Sherwin-Williams(SHW) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated sales in Q1 2019 increased by $75.9 million or 1.9% to $4.04 billion compared to Q1 2018 [8] - Consolidated gross profit dollars increased by $48.2 million or 2.9% to $1.74 billion [8] - Consolidated gross margin improved to 42.9% from 42.5% year-over-year [9] - Selling, general, and administrative expenses rose by $29.5 million or 2.4% to $1.24 billion, increasing as a percentage of sales to 30.8% from 30.6% [9] - Profit before tax decreased by $4.7 million or 1.6% to $298.9 million [10] - Diluted net income per share remained flat at $2.62, with adjusted diluted earnings per share increasing to $3.60 from $3.57 [11][12] Business Segment Data and Key Metrics Changes - Americas Group: Sales increased by $74.4 million or 3.6% to $2.15 billion; segment profit decreased by $6.3 million or 1.9% to $331.1 million [12][13] - Consumer Brands Group: Sales decreased by $1.9 million or 0.3% to $654.5 million; segment profit increased by $13.7 million or 18.5% to $87.9 million [14][15] - Performance Coatings Group: Sales increased by $3 million or 0.2% to $1.23 billion; segment profit increased by $7.9 million or 8.7% to $98.7 million [16][17] Market Data and Key Metrics Changes - Comparable store sales in the U.S. and Canada increased by 3.6% [13] - Sales in Latin America declined due to unfavorable currency translation [24] - Sales in Asia and Europe showed broad-based softness, impacting overall performance [20] Company Strategy and Development Direction - The company plans to open approximately 90 to 100 net new stores in the Americas by the end of the year [24] - Focus on maintaining discipline in spending while investing in growth opportunities [22] - Emphasis on improving profitability in the Consumer Brands segment and aligning with retail partners [25] Management's Comments on Operating Environment and Future Outlook - Management noted a slow start to the North American architectural painting season but remains optimistic due to strong project backlogs [19][20] - Anticipated gross margin improvement as raw material inflation moderates and volumes pick up [22] - Confidence in achieving full-year revenue guidance of a 4% to 7% increase compared to 2018 [31][32] Other Important Information - The company returned approximately $410 million to shareholders during the quarter, including a 31% increase in quarterly dividends [29][30] - Total debt stands at approximately $9.8 billion, with plans to reduce net debt by about $600 million during the year [29] Q&A Session Summary Question: Trends in U.S. housing market - Management believes declines in single-family starts do not reflect a decline in demand, with strong household formation expected to continue [39][40] Question: Raw material trends comparison - Differences exist in certain commodities like titanium dioxide, but overall petrochemical prices remain stable [49] Question: Americas Group margins - Margins were impacted by lower-than-expected volume and higher raw material inflation [59] Question: Architectural paint market outlook - Management remains optimistic about remodeling demand driven by factors like aging housing stock and consumer confidence [102][104]