Several coatings manufacturers recently released their earnings reports for the third quarter of 2024. Of those were Strategic Partner of the Commercial Painting Industry Association The Sherwin-Williams Company and CPIA Gold Members PPG and Graco Inc.
The Sherwin-Williams Company Q3 Results
On Oct. 22, global coatings firm The Sherwin-Williams Company released its 2024 third-quarter financial results, reporting a 0.7% increase year-over-year in consolidated net sales to $6.16 billion. The third quarter ended Sept. 30. According to the press release, diluted net income per share increased 7.8% to $3.18 per share in the quarter compared to $2.95 per share in the third quarter 2023. Adjusted diluted net income per share also increased 5.3% to $3.37 per share in the quarter compared to $3.20 per share in the third quarter 2023. Consolidated net sales reportedly increased primarily due to higher sales in the Paint Stores Group and the impact from an acquisition in 2023. However, these increases were partially offset by lower sales in the Consumer Brands and Performance Coatings Groups, as well as about 1% unfavorable foreign currency translation. “Sherwin-Williams grew sales, expanded gross margin, and increased EBITDA and adjusted diluted net income per share despite continued choppiness in the demand environment,” said President and Chief Executive Officer, Heidi G. Petz. “Strong cash generation in the quarter enabled us to return $631 million to our shareholders through dividends and share repurchases. We also chose to invest ahead of the curve in the quarter, given the unprecedented long-term opportunities that continue to emerge from an increasingly uncertain competitive landscape. We are highly confident these current near-term investments in stores, sales and technical reps, expanded services and digital capabilities will help generate sustained and profitable above-market growth. We expect SG&A to moderate sequentially, resulting in a low to mid-single digit increase for the second half as anticipated.”Results by Segment
In the Paint Stores Group, net sales increased 3.2% to $3.65 billion from $3.5 billion in the third quarter last year. The company attributes this to low-single digit sales volume growth and continued realization of higher selling prices implemented earlier in the year. Additionally, net sales increased in most professional customer end markets, led by protective and marine, residential repaint and new residential. Segment profit, on the other hand, decreased 2.4% to $895 million from $917 million in 2023, reportedly due to increased costs to support higher sales and continued investments in long-term growth strategies, including higher employee-related costs, partially offset by higher net sales. “In Paint Stores Group, growth was led by a high-single digit increase in protective & marine. Our prior investments in residential repaint continued to drive mid-single digit growth in a down market,” said Petz. “New residential grew at a similar rate as anticipated. The Group also announced a 5% price increase effective January 6, 2025.” Looking at the Consumer Brands Group, net sales decreased 7.5% to $790 million compared to last year’s $855 million. Sherwin explains that this is a result of soft DIY demand in North America and an approximate 4% impact from unfavorable foreign currency translation driven by Latin America. However, segment profit for the group spiked 62.9% to $165 million versus Q3 2023’s $102 million. According to the company, this is primarily due to higher fixed cost absorption in the manufacturing and distribution operations within the segment and effective cost control, partially offset by lower net sales. “Sales in our Consumer Brands Group declined driven by continued softness in the North American DIY market,” said Petz. Finally, net sales in the Performance Coating Group were relatively flat at about $1.72 billion, a 0.2% increase year over year. Performance in this group was led by Packaging, which increased in all regions, Coil and Industrial Wood. Segment profit for the PCG decreased to approximately $260 million, a 7.2% drop from $280 million in last year’s third quarter. Sherwin attributes this to lower sales in North America and unfavorable foreign currency related impacts. “In Performance Coatings Group, our Packaging business grew by a high-single digit percentage and continued to regain share,” commented Petz. “We also delivered growth in our Coil and Industrial Wood businesses.”Looking Ahead
Sherwin expects fourth quarter 2024 consolidate net sales to be flat to up a low single-digit percentage compared to 2023. Additionally, the company anticipates full year 2024 sales to be flat to up a low single-digit percentage compared to last year. “In what remains a tough macroeconomic environment, our strategy continues to be providing our customers with differentiated solutions that make them more productive and profitable,” noted Petz. “We are confident the growth and efficiency investments we have made will enable us to continue outperforming the market. Our team is focused, determined and experienced, and we will continue to aggressively pursue above market growth while controlling what we can control. “In our pro architectural business, demand remains variable by end market, with no impact to date from recent interest rate cuts. North American DIY demand remains weak driven by inflation and higher consumer debt levels. In our industrial businesses, demand remains choppy by end market and region. “We are maintaining our previous full year earnings guidance, recognizing the current range is wider than typical entering a fourth quarter. This range accounts for several variables that are hard to forecast precisely, including demand related to recovery from hurricanes Helene and Milton, and the potential for extended holiday shutdowns by industrial customers.”PPG 2024 Q3 Financial Report
Global coatings company PPG released its third-quarter earnings report on Oct. 16, reporting $4.6 billion in net sales—about 1% higher than this time last year. Net income for the third quarter came in at $468 million with adjusted net income landing at $500 million. PPG also reported a record earnings per diluted share (EPS) of $2.00 and record adjusted EPS of $2.13. “We delivered record third quarter EPS driven by positive volume growth in seven of our ten businesses, including strong growth in several of our key technology businesses and despite deterioration in automotive original equipment manufacturer (OEM) build rates during the quarter,” commented Tim Knavish, PPG Chairman and Chief Executive Officer. “Our reported EPS was $2.00, and adjusted EPS of $2.13 grew 3% year over year even with an unfavorable impact from a higher effective income tax rate, which reduced the year-over-year EPS comparison by $0.08. The third quarter was our seventh consecutive quarter of adjusted EPS growth. Our aggregate segment margin improved 60 basis points year over year aided by business mix and lower costs, marking our eighth consecutive quarter of increases.”Results by Segment
In the Performance Coatings segment, PPG reported $2.9 million in net sales, compared to the $2.3 million from the Q3 period last year in a 1% increase. Segment income also reportedly came in at $513 million, compared to the $452 million in 2023. Within the segment, PPG explained that net sales had increased, as higher sales volumes and selling prices were partially offset by the divestitures of the non-North American portion of the traffic solutions business and unfavorable foreign currency translation. Sales volumes reportedly increased 2% year over year with growth in five of the six businesses in this segment, led by aerospace coatings, protective and marine coatings, and architectural coatings in the Americas and Asia Pacific markets. PPG’s aerospace coatings business delivered record quarterly sales stemming from double-digit percentage organic sales growth and ended the quarter with an order backlog of approximately $290 million, even with improved production capacity. Protective and marine coatings organic sales increased by a low single-digit percentage compared to the prior year, driven by share gains in Europe and Asia Pacific. Organic sales for architectural coatings in the Americas and Asia Pacific were higher by a low single-digit percentage, with solid volume growth in the professional contractor segment in the U.S. and Canada. Automotive refinish coatings organic sales also reportedly increased by a low single-digit percentage as strong year-over-year growth in Europe, Asia and Latin America was offset by lower demand in the U.S., showing uneven distributor ordering patterns. Segment income reportedly grew by 13% from the prior year, driven by higher sales volumes and targeted price increases partially offset by general cost inflation. The Industrial Coatings segment’s net sales had a 6% decrease, coming in at $1.65 million compared to $1.76 million year-over-year. Segment income landed at $199 million, 19% lower compared to $246 million this time last year. This was reportedly due to lower sales volumes and lower selling prices from certain index-based customer contracts. Automotive OEM coatings organic sales decreased more than initially forecasted, declining by a double-digit percentage due to lower U.S. and European industry build rates, which deteriorated notably late in the quarter, partly offset by PPG growth in China and Mexico. Similar to previous quarters, industrial activity in the U.S. and Europe was “lackluster.” As a result, industrial coatings organic sales declined by a mid-single-digit percentage, more than offsetting solid growth in emerging markets. PPG notes that packaging coatings organic sales were up a low single-digit percentage year over year with improved sales volumes stemming from share gains partially offset by lower selling prices. Segment income also decreased 19%, driven by lower sales volumes and lower selling prices on certain index-based pricing contracts.Looking Ahead
At the end of the quarter, the company had cash and short-term investments totaling $1.3 billion. Net debt was $5.2 billion, up $0.3 billion from the third quarter 2023. Corporate expenses were $72 million in the third quarter, which was $16 million lower than the prior year due to lower incentive-based compensation and cost savings initiatives. Net interest expense totaled $19 million during this quarter. “Looking ahead, we maintain our full-year 2024 sales and EPS guidance, expecting organic sales to be flat and adjusted earnings per share to be at the low end of the $8.15 to $8.30 range. The pending closure of the silicas products business divestiture and the architectural coatings U.S. and Canada strategic review reflects the execution of our enterprise growth strategy to focus our resources on businesses where we have the greatest growth and margin opportunities,” continued Knavish. “Finally, we remain committed to our heritage of strong cost management and improved productivity that reinforces our ability to maintain momentum in driving higher margins and earnings growth."Graco Inc. Q3 Results
On Oct. 23, equipment manufacturer Graco Inc. released its third quarter financial results, reporting decreases across all segments. The quarter ended on Sept. 27. According to Graco, net sales decreased 4% compared to this time last year to $1.56 billion. Sales increased 1% in the Americas, decreased 2% in EMEA (3% at consistent translation rates) and decreased 21% in Asia Pacific. Year-to-date net sales also decreased 4% from the comparable period last year, with net sales flat in the Americas, decreased 2% in EMEA (3% at consistent translation rates) and decreased 18% in Asia Pacific (17% at consistent translation rates). The gross profit margin rate for the quarter improved approximately 1 percentage point for both the third quarter and year to date from the comparable periods last year due to favorable price-cost dynamics. “We continued to experience soft demand trends in our core end markets, especially in Asia Pacific, which negatively affected our sales for the third quarter,” said Mark Sheahan, Graco's President and CEO. “The decline in demand was widespread, with the most significant impact felt in the Industrial and Process segments. However, our gross margin remained resilient despite the decrease in volume.” Graco says that total operating expenses increased $9 million (7%) for the third quarter and $19 million (5%) for the year to date, respectively. More than half of the increase for the quarter and year to date was reportedly due to investments in new product development and other growth initiatives, including the relocation to a new distribution center.Results by Segment
In the Contractor segment, net sales at the end of the nine-month period came in $742 million, down 1% from this time last year. Graco attributes this to softness in worldwide construction markets, despite a favorable response to new product offerings. Price realization was also reportedly unable to offset higher expenses, which resulted in a 1 percentage point decrease in the operating margin rate. The operating margin rate for the year to date increased 1 percentage point as price realization and lower product costs combined to more than offset higher expenses. For the Industrial segment, net sales at the end of the nine-month period totaled $454 million, another decrease of 1% from this quarter 2023. The timing of finishing system sales in the Americas reportedly offset declines in the Asia pacific. The operating margin rate decreased 1 percentage point for the quarter and 2 percentage points for the year to date as price realization was unable to offset the unfavorable effects of lower volume, product and channel mix, and higher expenses, Graco explains. Finally, in the Process segment, net sales arrived at $368.7 million, a double-digit decrease for the third quarter, driven by continued weakness in the segment’s semiconductor product application. . Operating margin rates for the quarter and year to date declined, driven by lower sales volume and higher expenses.Looking Ahead
Graco adds that, as previously announced, the company will move to a more global, customer-centric operating structure with four business divisions, including: Industrial, Powder, Expansion and Contractor. The change will be effective Jan. 1, 2025. That same day, the company will classify its business into three reportable segments:-The Industrial segment, consisting of the newly formed Industrial Division and the Powder Division; -The Expansion Markets segment consisting of the Expansion Markets Division; and -The Contractor segment, consisting of the Contractor Division, will remain unchanged as a reporting segment relative to prior periods.
Segment operating results will be reported under the new organizational structure for the first quarter of 2025, in connection with the effective date of the realignment. Historic segment information will be recasted to conform to the new organizational structure. Graco says they expect to provide recast segment financial information in connection with its earnings release for the fourth quarter of 2024 as supplemental information “Overall, many of our end markets and regions continue to face challenges,” said Sheahan. “We are reaffirming our full-year revenue guidance, which anticipates a low single-digit decline on an organic, constant currency basis. “Despite this outlook, we remain dedicated to our established core strategies: creating innovative products, expanding our distribution, exploring new and adjacent markets, and pursuing strategic acquisitions. We are eager to continue advancing these strategies within the framework of the new organizational structure.”
