.9 billion for 2019, up 2.1% from $17.54 billion from 2018.
Net income for the year totaled $1.54 billion, up from $1.1 billion in 2018, or $16.49 per diluted share, compared with $11.67 per diluted share in 2018. This was primarily due to higher paint sales volume in the Americas Group and selling price increases.
For the fourth quarter ended Dec. 31, net sales totaled $4.1 billion, up from $4.06 billion. Net income was $248.6 million, up from $101 million in the fourth quarter of 2019, or $2.66 per diluted share compared to $1.07 per diluted share in the fourth quarter of 2018.
Net sales in the Americas Group rose 5.7% to $10.17 billion, which the company said was due primarily to selling price increases and higher paint sales across most end market segments. In the fourth quarter, net sales increased 4.8% to $2.36 billion, due primarily to higher paint sales across most end market segments.
Net sales from stores in the U.S. and Canada open for more than 12 calendar months rose 5.3% in the year and 4.6% in the quarter. For the year, profit in the Americas Group segment rose to $2.06 billion or 20.2% of net sales, from $1.9 billion or 19.7% of net sales last year. The company said this was due to selling price increases and higher paint sales volume.
Net sales in the Consumer Brands Group decreased 2.3% to $2.68 billion in the year due to the divestiture of the Guardsman insurance business and lower sales outside of North America in some end markets. This was partially offset by selling price increases and higher volume sales to some of the group’s retail customers.
In the fourth quarter, net sales in the segment increased 0.9% to $539.4 million. This was due primarily to selling price increases and higher volume sales to some of the group’s retail customers.
For the full year, segment profit increased to $373.2 million, or 13.9% of net external sales, from $261.1 million, or 9.5% of net external sales last year. The company said this was due to synergies, improved supply chain efficiencies, pricing initiatives, moderating raw material costs and lower acquisition-related amortization expense.
In the fourth quarter, segment profit increased to $29.7 million, or 5.5% of net external sales, from $12 million, or 2.2% of net external sales, in the prior year quarter. This was due primarily to pricing initiatives, moderating raw material costs and improved supply chain efficiencies. Currency translation rate changes increased segment profit by $3.9 million in the quarter. Acquisition-related amortization expense in the full year and fourth quarter of 2019 was $91.2 million and $23.2 million, respectively, compared to $110.9 million and $24.5 million in the full year and fourth quarter of 2018, respectively.
Net sales of the Performance Coatings Group decreased 2.3% to $5.05 billion in the year and decreased 5% to $1.21 billion in the quarter due to softer sales outside of North America and unfavorable currency translation rate changes, partially offset by selling price increases. Currency translation rate changes reduced the group’s full year and quarter sales by 2.3% and 1.1%, respectively.
Segment profit decreased $73 million in the year to $379.1 million compared to $452.1 million in the prior year. The company said this was primarily due to the recognition of $117 million in non-cash impairment charges related to recently acquired trademarks, partially offset by moderating raw material costs and good cost control. As a percent of net external sales, segment profit in the year was 7.5%, including a 230 basis point impact from the non-cash impairment charges, compared to 8.8% in the prior year. Currency translation rate changes decreased segment profit by $7.1 million in the year.
During the fourth quarter, segment loss was $7.4 million, which included $117 million in non-cash impairment charges, compared with a segment profit of $112.3 million in the prior year quarter as the impact of lower sales was partially offset by moderating raw material costs and favorable currency translation rate changes.
As a percent of net sales, segment profit in the quarter was a negative 0.6%, including a 970 basis point impact from the non-cash impairment charges, compared to 8.8% in the prior year quarter. Currency translation rate changes increased segment profit by $3.4 million in the quarter. Acquisition-related amortization expense in the full year and fourth quarter of 2019 was $215.5 million and $53.1 million, respectively, compared to $215.8 million and $55.2 million in the full year and fourth quarter of 2018, respectively.
John G. Morikis, chairman and CEO, said “Sherwin-Williams delivered record results in 2019, driven by above-market growth in our North American paint stores and margin improvement in all of our segments. Sales grew to $17.90 billion as the strength of our stores platform and growth with our largest North American retail partners more than offset softness in certain industrial end markets and choppiness in our international businesses. Gross margin expanded to 44.9% as our pricing initiatives enabled us to gain ground on the raw material inflation we have experienced since 2017. Adjusted EBITDA grew 8.3% to more than $3.0 billion, and adjusted earnings per share increased 14% to $21.12, both of which are full year records. Net cash from operations was more than $2.32 billion, which enabled us to invest in organic growth initiatives, repurchase over 1.6 million shares of our common stock, reduce debt, increase our dividend 31% from the prior year and execute on selected acquisition targets.
“Our global team delivered significant accomplishments in each of our operating segments,” he added. “In The Americas Group, we reached the milestone of more than $10 billion in annual sales. In the Consumer Brands Group, we completed a very successful first full year of our exclusive partnership with Lowes. And in the Performance Coatings Group, we continued to execute on integration efforts that we expect will accelerate growth and margin expansion over the long term.
“Turning to our 2020 outlook, we currently see a similar environment to last year, with North American architectural demand remaining solid and industrial demand remaining variable by geography and end market. We will continue to focus on providing our customers with solutions based on innovation, value-added service and differentiated distribution. In the first quarter of 2020, we anticipate our net sales will increase 2% to 5% compared to the first quarter of 2019. For the full year 2020, we expect net sales to increase 2% to 4% compared to full year 2019. With annual sales at that level, we anticipate diluted net income per share for 2020 will be in the range of $19.91 to $20.71 per share compared to $16.49 per share earned in 2019. Full year 2020 earnings per share guidance includes acquisition-related costs of approximately $2.79 per share, respectively. We expect our 2020 effective tax rate to be in the low twenty percent range.”
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