Sherwin-Williams(US:SHW)2022-01-27 19:55Financial Data and Key Metrics Changes - Fourth quarter 2021 consolidated sales increased by 6.1% to $4.76 billion, while earnings results fell short of expectations [6][8] - Consolidated gross margin decreased to 39.5%, driven by lower sales volume and raw material cost inflation outpacing price increases [10] - Diluted net income per share decreased to $1.15, with adjusted diluted earnings per share at $1.34 [11][12] - Full year consolidated sales increased by 8.6% to a record $19.9 billion, marking the 11th consecutive year of growth [20] Business Line Data and Key Metrics Changes - Americas Group: Sales increased by 3%, with segment margin decreasing to 15.1% due to lower sales volume and higher raw material costs [12] - Consumer Brands Group: Sales decreased by 7.8%, with adjusted segment margin at 6.3% due to lower sales volume and higher costs [13] - Performance Coatings Group: Sales increased by 18.7%, but adjusted segment margin decreased to 8.9% due to higher raw material costs [14][23] Market Data and Key Metrics Changes - Demand remains strong across end markets, with raw material supply issues showing sequential improvement [7][30] - Sales growth in the Americas Group was led by Protective and Marine, with new residential and property management up in the mid-single-digit range [31] - Performance Coatings Group saw high-teens percentage sales growth, with all regions and divisions generating growth [35][36] Company Strategy and Development Direction - The company is focused on long-term growth initiatives despite near-term headwinds from raw material availability and inflation [18][19] - Continued investment in customer relationships and strategic growth initiatives is emphasized [18][19] - The company plans to open 80 to 100 new stores in the US and Canada in 2022, alongside investments in digital platforms and product innovation [49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand outlook for 2022, despite challenges from raw material availability and inflation [37][39] - The expectation is for sequential improvement in raw material availability and a focus on volume growth and margin recovery in the second half of 2022 [40][44] - Full year 2022 guidance anticipates net sales growth of high single-digit to low double-digit percentage [46] Other Important Information - The company returned over $3.3 billion to shareholders through dividends and share buybacks in 2021 [25] - The net debt-to-adjusted-EBITDA ratio at year-end was 2.9 times, indicating a strong balance sheet [26] - The company announced three acquisitions to enhance capabilities in the coatings business [26] Q&A Session Summary Question: How should investors think about margin recovery in 2022? - Management expects slight contraction in gross margin in the first half of 2022, with recovery anticipated in the second half driven by volume growth and pricing actions [59][61] Question: What is the outlook for demand in 2022 given macroeconomic conditions? - Management remains confident in demand, citing strong customer relationships and positive macro indicators supporting growth [63][64] Question: What are the expectations for raw material availability in 2022? - Management anticipates some choppiness in raw material availability in the first quarter but expects significant improvements as the year progresses [70][72] Question: How will the company allocate limited volume among customers? - The company is focused on maintaining strong customer relationships and ensuring product availability to meet customer needs [113][119]