SHW - Earnings call transcript Q2 2021 | The Sherwin-Williams Company

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Operator

Good morning. Thank you for joining the Sherwin-Williams Company's review of Second Quarter 2021 Results and our outlook for the third quarter and full year of 2021. With us on today's call are John Morikis, Chairman, President and CEO; Al Mistysyn, CFO; Jane Cronin, Senior Vice President, Corporate Controller; and Jim Jaye, Senior Vice President, Investor Relations and Communications. This conference call is being webcast simultaneously in listen-only mode by Issuer Direct via the Internet at www.sherwin.com. An archived replay of this webcast will be available at www.sherwin.com beginning approximately two hours after this conference call concludes. include statements will the defined call U.S. conference certain as forward-looking under This with earnings, to Securities respect Federal laws sales, and matters. other such statements or update forward-looking statement date the speak only undertakes statement new which company as and is result obligation revise as any otherwise. Any information, no made future a of or to whether on to the of forward-looking events, earnings statements release regarding A forward-looking is provided the full earlier transmitted company's this morning. declaration in session prepared to Company's After remarks, open this we questions. the will I'll turn to Jaye. now call the Jim over

Jim Jaye

quarter. Thank delivered you. And very solid good morning everyone. results Sherwin-Williams in the second

impact We dynamic persistently robust business, and X June was targets. continue winter and on on supply we industry’s in challenges these to of material raw an delivered operate of product Amid a continued high environment where Day, our entire our sales at chain raised those and Uri majority the we very the the have demand expectations inventories. Analyst remained our inflation effects across storm to

gross given raw the in material costs. were sustained, the quarter, under Our higher considerable pressure margins

a past the we Despite near-term additional cycles, a the income net as gross the grew which percentage in in compression, pricing quarter, in realized we to inflationary costs by on. single-digit double-digit demonstrated have committed actions we are EBITDA announced be will adjusted diluted quarter, year high offsetting these by goes However, as fully and margin expanded the per share percentage. and

largest of the Supply quarter in consolidated points constraints the Consumer billion. sales to approximately prepared second negatively unless chain company's in the percentage otherwise Starting me XXXX, the margin The This inflation cost XX.X% more points Let gross to material All a by near-term to topline, expense, XXXX before to as this and the commentary a points increased to quarter $X.XX million. increases basis $XX.X quarter decreased briefly summarize of and revenue X.X% to or return second are driven XXX XX.X%. the X.X morning decreased Group increased is between second numbers. with quarter raw impacted basis by outpacing compared Consolidated our margin sales sales, mix. our XXXX. the points quarterly million basis Consolidated XX evenly Americas of Group. a $XXX.X split comparisons Gross to profit tax price Brands single, XXX specified. normal SG&A increased XX.X% history. percent

acquisition and XXXX and depreciation of $XX XXXX of million and $XX.X quarters second respectively. expense The related million included amortization

profit the million. before per X.X% share Diluted to $X.XX ago. share $XXX.X year per per $X.XX share income Excluding increased these tax to from consolidated a net in items, quarter increased cents

amortization The second and XXXX quarters of $X.XX related share share depreciation expense and per included acquisition of respectively. XXXX and $X.XX per

period per in months an per diluted billion Net quarter in to share sales. first the increase share. the $X.X from earnings quarter six in cash $X.XX grew compared Excluding these same XX.X% second to items, the XXXX. operating XX.X% grew to or of billion EBITDA of per share adjusted $X.XX increased of to XXXX, $X.XX XX.X%

higher in anticipated strong normal more Looking a sales Segment at material industrial our very significantly as was growth DIY. segments, to much raw our margin operating year-over-year expected, historically and businesses primarily we in under came as in three architectural and pro pressure segments, due costs. with all

percentage exceeded basis increases points still to XX.X% XXX decreased higher sales, segment offset Consumer near volume cost raw including divestiture. points and the selling XX.X% primarily costs, material in Sales XX.X%, term enough margin in the and related price Sales Performance from higher Sales pressure decreased being good partially of leverage operating the to four costs. by related lower points resulting price Adjusted gross offset decreased basis decreased from of are increases were operating to from selling basis XX% increases and XX the to Segment margin grew Group which raw expectations higher material higher the Brands The sales the margin offset Adjusted the control. were selling by volume material to volume raw price higher in XX Group higher the Group increased in Wattyl increases, price costs. offset material as sales segment XX.X%. as points XX.X%. our Coatings implemented, and leverage margin and to by additional were Our costs. not Americas

our first me to XXXX. now for and for over additional on quarter along year the turn with guidance third John Morikis quarter Let half, our the commentary full second and call the John?

John Morikis

morning, And good Thank you, Jim. everyone.

me by comments some with my framing begin Let key themes.

with business, very is while customers and more their our opportunities. and paint has Three, raw inflation constraints keep are the we and are assets Two, nobody than to across impact to capabilities demand businesses. growth pursuing strong significant supply we production our of across of industry continuing majority sales actions chain aggressively the combating price in Sherwin-Williams each material and are aggressively on job. First,

with goes And each experienced color amazing company XX,XXX creation industry quarter the will I'd seen stronger some job at segments. up challenging current make to a But moment, our deep in customer members value is nice before, from emerge challenges, now. manage through team We to did no framing on Jim high the remain with team strong thanks for our who job right first there an half. a do so this our shareholders. as the circumstances a get My better to doing level. like a movie first, comment continued in to relationships we've for We extremely of second will these last, continue our into we of a additional pretty current and necessary. all confident, of stronger In environment. some I'll or are more

of or or margin basis Adjusted $X.XX up impact a billion. in raw much especially light XX.X% very XX.X% sales. net million. described. of This increased share, material diluted our we've year Adjusted results in than the and ago, inflation second XXX PBT $X.XX to anticipated consolidated Given pandemic of on And per half was increased is XX.X%. first the PBT XX.X% seen we've the strong an of income points challenges sales performance, was adjusted the increase XXXX chain the quarter, supply a $XXX.X higher

U.S. growth the Now material. double-digit In up and we not was turn the backlogs, are second Residential into Canada largest segment in were XX.X%. sales the XX.X%. strong. business both this repaint, to across pro sales Group, the quarter. TAG's in continue. translation expect exterior We in Contractors unfavorable to Americas solid generated markets currency TAG interior impact in performance were and momentum increased quarter. of all fastest was second growing quarter the and strong and reporting Same-store of our we end work the The

comparisons Projects commercial we at and Our was business also next and the to the return varying momentum. or favorable office travel momentum our Apartment all gaining is remainder to the paces comparison, a and to turns expected. gaining continue growth. growing maintenance year. of as resume over fastest and are contributed as Property favorable

year as see We progresses. improvements continuing the expect to

area New of remained another us. for strength residential

solid and with marine our sales customers gas highway, flooring, and our From architectural saw strength both significantly order growth. consecutive permits interior up And in and continued business last and are percentages interior since encouraged protective finally, in a being of growth rates. applications. and five TAG the of in and been after perspective, double-digit as also expected, double-digit business. DIY summer, larger with quarters delivered growth product starts Notably, was housing mix. XXXX. over return down of We bridge the a exterior all well were pharmaceutical part New reporting trending very customers quarter the and and paint businesses oil second by to have We're growth by

healthy this the price Additionally, consecutive sign fourth to price double invest We our the X.X% as be This spray quarter X anticipation equipment increase. realized in typically solid increased contractors second a quarter in of February resulting in of this equipment of of recovery digits. continues nearly demand. is type sales of from by very

result the experiencing, announced are additional raw August and fourth quarter, better TAG our of price August inflation the that persistent that full would realization to effective year percentage increases X% price and in expect mid-single-digit putting for third an than be of a range. February quarter, the price TAG the will X. combination We price last increase Given material in month, in we mid-single-digit these in the

a of margin up is we new which accounts, will half. pay investments of in up and in opened as continue XX.X% XX% very a sales. half new sales compared We actions the business A well needed. above Along On basis close few stores, and the picture XXXX, is drive Sales basis, in XX indicator enhancing products, additional to clear points, the year-to-date. innovative to XXXX of growth. evaluate metric are XXX new out segment the close first basis first are is To number attention with TAG have is reps, of stores discussion nearly two-year pricing X% We over first ahead. are average continue XXX these a on points my net annually, management up additional make of net margin XX.X% and the with how productivity versus trainees, new period. XX% first half market provide the Segment of opportunities or sales the to to to XX we two-year same an opened I'll terrific up performing, quarter this stores new half. stack e-commerce of expanded This growth. comments a fuller services

to X.X the related to translation points our of X of decreased Sales positive to Pricing positive. and was divestiture. on percentage including Wattyl Consumer related in points XX% percentage Moving impact a negative the Brands impact Group. quarter, currency

lower by double And by work digits and were the to We're quarter. Asia-Pacific more category, the in prior not enough in our North to consumers year. of comparisons to were up areas strength which growth Paint levels our though As normal offset businesses, demand. business DIY DIY encouraged expected, both Who to these driven Pros America returning in and our difficult returned European

of progress half XXXX business the related same given the is compared half in look its the period. sure, digits past first first the down half is indicates up to to the think While quarter and Adjusting pandemic XXXX, the first XXXX year. DIY mid-single XXX compared half, low-single points comparison was a over and growing challenging of first is business better performance. to it half over for the of the over the making unusual improving basis margin first only the We for at Encouragingly, dynamics the of of business constructive the we're segment adjusted digits XXXX. to the up Wattyl, this it's to divestiture this

material raw supply this organization industry-wide managed by our do to work Uri. supply chain continues disruptions global know, caused is chain navigating Storm team you in within As Winter this segment, incredible the

quarter. than comparisons XX%, our be The third more Performance keep working region. wallet in Asia-Pacific and the demand, year’s recovery industrial quarter in double-digit customers was the in the robust gains double-digit new sales we've to the were including strong are business the Last, our of division I'll on share group. by comment last which and growth X% the Price sales collaboratively Coatings the We by Europe, favorable all tailwind Every positive This business with a let America, XXXX consecutive trends customer in in industrial wins, generated and group second across in since the appears third by the second all to sales Group. highest of quarter. support rate quarter. in by is of and me year’s and in them had Group growth swing. quarter America. wood in seen every grew continued and regions underlined fastest Regionally, positive, this full Latin accelerated translation The driven grew quarter percentage momentum increased a quarter division, in and divisions second again to growth. currency followed North start painting.

consecutive growth kitchen products applications. group region. New and quarter the General flooring of every second and positive posted residential were largest robust drive construction division furniture in industrial, to the double-digit demand in cabinetry, for of our continues sales its

were are Our percentage. finishing. Miles heavy customers Sales collision growth shop as remained refinish below restocking. seen sales and across levels. double-digit segments, containers strong they rather customer increased by strong temporary and true our building and market reporting volume products, driven including by being Automotive equipment, the general have demand driven than pre-pandemic inventory

systems and products good further strong. our of very installations is business. New remained in North a momentum of America indicator in our This

job This were coatings all to regions. in at continues team double-digit an winning business all grow. by Our remains performer. coil Construction to Sales do a consistent new grew regions. excellent appliances percentage strong positive in and were and accounts

region. a positive with high-single-digit growth to food coatings Our in non-BPA generated were cans year, and gain and and remains sales continue customers. for double-digit and team beverage our every comparison last robust new packaging against traction existing Demand

basis I other segment first the encouraging me half As Adjusted margin market segment group points stack million or first to inflation flat, up performance the same an segment performance, faced of in the average profit Performance inflation were sales of which Adjusted level highest PCG the down let up most to has or well year-to-date. sales the were the this raw annually, two this Coatings’ XXXX Encouraging material where year-to-date. is material basis, of half versus basically given On growth. XXXX XX% speak half seen increased Adjusted significant has is did business two-year the two-year given half period. over $XX.X in compared of margin was company again, segments, XX.X%. X.X% XXXX. XX that above a first just raw XX.X% first

Before speak to allocation moving to me let on year-to-date. capital outlook, our

price of to purchase shareholders have We billion average in share the of form million shares invested XX.X%. We $XXX.XX. billion an to little $XXX.X dividends, a buybacks. dividends in X.X over increase We’ve at returned distributed $X.X and $X.X million our an of

$XXX.X X.X our our expenditures, quarter ended project. ratio invested capital our also a We with business for $XX million including of We million through EBITDA in the debt-to-adjusted times. approximately future building

Turning to outlook. our

tightness architectural continue the to through end in remain demand will continued the more comparisons though a expect markets pro robust become second and half, North supply American in all headwind. chain challenging We

will moderate XXXX. We consumers challenging demand comparisons to expect DIY continue as and into to remain to return work

demand strong remain over industrial of expect We the the rest will year.

provide been proactive to the customers. As in to our disruptions quarter, supply highly last we described chain managing we’ve product

challenges in until to be a opportunity greater slower the make engagement We seasonally even drive customers. to when quarter the as mode inventory. we see ship to expect current building We expect and fourth begin our with an

platform, distribution customer all of let others our store leveraging simply centers, our up We’re fleet, unique and our come with us creative to solutions can’t. including assets, and that more our

raw supply inflation has cost continued the moderated the side demand. material of and On issues equation, not chain driven surging by

year, As the the third be a range. second an only raising demand expectations inflation are remains to it from in material our previous we for our than in increase anticipate be inflation We slight quarter raw to result, higher mid-teens in year-over-year with in the the the as was quarter improvement fourth quarter, high.

have We continue confidence. to great

these offset we price We will the costs with all the incremental quarter. second in increases announced higher during businesses

to timing recognized We continue are to margins in will price be additional should increases implement We on the near realization the pressure they of prepared necessary. term. put

expansion. up single percentage third longer consolidated the we XXXX. Against anticipate the high net will third margin digit we Over compared term, quarter be this of sales expect mid quarter to to backdrop, XXXX by

a sales to this by pro percentage above or with and the a of returning level. to sales at historic We high more up range high mid be expect The end DIY sales digit Group to Americas single

Consumer teens down be teens percentage, XXs the five expect high be negative high divestiture. related percentage percentage. points Wattyl including a a mid we sales sales performance of by We expect coatings to a And to impact Brands by to to to low up approximately

throughout quarter. our than raw improve quarter. from experienced is the to slightly guidance smaller we second a impact to raw expect material the availability availability We continue Embedded in in material

low high expect by For XXXX, a net be year percentage. the sales consolidated single to to full double-digit we up

low Americas digit down including mid percentage, Group double Group be points to Performance be Consumer of the related impact Group the up to be to percentage. percentage percentage. divestiture by to approximately four single low to a a up to Wattyl The expect high negative digit We Brands a by mid-teens Coatings and XXs by

we in per XXXX on we net the guidance per the diluted $X.XX $X.XX year XXXX. per XXXX per expense of delivered of $X.XX year includes of full over share to an $X.XX, to the the an in share, adjusted per midpoint the increase expect be Full acquisition-related XXXX XX.X% Wattyl in amortization share per and share. On to We $X.XX basis, at for income earned share of range $X.XX expect share loss compared $X.XX of per $X.XX earnings to share earnings divestiture XXXX.

additional points with modeling close me Let some data helpful may that for be purposes.

returning raw We our our expect margin the normal year. the gross to mix more by implemented material comparison and of second businesses customer half of to half see more in second partially across additional slightly to due product contraction higher more selling our all to half difficult levels year-over-year, offset first price and a in increases compared costs,

expect material lag expected realization between year in gross raw to pricing the increase full and rapid see We in margin, some than costs. contraction given greater and the

inflation As recover expand to over previous in we margin expect [ph] capture cycles. time and we it abates, price see gross just and has as then

to expect margin partially some gross SG&A to margin growth. contraction due by to see sales in due second leverage operating contraction offset strong half the our in We on the

our half expect raw margin performance perform depend operating our and on consolidated flat to to be in XXXX with of of a through last nice to operating our sales improvement with materials the compared range year where XXXX. the full trend where We will adjusted The year. margin level year approximately second the compared

provide that our will across to making We customers. our solutions ability will continue to investments enhance the differentiated enterprise

We’ll improvements, on U.S. around capacity innovation. Canada product stores return the cadence productivity and in reps, We expect opening new and to with XXXX. and focused also XX systems sales to our in normal be

year investments are These also the investments embedded center digital in in incremental additional our plan in full our channel. guidance. home We platform

a the year. full for foreign to X% be currency approximately tailwind expect exchange We of

the be low XXXX range. We tax effective expect rate XX% our in to

$XXX be amortization be and interest CapEx year last and guidance unchanged. full remains expense approximately The $XXX approximately million provided expect to quarter depreciation We million. to we

due We have long-term $XX XXXX. debt million of in

increase We the share year. share annual per by per dividend XX.X% expect to full the for

and to despite year. continue to we like happy our deliver on year strategy. opportunistic I’d that, our solutions concludes you repurchases. our focused We That making customers. first highly we’ll us considerable chain this expect full providing fit excellent inflationary joining half very delivered We’ll maintaining With We and expect guidance prepared remarks. and previous evaluate another to continue questions. to that We share strong morning, for are be thank our and to headwinds, acquisitions to take also your an supply remain

Operator

At be now you. we Thank Thank Instructions] Baird. you. time, Punjabi comes will this And Please our of first [Operator questions. the from Ghansham a proceed with your conducting session. with line question-and-answer question

Ghansham Punjabi

Thank Good you. morning, everybody.

John Morikis

Ghansh. morning, Good

Ghansham Punjabi

prices Good morning. case are recent or is stabilize to for that higher you just us know TAG incremental guidance, at are not driving Revision specific And point? end XXXX also moderating, that you to this not take your that [indiscernible] most started they have through which said markets versus but can sales upside? I the

John Morikis

driving would chain about from spoke that our a Ghansham of as confidence to going it I'll which TAG norm. the the in at going market we quarters segments likely ask back piece segments. be it are couple perspective, mean second. to it'd of part to just able segments. a last demand challenging would question terrific talk to understand But or have, on as businesses the loyalty last that to every an it's be to terrific they these even be we capitalize with the demand to started your one Al our before. think got in capitalize see developing of DIY to these about that business. position our in waving closer issues, to expectations have, challenges some that that pro times be another. it's in We I – And the we expect supply we've to business, with revert model be in let the the shift We've relates We the be the on We that fact, because first me question, that a your professional distribution we're And in the smooth, great that seen and quarter, that we take reps a across those. first swipe business, be perfectly Hey are one swipe if and that to across customers we're and easy think control business not in into didn't position excited a pro working able the we to from these showing of level and that

with throwing a the relationship gotten now right why with add to customers, stay to regarding our feedback comments just to the close Al, customers. statements as Before as made those just couple terrific our it I on customers. it our very and we've some to We I'll of our relates research, loyalty

keep them this to And got that we us and be challenging responsive else. to the to us to we've stronger these them, allowed managers As them fact in it records position during with our our is these demand challenging with come the feel combined and than predominantly set speaks to and contractors to customer with reps are with this highlighting through the there better respond exit you. the pro really business, that during today going ability our them times work are than anyone close to paint has and issues. And

Al Mistysyn

Ghansham Thanks, is Al. this

saying material be coming is higher are third And side, thought year-over-year. will going to highest the raw we our we that the the basket second into quarter that quarter be the year-over-year. On now quarter, second

across across So, we businesses. in there. going out materials. see we're a raw as all but out significant to materials, we'll the of TAG, pricing announced all moderation are increases, some inflation. businesses think The businesses. raw And is going up as also recovery. a why moderate, should see to our raw recoup August we increase X price but see costs expansion to those gross slight with price material we'll and all margin, some in higher moderation then but as recall, this We you we quarter, all margin But we're across were increases fourth getting with that regions in catches significant start start material And And our forward. contraction raw gross short-term our and industrial,

Ghansham Punjabi

Perfect. Thanks much. so

John Morikis

Thanks, Ghansham.

Operator

Our comes question. line Jeff Please the next with of your JPMorgan. Zekauskas proceed question from with

Jeff Zekauskas

much. very Thanks Hi.

Al Mistysyn

Good morning.

Jeff Zekauskas

morning. estimate your there you have the shortages sales Do material perhaps among you that an you in have allocate when groups? Hi, presume sales, of sufficient raw would that think raw good And lost how you quarter. I because your were endured didn't about lost you it the materials?

John Morikis

a Yes, X.X% raw was basis, consolidated Coatings shortages the Brands pretty Jeff think segment. on split material TAG we our the evenly Performance between on There were segments. consolidated, immaterial our a about and headwind of our was that impact Consumer an on and

Jeff Zekauskas

area that. Thank the in raw And where material where slowest? – that Brands your to likely raw your be you price Consumer is it's material, capture for is

John Morikis

I that off of Jeff, at the price across their we're is the lot implemented businesses. to the and there that we're more material increases of each what we additional consumer, comes in I basket of have categories, – pricing similar seeing. think different has that pricing TAG, each a – the team all those say would that are and categories where effectiveness raw

Al Mistysyn

while I'd that run working don't line. side response is customers’ TAG price our And both on actions how in in. say the in perspective we PCG perfect line right what always increases consumer, roll in to with try We've we've in Jeff, said the with on our much We're fact, our quarter. for are these the our pretty from expected. customers

we and ability price that the our in us that confidence those in to is get our will but customers. two the do allows with goal way we both that keep customers. increase to the put in absolute the work have of and do to retain to price And to We do a them,

John Morikis

almost Yes, versus is year, the lag, very high-volume margin Jeff of I make you very the still difficult But half on half first operating think, saw that, look look margin we our up because it's at I last at only just XXXX. the points in you versus first other would comparison if comment operating strength on consumer, and the the second was our XXX the the basis half quarter. if of first

the to sales rolled in on I a of half a the the be So, XXXX. first task because out, of of think, increase I half comparison maintained And that the think first year XXXX. we've would X.X% And way versus margin. first better

Jeff Zekauskas

Thank Okay. much. so you

Al Mistysyn

Thank you, Jeff.

Operator

Please from Our with the next with coming your question Capital line proceed John of McNulty question. Markets. is BMO

John McNulty

Yes, you buckets you raw whether When think guess, you, have speak forward, about to going here Can as my there packaging, we that to are taking look question. about it's expect a where materials, TiOX, that? thanks you to relief? the to for they And can see think sticky various resin, look us for what I ones you for can or or think help ones while? be you, you are

Jim Jaye

higher cost and monomer, was inflation was being Yes, by we really per what sure John. quarter second solvents, resins, When look at basket, the packaging driven we saw materials. the in the

to the maybe in only, was Coatings quarter. mentioned, relief that be quarter we greater Performance As fourth year-over-year, in to raw their Group, John highest side. inflation that the third We given modest inflation did guide think the material going and here highest the the exposure is

are just going think sticky. I'd So, – lot of are say on that the largely we inflation, pressure. a that's I side, seeing TiOX I mentioned, where but of most those, stable remain little that's not to part, the bit for a been not the

that committed very So, offset ability have. it's be we're We've initiatives very on their pricing about been this going dollars to mentioned good we the But and Al the those raws. we're during John to environment to as businesses. remarks, very year. our challenging out across mentioned aggressive, in on the a continue feel We

Al Mistysyn

aggressive where time a there, little we historically leadership we've determination been if there, bit in Performance stay lot a the in to ahead and experience at as that of actions the but this XXXX through margins got stay look company gained to operating ahead place that's a in the you here. I others. We're we're that right very where think focused we stay the we already our going took pricing think, I well going is we'll and this. the to very committed Coatings, the now, have that in performance experience that to industry of offset taken visible that of delay seen we've as believe in of back have reflecting And

John McNulty

this or enough. as Got your or it think I or Is a business, issues something or be some change? maybe follow-up, forward? of about you could stickier? should chain we the a business business, the we guess, then gain on that as share either where little meet lost potential is for it. about be loss this you And bit guess, needs, where the look how as how just Fair we temporary competitors something supply see some have, thinking it I should couldn't where

John Morikis

I in about that just that this. this stats we're transparency I'll this briefly indicate might to think in way right to projects handling way customers from as experiencing come time or scores working share look mentioned new in dealing briefly how talk customers, have lead with, mentioned, during us dealing growth allowing that with challenge which our win but going a we indicating with we're project we're as a to which really we're and our the the working maybe our is in of account might we're handling there have how getting at some have this we're we're the customers in have that bit our just is of some with that, a we're that customer moment ago, the some And we're a of been, some responsiveness we gain But research believe lost, should I of fact element responding it you been that the transactions, the these The that greater us confidence stickiness. there out now. customers little Al great customers. with our as

So, record with in we're year-to-date stepping customers. activity. account into And performance this new

road them them, to lead this to and new projects While accounts with in at we're will trial that itself, try those opening products, the new point customers. we're more with getting down

challenging as times coiled come uncoil. this, out we've confidence that And So, going great accelerate that. that going other same we're that I've to to got spring you're see exited we of

to what as and to of that in these as see take of competitors number areas, in territories, we going are the these in are, about the best not our this but market. talked research, continue we're actually, and our for advantage times a company. close can You I've difficult And only as invest stores we to times close continue

expect We out this to stronger. of come

John McNulty

the much thanks Great, color. for very

Operator

comes proceed Our Bob question Goldman questions. of with from with next Please Sachs. the your Koort line

Bob Koort

Good you. morning. Thank

John Morikis

Bob. morning Good

Bob Koort

what your materials could that Could are the as percentage mid-teens help cogs? John, was total tell to get you I figure us your inflation raw us math hoping of a cover. you out

Al Mistysyn

material increase. year are my Yes, XX% will in price the of we the catch about to dollar. increases we half, XX% I cover dollar for you behind the dollars. And up XX% bit first increase paint cover the Bob to the we'll raw materials dollar that get in little half, about but expectation a offset, year. raw raw tell XX% is the full of our material, material full dollar A need second it to to in costs. would increase raw

Bob Koort

so as think question. guess dovetailing leverage relationships, your you maybe to supply you North preferential John's on than then would largest paint company, were in availability, do better the you able – I certainly you America, had And competitors? did

John Morikis

taking our suppliers our are them chain, working have serve our work situations many I we that customers. think with put that ability Well, worked to approach supply clearly of leverage ourselves with our can here way in to we're in a And in We well. is to a accelerate closely as unique with suppliers. our position them that the

front the that have fleet So, in our unique of own raw with fact one from closely on we the vehicles. We're them. working we're materials, incoming

once and right tractors we into to plants materials trailers from that plants. we to X,XXX use receive expedite XXX have We And projects. right now, these customer many cases in raw our our

transparency Bob the to this gains. as as know serve entire we're days customers And expedite, exactly that to communicate entire I to the on working going of possible that it's So, out and our We earlier. our chain we're is mentioned come to we that why cut many customers. out with supply as share

Al Mistysyn

capacity global global opportunities Hey, really additional Bob. our would is add have thing to material environment our coming few be above to of only gallons investing the look next additional is forecast an coming for utilizing million into well where XX where it's initial raw season. the because, for to our supply relationships online scale, over other that footprint, quarters The demand and we're supply capital I would our the

expect So, into quarter, faster. additional also fourth inventory. you the as we materials, the quarter quarter, we'll in we'll for into can inventory we come be next convert season And first out get those third And to building can XXXX. of as ready get going building selling materials additional the raw the raw

Bob Koort

the Thanks Great. help. for

John Morikis

Thanks Bob.

Operator

with be The coming line proceed question will your questions. Wolfe with Truman next the from Research. Please Patterson of

Truman Patterson

Thanks morning, everyone. taking good for questions. my Hey,

you I PCG Coatings, that specifically to when mid-teens raw price in just inflation Coatings, taking basis expect company Performance will versus actions of heaviest material magnitude us guidance? on your And be know that kind help inflation on this but in gauge suggested the actions, a in pricing Could segment. segment? inflation in you do all Performance you're dollar First neutral get you cost of

Al Mistysyn

To Yes, year. Truman, a operating the price low last the would industrial businesses, maybe half in fourth year talk little important our seeing goofy cost mid-teens, quarter. it's moderation first about about we at and bit some in look XXs business high on think, teens, a it's talked dynamic, because of the be the the then I to margin, depending

talked first cost well the selling adjusted the up are implement company in they that up and selling And a including when caught at to basis And Sherwin basis XXXX strong the as while material half tremendous materials, as we've today. last from industrial team highest our to first a half. half in margin half offset operating the basis, – And year raw raw XXXX. working to prices full back that through our margin keep declined inflation. maintaining XX year to as material then in environment raw forma with look, price half the points first go this on of operating margins and you And in operating just the perspective material XXXX wasn't of down increase, raw you expansion higher increases a as with it's moderate, XXXX. and Williams. we're experiencing XXXX, And first and XX seeing pro I to they a points a through inflation significant look about. we demand material And just we having down a margin, saw in inflationary think has significantly Valspar in their done significantly it's their to if job put XXXX environment, operating raw customers finally the started you first the

think Justin what's our question and financial you this right the at it I presentation answered asked way. important, community

been more pace seen priced the leverage stronger And into a aggressive than, as this material raw getting we and a getting we've market have faster in inflation. We higher at volume. are on

as be our material of So we're high along actions raw continuous to us improvement we and low other come that with taking, XXs out in the getting inflation teens mindset gives going environment. to this confidence it to

position we lasts but will take we a to much are dictate get ago. in in a today So, somewhat it's few margins, how to long inflation than going how were back long our years better us operating this

Truman Patterson

Okay.

then through are is quarter. into DIY help North as improve moving business And guide DIY I'm North the it America, supply all to like start just trended work the, at trying through divestiture, on consumer the impacting that. plays understand you seems how healthy parts in seems it how us least Brands demand pro can deceleration chain there, the to the the of year the core quarter side have hoping full for constraints America, it some your Consumer the and especially, should in in we the through thanks which like move Okay, well you the sales, Group of

to Just there. the of parts understand some moving trying

John Morikis

would Yes, me levels property than we TAG Truman, that confident just DIY expect offset more let maintenance would other normal particularly and segments, the within were slowdown. we that more the And very commercial in as in that comment year return to progressed.

teens the are comparison mid-teens. low digits double full Brands just guidance So, sales right the toughest. down second be you absolutely the Americas our at took to our and while look yes, going from when we And Group up quarters are year-over-year, year to Consumer mid-to-high taking third to you

at fourth to slightly quarter think going but from look architectural better, is perspective. it get an I it's Our important to market

businesses. our full And is our year. the combined Consumer the CBG right year, second TAG TAG single half we up look guidance business, there be first you be were expected with in if half versus half We've digits range. with at for digits. architectural expected And sales to think to double second and mid-to-high said we we I last the low and that our

the full to be high digit really perspective, guidance turbulent position shifts. advantage architectural about an in different strategically we shifts the we from take And on at So, positioned to return believe the to low when excited company those we're look growth year capitalize single a you our the market. up just sales of digits, us to in to really plus, of industrial, double market

Truman Patterson

in quarter. for the guys upcoming the you, and good luck Thank Okay. time

Jim Jaye

Thank you, Truman.

Operator

Markets. with of Viswanathan questions. is your coming line question Next Arun Please from RBC Capital the with proceed

Arun Viswanathan

in inflation. impressive face material taking for the question. Thanks guess, the my I And Great. raw results, yes, of

I just, guess ask market overall growth. I about So, wanted to

just do You repaint it's really single and well of continue in you TAG. up to low resi in for, double high kind noted, you setting to as digits

will be next guess a comp there well. comp I achievable facing slightly DIY you facing So, performance more and in year as tougher will potentially consumer a you be and

range. a kind to one thinking that in TAG? Performance thinking times still are back position thinking how X% to the we more I line of more Sherwin is half growth with to you as kind mean, kind are are as in ongoing of DIY of How grow kind into a settles maybe sales then about basis? business? far consumer on And segments of the growth two in in and kind production kind of your industrial is kind So you market of of and then about X% midterm a different

John Morikis

of we say absolutely repaint, see it don't the macro growth slowing continue some numbers. rates the now had Jim market. me that let to I'll in with you as then I projected the Arun take I'll We've to that five to Yes, use would consecutive of to and you, spear double-digit res And throw repaint agree swipe in down. residential give we tip your years you conversation. exceed growth remind a the quick here

face In of our products continue expectations that's of in challenging of what the that to areas of investments as to in TAG to is particularly Yes, invest. helps in during times, competitors. I terrific but continue organization digital given platform adversity stores, some our reps, a us some and of our fact, moves believe We're these our earlier, that we to making, business the we growth. believe, that there Heidi accelerate we mentioned accelerate some number cases,

those. kicks the So, And excited we're Jim professional throw when about each talk excited numbers I'll accelerate. segments inside And business. of about the some at of to we're it maybe to growth there macro about TAG side. to the also the off, Jim you across But just I the PCG opportunities business, before our one look mentioned

We good have team. We've there. really Binns got and some momentum high very for Justin his expectations

the we unique. clearly products to of individually us differentiated great our in you as the at technology solutions we segments. We combination that's combined companies visible two with the where an throughout that believe technology portfolio try bring and of is to Valspar, some to the automotive example, And is the that starting look a the to Our beating customers. together. focus very really the done work if unique that's Sherwin Particularly different brought and here, have know way had we harvest believe both we're market companies that allow

and digits absolutely the model good market. we businesses number the idea use. be TAG believe to our PCG But is low of into outpacing probably reverting consumer single So, will back a that

Jim Jaye

while that TAG, it's opportunity that, that's, John's gain point segment have to repaint, you Yes, the we space again, largest most and think remind to our also about the residential it's about you share. I’ll where

So, we good about residential really feel repaint.

very that's you of the market I it's some supportive. out at if data, think look there,

into leading time XXXX. existing to remodeling very at We right that's highs accelerating indicator market now. strong. the example, be The activity all continue For home look is sales remodeling index

going to So continue resi repaint us reason to think not strong. no to be that for that's

that you are extending governor, about significantly multifamily. new they hearing on of on you I And year-over-year, that think, numbers have of at family the single side, a On little materials if and but, cycle. a being still and a the effect news both just bit starts, raw very are labor the residential look could lot

You’ve and that in we always strong got historically flattish mortgage rates formations confidence household consumer talk still about.

side, Commercial to the resi good. like are second, you’re COVID, has place, a and that work. other of very returning growing lot of right index, the quarter. touching indicators market architectural people example, supportive. very in are second fastest in the on vaccines new now, as momentum seeing And billing for that So, that Commercial, our just on we’ve a was for come out

And travel, to then there. feel indicators, people industrial we good So, as returning And segment, that. in know, we’ve to the as returning of for business, at a opportunities to you close divisions gains. but is U.S. good of every is regions region. manufacturing, property the up feel very said, of about lot in the with the out different look we management, offices, that maybe very Even there’s We quarter. lot very often in nicely very, share the up a different huge market in outside PMI our are

market continuing to probably in about said, business. good to to TAG a And return environment. and PCG to we’ve very as more we going feel our normal start in So, consumers the outgrow

John Morikis

that We outperform But consumer we the the side, I would add, we committed. market. customers even our can help believe are on

can market to help business ourselves outpace share. might more run that back and them that desire help working market aligned into They we well. well the share we’ve want, customers while with we’ll market. our in that we and grow to be that them with our outpace normalized revert as investing very a customers. believe continue rate, and So, it that believe we to And in investing we’re And

Arun Viswanathan

side. that just of be buyback investments? I that your on from valuations you’ve very of use that. deployment Thanks the is but cash. the on some accurate quick going And or high comment still M&A then environment internal are ask attractive, just a Okay. your not cash maybe completed Is I.e., follow-up, here? capital for activity, maybe to could that’s uses showing of outside as It like main still sounds your

Al Mistysyn

Yes, Arun.

I our think allocation in very we’ve been capital policy. consistent

John to the think don’t want buybacks. our about, and the I the to As need first in talked And make strong billion to acquisitions. shareholders and point of we half that a return I dividends cash $X.X make in generation

look talked grew to XX% or compounded at that’s I And about this on growth averaged, financial we’ve a you our I from flow-through. average X.X% community PBT, $XXX $XXX million, we XXXX, presentation. rate, growth adjusted think million. our XXXX And

margin operating strong. Our is up

our to it’s continue about to And We deploy continue and fits to invest so, opportunities, look architectural I we think think head. the to strategy. we’ll great way our We’ll And have would say, in capacity important for that improvements. I a M&A growth to cash. I note that’s our But for don’t opportunities. gun a talked organic that long-term

but packaging we second purely more We leverage M&A, growth think have increases buy this just than but capacity get stock our back coming half. on I the the absent M&A, will we in organic and others,

John Morikis

Al response. referred great strategy And M&A a I it’s little to on think put also want I that to. do And color a the

completed there. are our think though shareholders. that but deals we our out And have are they’re opportunities can to While could value disciplined we that a to there working to head, on we don’t be we this there that do that gun we’re bring year, several we going feel as deals that be think

to not We’re trying everything everywhere. everyone to be

that areas necessary Al We’re targets fit be fill gaps. would for mentioned, those geographic looking and proactively as strategy, would our that

a a our We a void bring customers. other could be we’re throwing at here not. types us just out trying not the that could to technology or platform to leveraged serve dart can across where fill We’re help map figure of

we’re And fit out to that to just as could buy proper though there we sellers so good M&A that in believe we So, we a there growth. that demonstrate meanwhile, to trying are and don’t that feel absolutely book are at targets get we the fairness there business out a of the our shareholders. can value

We have growth those pursuing we’re opportunities and actively organically.

Arun Viswanathan

a Thanks lot.

John Morikis

Thanks.

Operator

Our comes questions. next of with Barclays. line with proceed question Please from your the Fischer Duffy

Duffy Fischer

Yes. Good fellas. morning,

John Morikis

Duffy. Hey,

Duffy Fischer

question the freeze supply a just doing is and than a tightening around in to different strategy just change this your this straight raw spikes COVID. demand bit First on Is materials with anything little how of raw you to do geographies? side? either change source see structurally the diversifying upstream more any integrating yourself resins, diversifying producers, to on want more to expect meaningful Should we materials, that

John Morikis

Duffy. No,

think going And a to how but be customers should we you about as think experienced have don’t that veterans anything as have protect and the should concerned that well call that’s right a we’re looking us to would that to supply experience, are. taking thinking them and like We the you a on I of that if we’ll both steps. with and we’re you have years standpoint our changing want a talk technical, from what be those don’t to now. at and differently. don’t this, things lot in that But I structurally of our XX-plus capital terrific of necessary about those team as define in expect public procurement steps know I expect model forward, chain. business, to be expect want we

Duffy Fischer

to your you enough. to inflation? as we’re And and hire then labor Fair new talent attract both about can ability and growing into you’re people this, on seeing talk your customer’s then ability what

John Morikis

feel in some have we wage uptick say pressure. a pressure, seen slight I’d Yes. some that we areas, where

and most steps have that terrific people. secure you I’ll important We’re we turnover a our to on rate taking to be the resource, our what average. we X% believe between X% remind

and then the the become hire the we and for our resources very recruit our team. win, reason to talent. train we they give them So, right success them, of We we’re and proud

their path, that have a career and of stay. tend As our that to the result in they fact people success

over a think our very we fact, third employees the In more XX with that’s important. and years have or of company

to making a make. that right retention, we’re this able while of do with customers. some employees where we’re that that result to as we serve respond believe investments And necessary, experienced we their they’re can the adjustments believe So,

perspective, moves retain in As making to to the and steps need. financial I material sense materiality the don’t the the we respond the we to talent are as moves from in we’re that some cases, necessary. the pressure, but recruit modeling that far of And a think this taking it’s making

Duffy Fischer

Great. Thanks guys.

John Morikis

Thank you, Duffy.

Operator

the with from your questions. line Mike of Fargo. Sison Wells Next question comes with Please proceed

Mike Sison

the the can paint year like a to higher this highest of sounds lot ever It guys. Hey, price the been. maybe going is and be it’s

Just project, what you environment inflationary it historically. expand you’ll worries feel? that feel been, know pretty of given And do part a cause level like the there. just we’ve some not has of – could given? could exponentially seen and margins sounds high thoughts paint it’s the keep do our if you any good then But really curious, that why that how materials price the can biggest that the fall, I paint that destruction demand versus pricing any but is

John Morikis

cost a cost to is think the relatively their what’s a the of that the costs small the is labor. is painters’ paint or project I remember in in Mike, of percentage, important total XX% XX% to

the products developing in many unskilled new people bringing offset to that able help are many And training costs. secure they so, them moving And labor while on and talent hire innovative that to and them. are we’re them need, of

help cost of can small paint so, goods. it’s of their finished of the a customers nice product percentage gallon produce that of a relatively enjoy, their them cost And that will good overall,

that to I paying And hire, labor I our in responding at just we cases customers. cost higher have some our our pricing to well think recruit as as just and I products. that that make. gets as that And the as all favorably factored consider ago, are decisions described, and talked to our We bit look about that and retention retain and talent willingness into more. they of we the well So, a little labor quality a moment that

contractors same. doing Our painting the are

of with stores through increases, cost we’re with products. offset costs, efficiencies while the plant, increases impact do painters our there we’re minimize that price to the in And in in to quality same trying labor to projects, to seeking. to And labor some so, our our experiencing their efficient we’re that offset the customers, of higher we’re of some trying out trying as we’re

Al Mistysyn

were we environment XXXX, through Mike, XXXX a we offset the do had to increases significant XX-month we And where in that facing period believe solutions. line moderated digits, EBITDA bottom benefit we’re in XXX stores points. that paint customer six similar in XXX-plus as which the implement price our multiple through stores, almost consolidated period materials long-term adding see line new over and And on we by we in reps to from a other in did XXXX. invest America North top And high-single But grew was raw paint XXXX increased as our margin increases. growth grew three-year a basis, percentage North the and of market, basis opportunities, margin a America we almost adding over as XXX points. basis over grew operating segment and XXX material in – volume high-single-digit raw continued well stores a that

of there to this, of but invest. continue similar see we we types the We think expect to out key come results is I as

So, less that second little to on show SG&A, we’re successful. we’re investing I our make and a think But in in we important half our them customers in year. times leverage their including it’s willing this business to accept that difficult good

Mike Sison

Great. Thank you.

John Morikis

absolutely I’m Guardian question name. about Mike, shocked first wasn’t that your the

there. let down You calling. Thanks for me

Al Mistysyn

Mike. Thanks,

Operator

line David Please questions. question with of Deutsche is Bank. from proceed next with the your coming Our Begleiter

David Begleiter

of you. question, period, just Al, off? that to started if price the our we entirety those increases on Thank back last coming XXXX-XXXX raw time retain did when you John, go

Al Mistysyn

of the Let’s majority David. them, say retained we

Cost benefits when And into repaint. example those that you look get their And products. up to pass were at the what of about our costs. residential base, XX% higher you of product a get And can customers product. gallon is in As even using of quality their a costs far cost the way I’ll our current use they quality to customers inflationary we’re when which paint, compare move trend moving they see environment a to bids, previously segment, especially especially, efficiencies, we it higher to the once of do outweighs that gallon paint of an talked as they largest customer of John on. an of that to the

majority but side industrial So, business. architectural, on not price, we a of expect of also do to our on the retain just

John Morikis

But I closely track the that think money. our to important we ability more metric help is our customers make

we our that do, decision-making. in helping with we’re money. important at process, that up – look focus gauge we providing, that’s you our every we’re the in the every So, that resource always ends that that we entire you services it an more metric make are when making, And investments have,

David Begleiter

how impact at the price half just back the we of I are the you the half look Performance And expectations mix and what back expecting think gave Understood. you Coatings’ but on TAG, Brands’ of or price should year? on Consumer in for us expectation the year, the

John Morikis

the as different and expect As in we’ve would within it’s similar staggered businesses but within right, you our kind to because talked a would see PCG outprice, Consumer David, but expect consumer, the similar, And in you to businesses. because at timing industrial whereas just region just higher our about, range timing-wise a expect of even you second material range to they industrial categories it’s timelines, higher our businesses and within TAG see raw a businesses know of basket a by cadence different look the for go on a on little more across different uniformed industrial, in higher the to is are by half. when see you business being could industrial harder

David Begleiter

you Got it. much. very Thank

John Morikis

David. Thank you,

Operator

Our with next question. of question is your Byrne coming Bank from with America. Steve line of Please proceed the

Steve Byrne

decision send that you base And price if Unlike Was price your that Do a started pro and this part raise and so won contractor many those basically you that to that being of to environment contractors you that in you customer few gained think of pro forth? Thank peers was share contracts months. of your some decision? had that to when that contracts because message do made that the that successful? already for decision? drive loyalty weren’t a Yes. inflationary market decision you. the of really among think escalate, you them had assumption to it so, going Was

John Morikis

have it Yes, I do if that the we’d with the time. take we in approach. XXX% likely same And again great certainty. And future, do the I would of to tomorrow.

increase execute with our and question. that, so, dramatically effective as result price of ability loyalty customers the Our to increases our even without a

Steve Byrne

comment Is different? that also your was couple Can say compare robust. that? versus you ago? was years you And of have a John, it where Do backlog a earlier about it you would contractors meaningfully backlog made data from that quantify today

John Morikis

do. We

we that. that I proprietor but and very period we and It we’re backlog. We do to in keep an the any in with built have we on is a system a on use, the speak confidence more CRM share specifics, detail backlog strong not going great eye

Steve Byrne

you. Thank

John Morikis

bet. You

Operator

question coming McCarthy next Our is your the from with of proceed line Kevin Research Partners. Please Vertical with questions.

Kevin McCarthy

volumes a to XX% year. long-term does what any or that your level of that activity remarks, it nearly for in might in that future How new of up future you. example? averages, elaborate into for for the you made compare translate example? half prepared Can account historical And mean John, you Thank new level, on gains, account to is that? is share activity way comment the first there record

John Morikis

a I’ll color. give little you

were get to metrics to on that or specifics else of doing asking, telling our going given that a those to we At to tell very a competitors open high would that were comparison. some the one is been through way doing teams, leadership our very you think high, many is not questions of this And it We’re very into were fact I’d customers raw the transparency. our no with TAG but shortages has we’ve the in in competitors. fantastic are are of that be conversion, me competitors out how I materials. And And say the job. of the one any in our that. you to I are early with all first is some our is, why compared closest number approach our denial. our would

while is or boardroom a and of are were them had kept competitors And getting that felt procurement going whatever that they ultimately and offer I now commercial important I full to of to truthful customer’s face-to-face to it other that chain with how helping we have to customers of we in to be reason, loyalty using this they the phones courage took out we’re and that going our In those And lost why were advantage in a might many fact, past took Suddenly competitive with in out our our opportunity. and think their from customers terrific have teams the and explain for this front credit a And And be great with denial in our how out to our and perspective team the that from the suppliers. say getting some at very were customers customers credibility. I that – that’s said may our that people with run as our week what supply team talking help who answered may them expect. to reason give teams two. we’re it today them come that for be transparency we’re business. was fall this our quickly the to market, that to in that

In might be our to in just and but on to simply stores, going getting And to real mentioned, forward mode the great trial customers I we with the we’re and our And back as exciting that about conversion care this one because product. with most is Now, the the them we important project, a know it’s importance existing to room step some supply and we’re these forward. focus. certainty cases, able right it’s of issues in and chain step supply in of talk the customers the this greater we own and taking trial the that try great some is cases, look now are of an new process. simply a alternate

going got that as and because feel heard So the out of team earlier that down to come that. we’re going money. products are I I for though asked, this to everyone front which the I’ve of confidence do in that with share and store, do in respect market was answered way And determined hope we’re these are help part-timers to make And the leadership are terrific in customers, to we I gains. that these introducing our more solutions customers all new just our new

Kevin McCarthy

potential look that. might question for that If you have grown can the major and those across which et there, wood, cetera, businesses general of such most pre-pandemic for remain My the which have for Coatings. you most packaging, sense rebound a the levels depressed, versus forward? going categories coil, second you more refinish, us give Thank relates Performance we industrial, to

John Morikis

we I in them. I’d help this to that the I the business, mentioned might That’s is to we’re way that those unique that will a terrific business. continue question. market us that we grow. really CapEx putting the may, Al we’ve I into interesting quickly. If just brought growth In packaging that technology see that through say answer spin to believe the all of do could

onto – easily with our equipment with customers VXX very It’s and and adopted unique think along we are product. investing a a plug additional a our with We existing that customers It’s can-making and and our capacity, in product performance. plug is helps play speed.

food protection gives application terrific. of is the products, flavor efficiency next the the and the both technology. it’s to great So, It of beverage, generation and non-BPA really

that first we’re differentiate model competitors. every and using a – it’s taking easy our from our little it’s because that same the while into packaging it’s I’m model, talk to teams depth to getting to So, help and bit more segment in

we gallons might less XXX working that at of time do look or get product at the it to as wood, you down in an gallons XX instead when into of days. industrial example we’re And – put looking but how not So, or gallons the required the been and technology, faster GI chain, them orders what whittle that supply only to weeks takes to with take thousands to of business have capital.

job are coil a fantastic doing of Our technology businesses and introducing speed.

in the marine about assets be the – between combined Valspar more to with our technologies to protective get helping back to I more customers their automotive, throughput and and business That’s Sherwin of get able In assets Our talked faster. earlier technology. productive. each play I’m sorry, be to

to to him hard when would grow I and asked the and quite So, room greatest look was expectations in honestly, competitors. that every tell what and Justin the of grow the you businesses answer If one I I’d of which tell have with it’s Binns in now, him them. I’d our the That’s eye for at excessively me expense offers question, those opportunities. right

Kevin McCarthy

Thank you very much.

John Morikis

Thanks, Kevin.

Operator

the from is P.J. proceed line question next with Our of Juvekar Citigroup. Please your with question.

P.J. Juvekar

I good afternoon, good Yes. Hi, or morning should say.

John Morikis

Hey, P.J.

P.J. Juvekar

your their I’m And and margins two looking the of industrial are competitors at of so much lower. businesses far

sure be are factors Your impact into raw that XQ other materials margins your and offset like kind raw shortages to impact? you’re of material isocyanides. likely I’m of held presumably by And epoxies up. Is there your impacted delayed the or same

John Morikis

maybe and think miss Al if start I to I anything. I’ll turn it

just of part solutions them will strategy money, interested not necessarily and we it is think that pursue business. our in help been we in We’ve make are selective pursue. very businesses that commodities. of And coatings I more what on mix

going that commodities. see just So, in where us areas you’re to not it’s

on So, we’ve and more businesses some focused high areas we’ve those value. of are actually walked away that from

at to that customers, them And be them important serve them help Al, add that highway, comes high-value to more to they approach and bridge an in just a our you’re opposed other understand return, be like and our bridge to is to we’re cost and in as as about with us the on think shareholders reward. talk an and part often to I that successful are sharing the see and to And us make plays that. ability that anything alignment our successful. commodities. partners just to else going We you’d we that? areas our low-margin want example So, area

Al Mistysyn

the go tougher to P.J., consistent levels return against thing a volume sales segment more margin through sequential up it’s quarter-to-quarter. expect second I The operating a half. our first going see Even we comp to only our still say as normal – is Coatings more versus would we’re we’re a seeing the would Performance half what say, half, I though in or improvement second strong to would

the being So, high high talked back teens. half teens quarter of XXs. that up up our about low sales implies in low full-year third the percentage We XXs to guidance

lot and has So but strong the this aggressively on SG&A, it’s getting to made those leverage volume commitment and that about earlier, the is this XXXX, timely that – – from market and offset XXXX like price that material also the I raw we – delivering into to now is said this a team it’s getting that learning. executing raw not team material learned inflation. XXXX, that, And in on

job. we’re So, I think a great doing

John Morikis

to going not I’m revisit that.

Al Mistysyn

No.

P.J. Juvekar

digital Great. can getting site? my Great. that Thank customers you the online much And ordering is, paint second pandemic? the question job about your efforts you. talk How your contractor to then are have the accelerated through may delivered and of

John Morikis

I’d that Yes, is our in that in more a service our say, an strong and increase all utilization I’d pros that say say And we’re the track. we categories efficient would all option the the seeing makes utilizing platform, in providing I resources. metrics

everything a digital So trying others bear. as unique who platform to the model, might ours brings that and unlike be is it

So, on utilizing want platform we’re take they that discriminate sales Quite we how resource frankly, encapsulates it one that that unique against to stores, versus of it them feel the phone we and any very them the platform make all. have talk What our easier going – customers reps, to those rep. believe so by digital or trying that do we as we through utilizing our model about want that store don’t platform is we’re in We’ll comfortable. We offering. every of the the for or is into our orders. and specifically any on not them. platform the This and we platform all –

allow this have us well. and projects, encourage into they business best can XX/X to the the their orders platform a cup and to behind prefer come with access if we their So, pricing, with their them they friend coffee store the that as And counter, conduct their digital will through platform.

P.J. Juvekar

you. Thank

John Morikis

P.J. Thanks,

Operator

question The with Roberts next line proceed questions. from your of UBS. the Please with John is

John Roberts

Thank don’t I you. Guardians, is an so uses at John, think the maybe all Ohio, Guardian there the in opportunity there. on Cloverdale/Rodda brand

John Morikis

everyone. where Yes. that. Only There might Now, the go, Guardians that don’t from do be. they Morikis, John? know came Roberts, John John I about not

John Roberts

Is was unusual be quarter mix the in interior to Okay. typically than larger exterior for quarter it since And headwind interior? in the than June that exterior? a is more expensive

John Morikis

say I John, would that more a mix return of to No, kind level. normal

you we in closer off and exterior X the start maybe And interior it are closer X.X in get X I the to as think the to prevalent. volume. less to where X quarters, quarter X exterior And Midwest the to to and out X. two think the on typically East then to quarters, middle trends to X X.X to to I ended we

John Roberts

know of constraints mitigate trucking trucking Were the to different were some that here somehow freight many use mitigate of you of you up help a raw that? able in issue? other competitors. I big if fleet shortage and headwind then but as materials you’re I raw And as to ways pick know some up an pick Okay. your cited materials the to you able distribute, don’t your by

John Morikis

we in just them Sladek Yes, Joe as we we Global plan And terrific we this leader every creatively use have and And as creative. were. asset. has do to runs to John, has continue possible, been our as given opportunity an us whose really Chain, Supply team a that

asking, just not we’re tractors which a using you’re great unique centers that stores, fashion. but a that trailers, our our everything is distribution it’s manufacturing, question the So, or very and in

And And coming this be we’re some that better be a is result our of of we’ve better a learning and been chain And and on ability we’ll will leverage out to supply able lot in to again, of that. a our out this come this it. about continued as to do our result. the as has to ability we’ll fly improve

John Roberts

you. Okay. quarter. Nice Thank

John Morikis

John. Thanks,

Operator

Research Please the your with Mike next of Partners. line proceed question Our is coming with from Seaport questions. Harrison

Mike Harrison

approach stronger product in of if were seeing those longer DIY that I talk about Asia. wondering Europe afternoon. or that to trends internationally the changes markets, in regions was maybe strength in seeing Is business. you’re good remaining you know you demand easier? for what made consumer those and a were of Hi, terms could consumer the I also that in you’ve but some strategic comps in comment your the on international

John Morikis

say largely environment. point that it’s if a out in John us. the [ph] little of on XXXX particularly region sorry, COVID, improve kind in the did everything. did impact look China, that Certainly, – that had even I’m decline Mike, in of we at double-digit bit related an I you to it will profits, I

further we focus our a operating on XXXX. volume We So, strong in continue to model the recovery the defining half China, with that in had growth in region.

wouldn’t might. this quarter give I’ve it look guidance to needle the business, by to way decade, area that suspect is, you looking but going as business an we’re next term. is not before, But going We’re long the that or if next I one move this said other.

XXXX. running this we Europe there. And we did around And a we’re continue so long very has team little to Kingfisher have I’d the the start and making decisions we’re in there. Padden increase expectations more to a his business in build a way we have Europe, bit here strong say through team that’s in are that And XXXX, our In and to comparisons for drive we’re strategic in really delivered The Brian looking challenging double-digit term continue XXXX. relationship. so

we one us. leader. whom is wonderful have We very strong such of leader to going who and well. there take a a him, to have U.S. as again, important the to strong here He terrific the speaks backfill job very depth, role we just brought very for leaders And in that’s did Europe, to a

are in nature, businesses So, I both for relatively we’re but think accordingly. of us small these and good opportunities managing

Mike Harrison

to terms seeing happening at or DIY Are Thanks. point-of-sale you’re normalizing? seeing were at you the to there the All And ask similar to big-box pretty to is levels in inventory what still data, right. we the working able retailers. revenue is demand that as wanted actually some look If then I restock also business decline? of destocking about retailers is consumer

John Morikis

working our I we and be relates year say as inventory. talk balance the Mike, to hard to to to to will are ability of I’d continue prefer serve that improve our will plans the it their hard to that working customers them.

appropriate mentioned So, us the to to we’re they their forward. But ours. tell it’s very don’t improve of a to That them decisions as with would relates But decide you gallons million working for bring I what that about investments to hard that’s incremental capacity. Al do, I will well. our made know it to they pull continue able be should we’ve on. position XX business as inventory help in going inventory focus important certainly to on of and that that, comment to more this

Mike Harrison

All very much. right. Thanks

John Morikis

You bet.

Operator

the Vincent Morgan Stanley. with line Next Andrews question of is coming from with Please questions. proceed your

Vincent Andrews

thanks. Hi,

in potential indicator the talked point, the of Is is that about trending equipment past you’ve a your stores or in as line sales with expectations – reflecting in in that? anything Just business backlog.

John Morikis

we confidence speak have. double-digit our think it speaks We the it that painters is Yes, – growth. to

excited about Yes. we’re it. So,

Vincent Andrews

any board, – with just customers painters? the coming actually any anything And that about availability, the across labor to the issues given you of season just with Okay. hearing or kind

John Morikis

I’d market every Yes, be labor discussion continues say nearly I’ve to a in. been in that

that in of point professional gain. I’ll governor. as believe as that bit segment is in mentioned labor his And a an issue, responses, every feel double-digit while out one we TAG a Jim had I As of though is a serving

move or run please that So, of our turmoil our to capability to we It of the in of through all to customer customer. they’re from but one all store this And any serve customer, short on again, issue. finding of write play with us a customers way these that rep way the has another, that ask grow that part – does that’s project helps these this serve to working to they to or but it on advantage. it adversity, other does If adversity, the there, the an to that challenges, have challenges. continue people for to is manager don’t allow locally our a them

So of try make money issue. with it. to can help and work way It’s that working is we many an them in a labor more through customers one our

Vincent Andrews

Thanks much. it. Appreciate very

John Morikis

You bet.

Operator

questions. Please Next question your line with with Greg is proceed of ISI. from Evercore the Melich

Greg Melich

sales question My trend. was the thanks. comp on Hi,

the at look I really all you – XX% reason XX% second quarter, from the Was is it around in the If raws? to think your to that the supply of for main deceleration? just was deceleration, that availability the

Al Mistysyn

Greg, TAG, on talking correct? You’re

Greg Melich

talking stack. two-year Yes, TAG, specifically, on the

Al Mistysyn

Yes, is we’ve it tougher had part of a I comp. think

if we headwinds a look that when our impacted at better talked If we headwind you the availability way a look And we of – had we Yes, quarter material then you our kind in in at raw way in look unfolded, you had second quarter. about the us. quarter. our at second X.X% XXXX second had XXXX, the

I So, kind term wonky, that, the you and two-year the up XXXX primarily volume. it’s out, half kind use the of two-year of for it XX%, And versus be some came – – to was way it’d stack look wonky. but XXXX bit prices little at a a hate but first half first

Greg Melich

Got it.

goes we maybe back trend looks the pricing the XXX So is all follow-on that basis look to and then of expecting maybe second, through, XXXX, guidance, to back to you’re as get it if at is your get but like reaccelerate that then a so the stocks two-year not points that better way couple fair?

Al Mistysyn

it even a looked bit better Yes, is if segment think I you and would pro the little that on at there be

John Morikis

to we share. Yes, gain expect

Greg Melich

it. Got great. Good luck, guys. Thanks. That’s

John Morikis

Thanks, Greg.

Operator

Zelman of question with Adam next & with your Please Baumgarten is proceed The questions. the Associates. from line

Adam Baumgarten

my Hey, question. thanks for taking

one quick me. one from Just

and at if through strongest, would be walk still can verticals in end what was the you business market kind of maybe what your look of struggling, was maybe that commercial TAG, Just some helpful? you

John Morikis

say, going Nothing Yes, lot schools, really of to that in expanding, I'd soft. say we're just areas. that lot Trying I'd is quite tilt-up, is Adam. others, warehousing hospitality of really of areas medical, a think tilt-up, soft, seeing in are in truly they're few lot – warehousing, some growing mind, really comes than more strength area, The well. expansion, of healthcare areas to are my all

Adam Baumgarten

Got Appreciate it. it. Thanks.

John Morikis

Yes.

Operator

from Please proceed Loop line with comes questions. question next your with the Garik Capital. of Our Shmois

Garik Shmois

thanks. Great,

Just one from me.

any homeowners seeing inviting variant, of you impact are the in pro or are of Just, contractors change early the how signs any painters? Delta in

John Morikis

No.

it’s repaint at res we’ve business and – really all. is Our hot not seen that

Garik Shmois

you. Thank

John Morikis

bet. You

Operator

of Cleveland Please question questions. next Bosshard Our your from with Research. is Eric with the proceed line

Eric Bosshard

you. Two Thank things.

consumer all, was First what what’s quarter, that that your in the second the or second improves drag relative somewhat persist the more that business in doesn’t growth second different half a of of in half? in half to XQ to notably in second the

Al Mistysyn

Yes, Eric.

little evenly I that impact us raw X.X% a dollar consolidated, material – I said when think evenly the availability a consumer bit more. on impacted a on does pretty

better see bit to little there. or less expect headwind we’d a little So, progress a

we quarter able we’ll raw in And materials, chasing in what I our get better higher their to cost think we pricing capacity be realized. be pricing fashion. supply and expect raw they’re will we half As bring second or on as a second material and more more our customers

Eric Bosshard

does the you. Seeing leadership surprising is though not there time? these period see like look past, a then can relative be realization. talked realizations secondly, to The that. raws, of on it’s and inflation Okay, thank price regards about question you unique in John, price historic realization increases years a amount in the realization great with to to period And stores of has different of in a to or it’s even upside path schedule it

John Morikis

been earlier do the and the mean, would we I our by our the rolled I’d that response of about as said very this say, might. I has customers it out. it well pricing received to approach Eric, times I XXX% exactly

right a also market now. pressure of is there lot in but the could, it So,

you what them tell do mean, with shareholders our tell So, project serve to to model. that our customers customers, we’re very that I I to to their certainty working we’re and to it, going teams our is in work be hard to That’s to trying with position XXX% successful to help be but effectiveness. that you could rewarded. turn, help our are hard facilitate number. could we’ll And see. price in we’re that put I able work at can’t a I

Eric Bosshard

Great. Thank you.

John Morikis

You bet.

Operator

comes line your question from next with Kevin Please with Research. of Hocevar Our Northcoast questions. proceed the

Kevin Hocevar

Good afternoon, everybody. Hey.

be the for price I Al, half. an wanted with I cost that revisit you half – – in On to the headwinds back the the in to first expectation had mentioned offsetting year full of neutral the you have think tailwinds

still – fourth and in of third phasing of the all Given the in is in, do to timing that and coming the the inflation also quarter? you’re to mentioned that you to guys – you’d of quarter then I of XQ basically those of I that the expect those And be I benefits the you to just front expecting the kind weaker on that the how kind or pricing Or back a wanted in? get kind reconcile drag margins in neutral guess to than gross believe year expect half. with half should phase be you comments expect

if headwind given the be front half the in should versus the versus that the would why So cost nice tailwind in back – headwind tailwind be price sorry, a nice half front the in in half? the

Al Mistysyn

in third increase in the fourth more you was look margin the in XX.X%, gross more getting top ground The pick businesses TAG second was grows second Kevin, if first and will much think, the price that quarter, I difficult announced, in on our Yes, quarter. then only to it you half, start the half it We’ll start gets not but across all on our getting in in of segments. comparison up it of top in the half. at adjusted XX.X% XXXX

you that mix. So, have also, headwind. have And you our customer

basis to DIY XXX-basis returns headwind. As so quarter, the at more – numbers but question about I our a last the normal, to look so year More normal in we that a more about year before, in answered, second that’ll talked businesses, and more on I last second starts architectural the points we that combined starting as was that returning be half that a impact saw. levels, when

traction you as gross in that’s second why think half So on as you would don’t much see margin. our

Kevin Hocevar

lost that or make percent could lost? that then Okay. to be in you or sales as those so future – the mentioned That that more we’re And quarter, up do periods you view you deferred are sense. the being do in X.X those – as X% made view

Al Mistysyn

they’re deferred. believe Yes,

across are strength demand there John about there. lot a the we’re and the segments. projects all think the I the seeing talked

I that’s deferred, in around, teams closely think moving and products necessarily. are lost working the not our very field with think but I So, the customers

Kevin Hocevar

Okay. Thank you.

Al Mistysyn

Kevin. Thanks,

Operator

the of reached our session. to end turn Morikis call the for over John We’ve you. remarks. Thank question-and-answer I will closing

John Morikis

and if you let important that day Thank least just for out everyone Yes. call really in tomorrow the today’s of out to to be the just you. Eric reminding pull And start ask rest by some for will mind. at have did first, me available points, and opportunity a I my Jim close couple of questions.

we’re had, we’re happened. that an we’ve pops that half First, not proud the of really what’s first that corks over isn’t This organization complacent. terrific but

on happen. We’re to focused has what more

better, continue to half. we’re first really So, the we’re get with but to determined pleased

So, to the I teams want thank for work they’re our wonderful that doing.

we’re a wherever that positioned this We strong market with the are with growth is demand, We position. exceeds in demand to in goal market’s demand our the capitalize outpace that believe market on do and terrific to it I platform, and mentioned utilization reps, positioned of very fleet our we digital we talked if determined. the earlier our presents our stores, that uniquely assets, our about, we’re it’s believe factories, our itself. about the do

an industry-wide conviction availability to and increases been with cycles, disasters who now raw knows have similar with seasoned whatever it that crisis, to and experiencing team or natural COVID, these from be, it the proud this them. we’re this experienced are raw have may might materials cost do have have that of here and been we leaders that it financial do and think material We we of team experienced issue what

our stronger as this for ability in and to positioned I share, through this come confident with mentioned better of us has All growth. future market earlier, greater relationships

this we’re challenging do our so, to our is year Lot And year, about excited This value we’re it. ability determination for leverage challenging and the but growth position excited. and of a company. to shareholder our in

that thank So, we better you your much. do Thank out determined for all very we’re here where know and in convinced you our company, that interest to can.

Operator

conference. concludes Thank today’s you. This

you your You at may lines disconnect time. Thank your for participation. this

The Sherwin-Williams Company (SHW) 27 Jul 212021 Q2 Earnings call transcript