SHW - Earnings call transcript Q2 2022 | The Sherwin-Williams Company

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Operator

Good morning. Thank you for joining The Sherwin-Williams Company's review of second quarter 2022 results and our outlook for the third quarter and full year of 2022. With us on today's call are John Morikis, Chairman 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 2 hours after this conference call concludes. include statements will U.S. defined call conference certain as forward-looking under This securities sales, to with and federal respect earnings laws other matters. speaks is company of new Any which forward-looking statement update statement only future a the any of forward-looking result as date or such revise statement no events made, undertakes the information, whether and obligation to as on or otherwise. this forward-looking statements company's transmitted earlier the is earnings in regarding morning. provided declaration full A release After the questions. the company's session will remarks, up open prepared we to to over call Jaye. the turn now will Jim I

James Jaye

you Thank morning everyone. and to good

quarter results what year. second half a came Our expectations in the and we challenging below conclude to be our knew would first

North On North stains. the we and faster sales, lifting which first DIY at in nonpaint namely Consumer industrial both demand North impacted of resins, channel, of our top strong saw COVID no and Coatings we described American June anticipated our particularly on resins, than Investor supply China the the line, real Performance meaningfully sales. end recovery tight markets, characterized by X; Group lockdowns, aerosols American by following alkyd architectural certain offset and and was which Brands impacted pro which in deteriorated partially Day the quarter in American in demand of Internationally, and softness Europe,

at otherwise. year North go and seeing, trends supply responding numbers of at prior earnings will the be interest expense. inefficiencies shortfall incurred and by are were a about meaningful our who through Comparisons cost and second in how outlook a demand, the line. DIY, multiple year, my stated our then costs, half. the high significant including and turn with impacted over just talk few revised expect will raw and per Asian sales material the we John, chain Starting the other top per period share improvement in Our to factors, slowing I'll earnings level including the growth we unless in higher the no customers, for it European serving share in we're what demand and to comments are American

margin XXXX Consumer basis, the slightly Pricing the Consolidated sales Group. guidance gross low the per million. was to profit the reflecting by by Consolidated in X.X% inflation. a low to sequential our expense share shortfall actions. $X.XX to decreased and cost before our increased gross income points, consolidated Second driven Brands XX basis double-digit $X.XX quarter XX.X% quarter pricing Diluted in was below SG&A decreased end per On ago. margin versus driven $XXX.X decreased of XX.X% by X.X%, a tax in range. share share net improved of per sales. year

second amortization a $X.XX share ago. quarter sales. quarter in Excluding share expense, $XXX.X the was $X.XX income EBITDA share a adjusted per was versus per diluted or Valspar acquisition-related net million year of XX.X%

margin increases. And Group sales, to FX particularly against lower and a by to material Performance sales. good Group selling supply Brands single-digit & price costs, from Segment tightness on the in a segment XX.X% sales alkyd Demand high increases increased decreased selling resins against regions, acquisitions, operating X.X%, resulting increased and of control. control. in volume, partially cost segments. to from price of chain volume single-digit and partially The soft segment price outside increased sales raw good primarily resulting professional North and comparison. Sales higher in our of low Adjusted the lower Sales by volume architectural offset by was raw inefficiencies, and volume Group impacted increases Consumer decreased all North in Sales offset Moving Marine and higher pricing from a due inclusive in higher price offset single-digit Coatings a margin selling increase. driven was sales to and partially by primarily Protective XX.X% in higher sales America material price High XX%, Americas DIY. X.X% comparison increases primarily lower and sales low XX nonpaint single-digit basis costs margin XX.X% to cost Adjusted were offset impact. of XX.X% partially increased points double-digit XX.X% by America.

partially was investment expenses, out and million expense, a driven and compensation Additionally, quarter, this gains, $X.XX losses lower disposition assets year-over-year by headwind last higher SG&A share. on $XX.X admin primarily year the a expense. segment gain of higher I'll per or had by where offset about we interest point This of

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

John Morikis

and morning, Jim, everyone. you, Thank good

be the me are clear results not Let satisfied with that quarter. our we in

cost is and job influence deliver expectations in a but to continue environment a the challenges business, year. ongoing our that, with of of short expect strong as just the this continue Saying impacting Our We fell not positive to report inflationary operate in results to of coupled we to we to demand. trends see results. half regional much we highly quarter second

confidence we incredible have we our in and confidence strategy, in our have model, confidence in have people. our We business

the Investor second to quarter strong architectural the sales and have contractors following month July, Let lower was are for in no no lockdown. in well COVID Performance bodes improvement in strong Pro alkyd out DIY portions remains date by played half. impacted nonpaint our Coatings. Encouragingly, There resin our costs. China further, meaningful event. The Consumer demand X for reporting backlogs, demand very me Day that of Europe continued, softened material post start describing strong. which tight particularly categories. America been raw we how impacted Brands North and June the This there has of significantly and supply described recovery lifting negatively and was

anticipated. this have feedstocks the solvents to down than inputs key is longer issue as trend resins, key and some sequentially, taking timing While come other are reflect

labor, remained rest the costs. cost the transportation, including of and Additionally, highly other elevated, basket fuel

in improve, chain for to to crucial products short our supply. and continue supply it certain to resins While subject remains industrial tight materials were raw Notably, of shots. specialty coatings several the

chain, we tightness in higher our continue have serving chosen at albeit the but the to With inefficiencies continue have operations in costs. our to customers, supply

and is sense the are While regional there is of amongst pressures experienced. cost no team, panic which our real, are we seeing and deep

X great pricing We we're administrative being taking are our X. growth. spending continue Group our These businesses. and urgency than to in increase XX% Americas capturing general on We focused share. demand gaining price focused in The remain operate on rather tightly with are and across the determination, our taken expenses managing and actions. September all also and announced other Significant highly actions We're groups. effective We've and implementing following are a

on Before segments. me growth our quarter. moving Americas architectural on Group, some sales additional positive second provide let strong to color In The pro and market volumes was our outlook, in were

and year. low America commercial We've business recovery in increased sales led by perspective, as mid-single-digit Residential segment & growth single were driven Limited Marine, up which From in sales sequentially. was half group was begun mid-single-digit Protective a interior down Residential, percentage. first net than part was was the comparisons North of X.X% paint faster products sales margin new down the a total still XX the and volume of digits, we slightly. resins which DIY the in also up and gains being stores. grew as for opened and us We single New sales DIY & Marine, exterior The a stores repaint very high by interior the availability up to Against Excluding plan paint by difficult price percentage. see over both was up were of certain for XX Protective expected, digits. by was to margin with and sales the larger the by expanded XXX as impacted property percentage. mix. double-digit management year of

with sales in reps and growth investments quarter, in e-commerce products, the services. added We territories along new innovative trainees, and productivity-enhancing management also ongoing

demand segment, were down China in the quarter On and note, a was percentage Pros chain Pricing again the North margin significantly Group Consumer of single-digit costs improved that by digits decreased packaging, nice tight Europe we quarter. well against pricing so our supply actions. mid-teens, a lower lockdowns. from slowing environment pricing. sales. in positive a certain were high by more comparisons. raw high in double Investor in Low double-digit volume, difficult of macroeconomic challenging in quarter. impacted slowing our increased comparison. single-digit digits Asia, comparison. including double-digit very were resins, XXX resins, group every The related backward double-digit range. which up Segment over due did due were lockdowns were the double due COVID a at Sales high down Nearly a in cited not up inefficiencies. In particularly American up supply headwinds. a Our coil basis positive to sequentially, single double our North were a high the Adjusted indicative in basis to Paint significantly expectations in sales year-over-year small, up grew by against and Latin America Coatings segment the month, but the division while were in given very than offset led by and of Who mid-teens nonpaint by percentage and low Sales strong Performance digits comparisons. a executed had Sales margin material challenging sales XX we Europe Sales below contrast, Day FX digits. and sales improve America largely alkyd remainder the difficult acquisitions points favorable America was North percentage. grew, also single-digit Group Regionally, COVID-related our Brands and both Sales a very experienced increased to strong to comparison. had and points strong

single slowdown strong and clearly comparisons. refinish Sales in general lockdowns single sales wood Asia low are against in in to Industrial related and Europe. industrial share high digits and businesses. very increased these digits, We mainly a COVID decreased double-digit gaining auto

outlook, the to $XXX.XX. $XXX purchase distributed of our capital of average million at and form million in $XXX speak buybacks. moving quarter returned price Before let million shareholders in We our shares We to me an $XXX.X quarter. share invested allocation X.X dividends We in to dividend. the to approximately in the million

core Our business CapEx We for $XX also $XX in and projects. million million including Building capital in Future million our invested $XXX expenditures, through

Perthun Additionally, X.Xx X. net Dur-A-Flex we as of the acquisition Gross our debt-to-EBITDA closed fund to borrowings recent short-term quarter with the & increased We a July on and ratio of ended acquisitions.

We ratio our end year long-term to range drive to target Xx around in XXXX. and the of X.Xx to X the will expect

the to offset to done buybacks be XXXX We cash half second manage of option will will in use share and dilution. debt,

outlook. our to Turning

of year X first As we've halves communicated year, this back January multiple the with times going expected difficult contrasting in to a easing half. of would back comparisons XXXX we half be

including second up deliver earnings expect We of and low to rates a continue with see our interest through our mid-teens of to at demand the per we Residential double customers strong all take end by Within that reporting extremely XX% sales Americas up of share The guidance. higher midpoint diluted digits Group, and will half the longer. pro-architectural New them strong likely the percentage across to backlogs despite year with markets, strong

We win a as contractor opportunity unique transition also pro see their competitors business business new models. to

difficult when alkyd we industry America, inflationary growth expect American Performance our exceptions perspective, Brands From demand it's the need the chain consumer as Coatings At faces continue choppy. and and Within near region. In Exiting in take these Group, prove own remained we our demand term COVID demand we Consumer the operations, year. as getting not additional challenges some as and pace European trajectory. Europe the Group, North Within raw meaningful In resins, remain are necessary prospects customers expect beneficial our that and need half expect will we've has steps the China the this for which overcome ensure Asia, lockdowns the recovery not largest with inefficiencies challenging. customers DIY modest the second we in to an with more of strongest of optimal. we our slowed product to quarter, materials same North decided serving remain the in time, they prior pressures supply we're such and in lockdowns and our where to it it. China shareholders. from with improvement era assess required to make second to do

margins be out inflation cost X. clear, we did we're while our the a to On the to raising material pushed investments a to expected our we've value side limited. expect visibility the not or the To to deliver do and make, equation, market, quarter expand. and quarter quarter and is expect appears expect or continued is on cost guidance and moderate. There's hold high we based pricing not to raw in of material teens precise, be in the the volatility short-term our as we to We on costs raw customer-facing do the considerable materialize second to beyond do moderation mid-teens timing X

on track. remain actions pricing Our

Additionally, the year. is elements with increases X segments cost second seen combating affecting XX our the and in all the years our these in costs. highest rate of of labor, we've in other fuel of basket, inflation price increases We're including transportation, additional selling other half

double-digit low will increase. quarter by we for a specifically increase mid-teens low of the third So inclusive net consolidated our a sales to percentage XXXX, price of anticipate

a high percentage. The We by teen's to Americas up expect be Group

a Consumer by single expect a Performance percentage. to be we And single-digit double-digit expect to low by to We high percentage. up up be Coatings low Brands

we maintaining the we're For the based our seeing industrial. consolidated momentum sales American full year and XXXX, are North guidance pro net architectural on in

We net percentage. to increase consolidated low high single-digit continue to expect by double-digit sales a to

be Group mid-teens up low Americas The expect double-digit to a to We by percentage.

to down double Consumer be Performance low mid-teens and a Brands Group single-digit a percentage expect to by to up percentage. low Group by Coatings digits We be

for increase be these pricing per earnings we in described fully year based includes actions earnings adjusted Valspar earned headwinds share XXXX The share. on an basis, $X.XX XXXX immediately. guidance X.X% year Full share over cost approximately I We last we our $X.XX expense per midpoint, will the year. of half diluted to administrative per reductions amortization general an at incremental adjusted per an guidance of and range in are share share second delivered to time expect acquisition-related the to of XXXX share full the XX% diluted per On expect headwinds earlier year net implies to share full income the of the described income per and we a compared the midpoint, $X.XX We $X.XX the offset in for over per $X.XX at $X.XX earnings not decreasing $X.XX XXXX. of net of now primarily This increase XXXX. same per previously. share $X.XX,

and our interest CapEx, our slide including full addition, year several points In for amortization. on we our provided data updated expectations guidance of deck, FX, in expense, depreciation

the We year low-XX% rate tax our full remain range. in expect will

While our confident to in we an continue uncertain environment, macroeconomic operate we remain in strategy.

the We the the more expect shareholder over to deliver a strong second and half year, term through following of importantly, long value actions. create

reps. strong We new investing stores North demand and future will in sales in continue with America while leveraging incremental paint pro architectural stores growth volume

Group Consumer to We initiative in services on that and of value to company appropriate Coatings margins will the to continue customers gross focus XX%. across implementing input Paint a Pros the Performance with and target offset Brands continue We'll Group. invest costs our Who range persistently back the pricing our regaining in in long-term in to higher actions XX% products

investing recently top and operating accelerate as and expand long-term continue will Gross add we've the Sika, Specialty margins our line our through acquisitions Dur-A-Flex Perthun Polymers, that & growth plan, demonstrated We acquisitions. strategic in

continue appropriately general managing future administrative while will and investing We growth initiatives. costs our in

value. to We above-market our adding review businesses, will growth and ensure long-term brands to portfolio and programs customer they shareholder are continue of

capital allocation disciplined our maintain will We philosophy.

dividend, our We targeting cash strategy, absent while appropriately paying buying in acquisitions will our M&A, investing and CapEx, not hold stock. accelerate the that back

experienced. team leadership Our is

That we remarks. take to this Our questions prepared expect on your be task We'll time. are focused our hand. at win. XX,XXX the And employees concludes at to happy

Operator

Instructions]. [Operator

question coming Panjabi. today from Ghansham first is Your for

Ghansham Panjabi

subsegments a mean, over obviously, changed has few John, it various past I just guess, first has with lot in the over first Baird. W. to Can given relates TAG? months the North within and concerns off, update if America. the it view, in your rates here increase changed, interest us construction markets I you Robert end as

John Morikis

say TAG as I'd Ghansham, strong it Well, been. always remains has confidence as our in

them what's segments, within If at you just I could those look briefly run maybe happening here. through

and New look there stronger. position you If strong Residential, is getting our at

of transparent the sharing homebuilders. been with matter we've had XX top national of relationships a fact, that XX these exclusive we've very As in

wording we're hanging XX XX XX. the top is in fact, of but the the grown been the because top on and financial The we've if specific relationship of and our with we've exclusive top grown that actually some to In relationships. top community gotten inquiries able of in to that XX, we've to slide Proud of remaining the the maintain the XX, those actually majority few we've a for now presentation the fact them. team selling of X

this us the year. in the confident balance strong is of are in and customers supply simple demand. they just telling So Demand on space are the based

strong creativity is is And pretty application. they I so they touchup, us national it's demand work to where continued that as with products. is that their is are think with demand These high. here mix in size and ensure a products repaint, we the Supply level an to our of If whole here displaying market of the shift there demand. the area below customers productivity, homebuilders, look the value. visible with and just regional those we building positive our itself appearance, into help high. space, is and the that higher-quality job is higher-quality that growing industry a Part residential at keep But of of ease is in

demand, really residential, residential we repaint we growing. the challenges that last point if the you catalyst do these that here, where balance of in go XXXX now. here that business was really period might the our have that interesting faced back we for and the -- be to significant Our is And with confident I it out to think through again, year customers are position very our

different So Because think have much it than is right and company a a stronger more much in the we for Residential, slowdown New last favorable if business uniquely there position slowdown. position we I a now repaint now. is did our during residential

and in stronger we strong So strategically be of that the think an offset forward. that a puts we've takes focus in now have going will And repaint area any the had it's res position to position market. we that

-- benefit. But would have. the there's the that spoken we've area, if other not New relationships again, are with expect homes. And talked be still you're the demand well, that area here the strong following past, exclusive about there. we the would The about top people happens to of exclusive of other have top we demand concern what would Residential XX. that buying we new relationships if Again, XX be, XX property with we maintenance we've In now the have We relationships. XX think

In with XX% with we fact, top solid have the agreements of exclusive in them XXX, relationships XX%.

distribution, run that well. might We a would that, at place is a opportunity, some still top in historic almost right strong. a which it our even and would while the XX% and Marine of of include here business. seeing of area Ghansham, was plants you as -- an of other investment has is alkyd property we're in a ahead part the and So one product also if exclusive good has of tilta, the There's lot for data well area resin short in as TAG off many as now. again, lot amount wastewater, here. very We particularly business mentioned, area. as Also could with is commercial, growth multifamily our more in in have This In that and that's felt gotten I Protective for resins. pipeline our is position runway a data -- value in as the pressure us. business tremendous in turns, annuity The business, bit a us. We lot demand were teams remarks is alkyd the that space offers very But in taking water describe pleased room supply. through This impacted considerable the here backlog. good acts the commercial business petrochem, XXX, more In sold here been and that CapEx, charts I centers is high in infrastructure, activity ways. terrific we strong, as We're have describe robust an management it, as of talked prepared of area as our an & negatively. really believe our We about another could we centers. where a know, battery we a of of

Allen Mistysyn

pricing Ghansham, XX% what we're second remarks, our we on gives Plus this announced, is in is X, this strong TAG. the a actions with adjusted Mistysyn. that increase building opening of the up us across to in the half confidence in And Al EPS strong confidence guidance as demand, mentioned with groups. his effective be price John rest volume taking September XX% along the in

Our going of fourth we're confidence. trending starting I'd year-over-year, quarter couple a that is and our just to points margin third that to our through improvement expectation highlight reiterate -- in another quarter. to like other see nice gross And

If in going second TAG taking strong volume and get half. think our our operating was at the yes, pricing you in in margin help a year-over-year, second but into it to quarter, we're the strong actions XX% us are the improvement that down at I look

making XX%, progress. lowest on our overall business lot to you good it XXX that Coatings to -- I XXX low I of margin target we to XX has that basis will quarter. better the needle know, better confidence points margin got points think by our fourth attaining As basis historically operating results, And is, Group and quarter our high sequentially because, operating the by and and about of have as second been And basis versus a Performance our was we're talk date. move in teens

which SG&A to Asia that that fourth we'll increased margins half even can particular, on our synergies we XX% us to acquisitions basis down, facing quarter than we're second quarter. are to expect basis than talked better Group, operating profit. gross to have pricing And second we with improved away this to Even experiencing as portfolio we our and about that improved those including is part which And made talk the margin ANZ came And XXXX. coil, talk and and the in second we points Still Brands we we year, you absolutely expectation within you quarter. and and second and able that to packaging be volumes sequentially if this the and about this quarter XXX businesses fourth and down that our margin half, going we that walked tailwind second as margin though that's understand under to to a the the flow, we as we're we expansion, points sequentially -- our that in call, XXX we're improved and market are our our hitting consumer to we Our macro great you be operating Ace that in our basis as expand and label operating agree, give profitable returns modest set. the And but that our we our And haven't committed the John in and actions, business. business points includes, confidence know, efficiencies, path continuous shareholder half as XX value changes. about, at, don't of targets, making pressure that But business we on expansion and realize in to are on integrate XXX in second our and targets divestiture continue initiatives generate believe with year-over-year And our in XXX RONA next compared year-end the more And I'll -- Europe know, flow. on those basis and focus operating finally, gains that's we gallon accretion the review gives going as the we'll Consumer And improvement operating from. share improve margins leverage. the that of acquisitions. that recall, and we driving growth, cash then challenges points we look do. expect those cash we're us committed drive margin in private

Operator

question Parkinson. is from next Christopher Your coming

Christopher Parkinson

the so demand in We're do Gentlemen, commercial, and I Mizuho. where just Al is. some optimism your there's in on let's business? multifamily, I stab 'XX terms Are some think should going the we I updated over know mean, thoughts into we little a we likely is and side, imagine. how just pent-up of on material stuff place in mean raw CB there? know to the margins there. going everything, can your they're been focus Price-cost, and by the even of a it, 'XX? of the take should step TAG in think year at go how a quarters. take ultimately resi about XX on think half on TAG Obviously, to get -- of look lot there's back we a go? TAG. the like when we pricing the But all where take taking the into bit back from of about John, couple side at I XX and even falling PC. a the and there any you basket How it's think next where repaint to going

John Morikis

a bit 'XX that be not to this a about talking Yes. about. is diversion you going just highlight And let little probably going be we're yet. from me talked of Chris, to what

here. So us with bear

Christopher Parkinson

enough. Fair

John Morikis

is the ability I people. And And think in way into focused to through I'll make confidence customers. the -- important to can your in the customers think margins Al But This that I want service, our highlighted It's now specifically that now. ask think I right to successful I projecting. that's do through through get see preface market we're when our adversity have it's to think servicing more details. we're that feed on we mention, that I it's best understand products, our as to those do you the our But at actually right is why on. and a is the is question, is maybe improve we the as

this the through expectations, weeks TAG It end projecting come than we couple what we're were missed less because while of lower sales was As on the a the the second -- by hit and is quarter that of we that now. number. experiencing we probably fact

on, went grow, continued June continued to increase. the momentum sales to As

don't in gain this but of we segment. double-digit you tell level nearly color, coming of out with I fact, In every normally would June that show a

into right averaging enter is and we TAG now as high Now in teens, up finish average day low July, our XXs.

our that momentum in they're as do here our create to starting make on believe our And the customers calls, helping have us products labor. on is that got that who money. people, distance them mentioned by we And you on research anyone is projects we're what of value projected be wide They've more competition got professional a do I it to And there, the helps we of side. of between our helping most our margin, lot are in the because in than great we else. that to challenges and is in They've challenges doing. stores, the them part better that fact the the more we numerous a and evaluate what we help and successful it's So stopping. a

Let our on projections me through walk let margins. you Al

Allen Mistysyn

nice sequential our Chris, improvement mean I in we margins. Yes. saw a

above expectations but actually did to the in raw talked costs were the the our that about, pricing what input to material we supply customers, not our Our other raw range, our increases the And as had. date with to not in the being -- chain we of we material plus up was is that have over raw end outlook just cost we the cost costs ideal. -- the put serve on place -- high

moving in increase were go around make you a out XX XX% customers similar right is to you this we're driving we to place So platform, September 'XX you X, product And what's if that's which we this previous do believe price them. X the with and will as will, and products recall in increases. have months. the right really know, our effectiveness where increases 'XX, and have back price to And 'XX, additional sure price we need

base under pressure. it's gross in a in margins points hold margins basis believe grew environment, And as even quite XXX year levels, can that, were price, make that XXXX because we're full Our much than -- investments in almost those because half to believe raw of from I though was don't you back a experiencing to we we these TAG we're And our or similar on we to And XX.X, coming second but go better continue if 'XX at moderated, get we and XXXX, out XXXX. we're we're were on materials starting XX.X. to 'XX. we headwinds.

turns to the So that lot a see that and start operating to TAG on as margins market raws we'll and going price we'll to nice we the snapback of a gross have forward. and confidence moderate, hang margins our in

John Morikis

people. always The with vice that managers let the believe or years, off just believe going managers finding ourselves is presidents I given store key average of it's and years with our our probably XX war averaging here, that, differentiation we'll XX our average XX that top stronger, environment message years, to think, experience, particularly strong on And me the sales that that averaging as in. XX we district behind years. we're that reps our We're driver

back point a experience this now that's to a we that and that fact our the between what of secret call training leading that and training we're to our got just way and weapon, we fact feel lot with. training our our a talent differentiation engaging now there's as able And engagement. is to we And we've competitors. we're as our we think, outstanding customer -- that ever. have an allows experience is the virtual the the into We are element people, us strong probably clear So And us as people. with our opposed get ability to right in-person attract

recruiting set been to X,XXX high-caliber, is anywhere graduates. the Al what It's college laid the people have We to X,XXX do program, open from year. talented training helps family We're as us our which our that XXth joining financials. apart. us exactly entering far employee And out this about management as its

Christopher Parkinson

DIY -- that quick past comment the going quick a pertain Just price follow-up small, of will though as you Could be think then pace get of helpful. the understanding thinking XX%, Al's of real would as the comment to the increase. once the corollary and a very long-term in to my in the how getting crowd, again a on seems you'll be kind realizing was -- 'XX small you're the just should And progression a contractors, realization It as And a fair do -- TAG, on we of you of price realization and increase. price net it the ultimately one? typically, increases is expeditious or what about real short-term all we us contractors the thought kind give assumption and initial So of just on past? realization of pace just of a it's actual that. part XX%-plus of back recently

John Morikis

that reasons what's expect say think creation want don't the I go we for happening. everything -- pump believe and Yes. our bring probably to we services Chris, gas all be understanding. customers. and value more we the continue, a see I I'd I'd for to that that labor that I But momentum to people where market the they say are and mean it's the

that healthy on -- to it. so execution our because want customers organization remain can so our help determined And are healthy. We're that prices nothing our keep we these arrogant not with we're we we

important is balance the so there. And

programs and helps to help business TAG to services, XX% efficient easy and We the is invest will might it's part our more to everything of labor recite their our labor, that And innovation, of their in continue to help roughly goods that do can business. that customers make point on products that cost we and of every profitability.

see the and then our and what cost a that's through drive we'll higher-priced, be quality business. our are move deciding to When part percentage we these believe actually But be their on, to gauge driving success. So we to And in going their they in high-quality our is success. a we're the of our programs success. a And are execute we carries success. that logic on themselves how focused because of able helps that product p there. to they We're up gallon lower of every element customers' we're their know customers that of prices better That's accordingly. successful,

Operator

from Your for Melich. today next question coming Greg is

Gregory Melich

opposed ISI. a you as you margin volume XXX points as It us, bp terms thought. sounds last are on, that Al, XXX as you of that Evercore not like with of how much of just And the raws declines have TAG, some on think, now top would My remind I versus that margin of saw? I'm price of year there in much inflection. or was the question to raws follow your at decline was

Allen Mistysyn

be would It majority raws, coming costs would there's the input the through, that are the Yes. of majority. Greg. be But but other that

of -- As know, price when last the and effectiveness moderation half, quarter. takes if to -- -- a volume we takes cost with margin increase it's it in recovery, believe always going our our that we positive as it's a start our increases, on be volume material be of and raw driver It's bit expected third seeing strong your always to And hit. you biggest going raws But of we're operating in second and even the moderation driver start offset is seeing selling increasing little backwards, increases you margin. to is the price that to always it's the margin. when operating

Gregory Melich

your the quarter up mid-teens, volume flat maybe and the of third to assuming probably you quarter has price question guide, if so be you look that is presumably guidance? that going that's third low also And if then mid-teens at sales to backup low are are to year-on-year in

Allen Mistysyn

price we at have second third the when our single think high the September probably increase, -- I quarter, I digits. On look

annualize last You year. have the to increase August price

start the annualizing surcharge. You

volume I up So you're I'm your digit, and heavy that high be in you saying. as have got tell what you've would -- not that up price range. as on as would in then high single volume single-digit

John Morikis

high little mid-single-digit up back in the single Greg, We're gain there. you color the company for gallons, low I on could TAG the architectural half, expecting for the to digits. with give company a

Gregory Melich

volume? On it. Got

John Morikis

Right.

Gregory Melich

Got it. And price. Great. the rest then is

Operator

Vincent Your at next Stanley. Andrews Morgan is question for coming today from

Vincent Andrews

indicative think Maybe partners is, what talk worse? on just the line following the that you of retail volume quarter. in about piece. up -- what you're Obviously, in where of it to their are Can the your takeaway you're think Consumer a up total just or with to it your but be destocking is doing you was we've what you bit the whether seen really And like in of you asking sort gallons or gallons, do Brands retail is gallons to more expecting I own seems of consumer sound architecture expecting mentioned be on? than inventories And going would be guess -- obviously that sort just up I'm then. TAG terms

in actually So back half year? gallons the gives the of the confidence that consumer the can be what you up

John Morikis

we Minwax this. impact to been not some us. put resins. inventory. going talking think additional by for the only made opportunities have quarter, inventory, that going We're relates to ability of that customers the of our We levels, speed have and the behind fill. about in there our crossing Krylon, mentioned customers' to to that, in say it's I and this, Yes. filling we it cautious still the in customers' think But as from always the progress too stains, to it's impacted as careful here customers' in Vincent, great full come I that areas everything relates that much are That's them, and and it their specifically shelves appropriate fill I key will we are our second business. line of inventory oil channel alkyd our

Allen Mistysyn

really single digits. low our you mid-single in trends probably mid-single-digit America Yes. consumer Vincent, it it's Europe lockdowns said talked remains John North expect just by quarter. rolling our but out, tells quarter what be And Europe not That second as softness choppiness And would the a we going going to percentage, high a and second driven destocking, the be Asia, up digits. gallons backwards see we TAG didn't be is by our China to second actually about with continued to softer see say clarify going to architectural see did to we in we and in up are that seen half and would is be I DIY. continue. to then continued and significant

Operator

David question is coming from Your Begleiter Bank. at next Deutsche

David Begleiter

just X, were you I'm changed it these embedded at that Was back don't John, numbers? slide. what earlier? expecting versus the what Or to looking see on Slide I headwind X. going a in FX since June is

Allen Mistysyn

little be to of going is a It profit are America. sales and But of in bit Yes. our David, a percent headwind. XX% North bigger

impacted. a as do be than it second bigger to So slightly we half. our headwind expect we're not But

David Begleiter

demand on North versus or Got just John, soften American your better expectation? -- did it just it. Did get expectation DIY. And June versus that not

John Morikis

sorry. repeat that? you I'm Can

David Begleiter

that American at Looking how did maybe X out Is should demand get versus that? expectation. not we earlier called Or June you softer think worse or about -- the DIY, it improve? North versus just

John Morikis

X I of And But his a disappointed just we time everyone went briefly worse, about of hold, get pretty were here. bit or than be CBG Performance we the the Xth lower the low it's end. cost improvement high and pricing And to And we with sales this the X again, that I talked would we I then In performed it's Demand taking year-over-year, per I in here expanded And the strong. XXs I mentioned is lot this that our this and we topic. expected. space, pleased it'd little expecting maybe teens the And everything a hit of softer. saw. And TAG, a reflects our quarter. very jump going that with challenge. of in guidance, areas did think mentioned. were couple DIY very about it do that to of We other we're say make I'd holiday alkyd expecting range responding and July as Marine. up to we Protective area. we on that -- start that season. Al -- completely pricing CBG put but day. think cover actions And softness is sure Jim I for to the regarding Yes. demand. sure remains prepared in very improvement only in talk talked I some into if seconds mentioned, I'm ability resin & I worthy perspective. it trends more at additional moment, together. mainly helpful businesses came want remains there's right that way a remains could the openly. X areas our questions actions remarks, Coatings. with within A of Consumer were about as we albeit averaging area which remains now, Brands. opened were accordingly. in an spend environment with Again, think margins here I the And the mid-teens, I'm taking we're good as just supply to if a as nice That quickly that I'll feeling strong, the our to Sales

softer. heart briefly did DIY to your Here went on Analyst in deterioration the But about And we're deteriorate again, trending our price demand the CBG on in that was quarter TAG. It Al prepared on. mentioned, Day, putting was as disappointing. that areas talked business The getting as on our further focused X of question I through the mainly remarks.

our improvement was the pricing they no going on as we're drive mentioned improvement We we're China. market. deterioration -- virtually This availability, there. just responding business, ability other performance this and do are XX% as people it. no and we it, stronger an other cost going second the And we well a we leadership, The the TAG executing right the aerosols serve the saw was were to as and to resin were as X, piece see to improvement the mentioned COVID of on to no Al business in lifted. is our to largest is to the our be like that And as in going strategy ability as significant to We're again, had they CBG virtually as quarter of important has stains I in those We'd guidance. by it. in earnings about actions underserved but in businesses. and which believe, impact to of after alkyd asked up faster areas our at to deliver. year, our lockdowns business, are You a parts than the Every the There midpoint the in lifted. the now, issues forward. half overplay lockdowns there The the not further European expected. progressed supply that was

this right. And lightly, a doing. what's Consumer of we're going Jorgenrud, COO, determination take it. but group don't carrying Petz, quarter what are heavy in we And mostly load confidence our running of doing there Coatings lot was got in outstanding we but Heidi Todd who's out one condition, deliver are day is them Brands, Justin Our our and while he's than a to right delivering. we've expected, driving softer it believe Binns, lot every what we're in -- we it it. got presidents a of that Karl Rea a each Group; and he's Performance our We've now,

Operator

with Your from today Capital Arun is RBC Viswanathan question coming next for Markets.

Arun Viswanathan

guess into bit. I wanted American housing to dynamics drill I down North a little

are in the builders okay, aren't the reports the the permits as cancellations report start potential and Even seen also. have sales from housing numbers we as many though builders great. So to of slowdown well, actual

TAG playing on could but you are, side? strength it seems residential still noted XX% the out repaint, of kind next even and the I over to DIY So existing gallons you guess correlated home little my see are you questions maybe R&R specific architectural and elaborate how while just of like in sales. kind

do So kind does through given of forward TAG what manage And of if for we you as just do housing that? expect through move slowdown positive really gains? the Or see share is we how it there, growth a big backdrop? kind

John Morikis

share the and some a mentioned, are confidence in lowered, that metrics I'll have still lowered that have been numbers, run it their have out few prior the of a homebuilders We've numbers highlight the but will at their gains. that but this of take got it, I great the me there, team. then an Jim majority focuses that absolutely Let housing on get over through increase you there's even the year. on

robust there. to growth if that we're upon there's initially, I that it's down, as rate, exactly that demand. not my the expected to demonstrate And highlighted got still So that with wasn't offset it customers be chest the that the as good know we've fact our exclusivity we're fact reason slowing we have it but may doing to is expanding more business

in in push -- is we're now management. hard very and property is we've to strong. Residential, strong so And right that New these the residential ourselves a to the pay work got that. It's behind what's is position But momentum we're Commercial repaint customers great view is in and very with there, establishing that doing continuing off. going our

you bit that. on of background give me Let little a

just let's TAG So in talk our business.

strong as team TAG our executed been. now Our is ever as outreach by effort it's right

call face-to-face calls last We've at high Our in quarter. was activity than quarter an last sales more never a all-time did we made year.

We've that So in now. than active it we surprise an never of our high. accounts more had stores active also in do hit our be no all-time stores accounts should the number right

activity account Second seeds for quarter, planting are new strong. is the we're future. that These very the

is customers, people So we're best. at focused how when and the are on this clearly, our our productivity and our of

us services, way is capitalizing to tilts, And that areas might the we unique. the the reps, market managers this variables going store I've respond whatever that in we're to in gain that have innovation softness. we're the market we that going and by in And believe on each the some there, model team that that controlled have. best specialty the distribution segments very do we offering we experience whole are do share market. we'll store this of with the those And to that solution benefiting. bringing, Whichever through allows be to the lead those reliable to the in we're So we the believe choppiness consistent, think, very products, format, the mentioned, the we're

Let it Residential his New to over to on through me you that the question walk turn had. Jim thoughts

James Jaye

is our with while and John bit, said national several and And of slowing still what first Jim. is and the we is be I'd foremost, And And pace recently, a this our I in may agree little we visited what of customers. takes of if are end there's there and out a Arun, through I of completions single-family homebuilders. just were it's but Yes. little think up into front always and be, there. that traveling do, now Al ready to And confidence them with you lot multifamily on trending stronger now, The year. look a whether wherever it the year capitalize well multifamily, or right next may the bit year-over-year. that. we're maybe there

still now, other talked a this formation. talk houses they're built there. And between in little we've still what by years You being of it's about there, strong mortgage seeing low shortfall about impact very And maybe rates, of and we're for periods. bit underpinned I comparison couple think but household a overall demand to again,

So I feels good. that think

price as really you side, Home us appreciation repaint be strong continues the mentioned, are strong. to On customers telling backlogs.

while NAHB right remodeling the third-party in remind opportunity. biggest index, I'll are the the repaint, You at look LIRA, our those pointing metrics, res it's it's our that you all segment, largest of some And direction.

good that. feel about as property well. management We comments and commercial made about So

the there, after and going out ready I think is primed demand and our teams we're it. and are

Arun Viswanathan

appreciate just all Great. could And the I on DIY. I if quickly guys. detail, then

goes like DIY? kind looks unemployment when are past, been around? there be take for that about? turn bottoming turnaround we've continue. what guys to in expecting with Is here, it and the are would In should Or else weak you maybe guess, thinking for improvement that some have a it to DIY what of seen it either and a guys we I higher. expecting So What we you

John Morikis

we your question see -- we that... how DIY what see is DIY driving. I or think Is would do if

Arun Viswanathan

from Yes. recently? given that I here, here How does the guess, weakness seen DIY just turn we've around

John Morikis

contractor. business say that focus is fair a think, foremost, those first to on that I with specialty -- think DIY prefer our professional it's I We're XX% Well, a the focused stores the focused very are on and store isolated format. customer, our contractor to painting our of

social our focus there the media, good a business advertising Our through of through is that that a through for primarily pull our we It's levers is us, to drive outreach various few methods but on professional stores. business. side

Arun Viswanathan

piece. No. asking Brands more about the I I guess was Consumer understand. I DIY

John. Sorry,

John Morikis

through talking think to you I thought stores. our Brands, the focus Oh, our I'm there, Consumer DIY about obviously, I win. our sorry. were is the helping Through on customers

stores. deal our There's Here, the you the share participate look at to store, in the that mentioned, we activities, shoppers buyers. there great innovation the and to The example, do into convert drive we're as product right training we that that ensuring with training that. including, customers brand sure a customers. right We the helping the activity an want of making in I that of we as have the we product, remodeling Pro so will right want rep right we now a our all we Who of at initiative. to bringing our help through traffic We that centers have center assortment, the own excellence not of And that that is in customer between continue We customers have, price. we as are is to company balance this really believe it initiatives Paints as inside the home some that by have and on advertising, through help the there. that, effort support kind been are there that's in Pro doing those customers Paints. And through the through that focused We're customers' customer also Who definition, our our contractor DIY well who's project. at completion We loyalty Who in initiating. want have And or painting to construction a well. as want efforts to that Paints, invest to supporting going of our that a that programs element of those various Pro that world

want drive drive the come back in that with our help to the home So and well. paint there's do center store can that department a to category ultimately execute lot to to every we customers as

Allen Mistysyn

that just that. -- over months. in have prices in last add have some we gas I'd be see to Arun, would moderation been if hard food very very helpful the It prices, some few moderation consumer hit the

those you projects. I some seeing discretionary to to So moderation these start to have get in back think costs help some of

Operator

Your next question is coming from Mike Leithead at Barclays.

Michael Leithead

Just outlook why me. in trying business. pro North you're pro or painters pretty DIY your guess, weak think of Consumer some just guess with divergence between now? at right level demand there's you and big least the square I'm consumer I do calling I a in to strong out American divergence one Brands for this

John Morikis

Al on So it I touched think now. just

their influenced projects to have I think might do think be spiked do prices the in choose inflation who some gallon of the to consumers by than of can other now, to a as homes gas some paint projects. areas of and and those more might price many I want consumers of painters that up, right afford

those a freshen it's but prices, that that home and have the you will on more in." now in and come at up invest -- impact on home environment I so impactful a saying, they a over from know painter home, something inexpensive I time, are to impact those And that environment have my my customer. very what is relatively an in moderate "Hey, to want where as positive are working they're think do-it-yourself And

Operator

Jeff Zekauskas Your from at coming is next question JPMorgan.

Jeffrey Zekauskas

softer where you is share. a you say You by $X.XX demand slide have hurting a

So $X.XX is a operating in share about $XXX profits. million

China don't know, $X And So or does that in sales? you American could $XXX expected break between million reflect, Europe? lower and it lower North DIY, sales billion than up I you in

Allen Mistysyn

is Jeff, Al. Yes. this

between it say Europe, this than the is our the rest is versus about the billion. I You're closer expectations, million $XXX look -- and $X other is comparing, half the at split pretty evenly what on about I'd which And way the the is -- then two.

Jeffrey Zekauskas

million Al, was is $XXX raw spread In the about Okay. Great. materials? million? half, first other negative first prices in material half price in versus words, your $XXX the raw And by unrecovered

Allen Mistysyn

higher And should the we our talk is almost input big to that to than quite of but talked of why to the in moderate million and that costs And definitely not price we It's being not a the we're It's about expectations, heavier you taking. first this -- down costs, the down, not half those a going taking that actions we that we're the versus quarter that delta. It's to be year-over-year about. or additional quarter. can so drive about, half second least $XXX expectations but to quite dime. with -- our line. help improvement. or some flattish And flatten increases in like a the also we the improvement kind influence sequential that And out those versus on costs again can tail then the the then in the I of -- margin gross it's and other talked so start X at seeing start input that lower again, those halves of in fourth third that then a -- yes, our price-cost seeing

Operator

Sison coming is from Wells Your question at Fargo. next Mike

Michael Sison

I are in price quick how sort the a paint much a and project can inflation Just the you of -- a know forward? that is terms the think paint increase. a cost renovation? pro demand -- of it of guess, But demand getting we affordable becomes labor is the impact paint question go fairly sort Or point impact if on think to you do starts about and now, as in the could project, we project I to September still of given the where paint of can smallest portion. the is

John Morikis

have shift that it a back cost. products' come moving clearly We they up opportunity affordable very contractor see mix the is, even that as customers' recognizing and it's helps we quality. to productivity, If our in to to project. or in they costs, products higher-quality whatever efficiency, definite impactful use A labor are clearly touch rework or the and up in the higher-quality see the shift. more a product. beneficial And actually in It's latter. And increases

it's counterintuitive as -- people to question, It's year. to line list, -- are a good what's the standing happening. balance counter I it's the mentioned, but throughout it's bid in the So of Mike,

quality. full very moving in and are they're year, contractors up referencing a Our

Operator

Partners. McCarthy Your next coming from Research question today Kevin for is Vertical at

Kevin McCarthy

better, labor your it labor a your basis? this or speak stable or is on ability up trends? your if customers' about execute think much sales John, impact trend on can to is point? an we the How at be to costs running cost year-over-year And And internally any you worse might sequentially? labor having

John Morikis

at to piece, past. contractors of our our In and made and don't could that impact. hire distribution you But talk I'll culture mentioned adjustments they and specific and I that earlier, I rates we've labor, a even as stores Well, the for more we many think we're now additional to would they I'll retention that have they than yes, the would achieve tell ask if you about our in labor take certainly that market swipe centers they paying are first ensure Al on frequently in the the that some the have. purely plants, were because, in you hire

our in a and pay can employees also culture, to competitive a have about in wonderful but you want wage respect bit We maybe And Al, a that. the market. know little we talk

Allen Mistysyn

Yes.

-- high supply And our I would say global basis. consolidated higher So our that's Kevin, single have costs on we digits do so we in a chain. labor expect

They've retention distribution in and as and centers to lot -- relates I able to the to you challenge Drivers attract it their work been factory really a As environment, global a would in improve to desire imagine, plants a team They've well-thought-out of it's distribution for give have have and the less in credit a their a to been plan chain. supply able drivers. rates been can attraction there's environment. although automotive. future get,

within TAG organization. have had We not issues our

years, there. Just added is last pipeline management strong. trainees and X.X We've X,XXX a the that over comment

shore we're we very So up markets people costly. shoring I turnover, know, to retain to up think because as you need is the

do So not but sometimes it's doesn't at -- think a there's leveling out -- market have leveling to this be or there and we'll to I more, seem point. where That it's out. here mean we

John Morikis

our appropriate It great does say out. we'll seem people. to the steps keep be I'd to ensure that take also we But leveling

Kevin McCarthy

in level, ago, an then sensing has have your that what are major outage of And allocation in more what resins manufacturer that you the if may, I alkyd true? and I'm resin acute I I'm wanted about secondly, about so, products if of particular. And affected there shortage a helpful. to but sort Is ask that about can your had there recently. was and materials impact maybe that commentary, on may you That's year raw cognizant alkyd sales. become a Okay. talk

John Morikis

the Well, in in It to market. you're fire disappeared about as of that date and does impacted XXX Columbus entire right. OPC from the the resins back XXXX, pounds million industry

we don't been The pressure next an all there might has something Louis that will been in the be more could this market, that that need. also of plant morning piece impact. that -- Kevin, at as fire in a here clearly is in And important here, negative an additional have that my same the one there have just understanding another was space also St.

we What out heard towards working the But before to what combination value is of lot going issue going external to into think transparently, woods. work degree, that end the its ways. we'll Brands And much monthly just come is about well. So again, on That's be than supply to work today. enter This proven the we've we would we the I've real-time recently a year hard team improvement, we we're the And in small inventory experienced. not. The in we it's in raw were business, is openly rates Since as or it's think The our a planning didn't stuff. our here acquired arrangements that is to say we've believe to be supplied in the better gain it the to likely the is one be are agreements that. we'll We've and boardroom to of rate been -- but again, and we to faced. believe going going speaking here, into SPI assets. anything. of end a safe trying as ago, to our of Consumer be largest solution we through here, towards and but a efforts, not resins our year, customers through make a utilization utilize progress also we them. that of say I internal that of the it's to the has many say to But We assets there I'd continue and I growing we next But material year talked of we're of it's that a of maybe built quarters be be inventory. than that couple were inventory. architectural increments. or And by going situation by quarter an ground, issues issue better plans,

the we And normally any impactful that and There's so shortages be. than like in times There's WIP. was to said absorb it no shocks shocks very the tight said, stand said, largest to also we going to any hand That extent, no or behind. everything in inventory far And we are would any to be or this, more anything. they mouth. system

if feel suppliers never or the shift past, X, some in literally, that. of we where has So in something goes for one our a would that cases, down

-- to some we cases, other one freight in one a tanker those dispatching, to serve our own customers. might the Al offset the we're in or mentioned, trucks and from of country we're -- Now as our producing deliberate batch produce plant part to

out to with we the to interest it mean best line. mentioned in very our We're this to drive that of money conscious all of them, what our we're of our remarks, I I here. hearts bottom trying As whom with my we're of believe But out of completely as spending decisions. are I not just these mentioned, prepared coming understand the be challenges shareholders. doing in will many it serve is customers, ultimately era that

we to to of the and a real, better, see time these And we're -- as our why we're out But our this doing. serve said, with we'd responding line example, pressure so shortages with there's or to an X, I our And customers going customers it we're we'll what exclusive while we're and as will. customers. And reason going backside. and are some on and in relationships, like these them, increasing real are to a challenges quarter to and bottom drive come feel faster the our because

Operator

Your is from Research. at Truman coming Patterson next Wolfe question

Truman Patterson

just levels in frame, in inventory your production still a March, lay all you it levels? highest get door? the we the as as I'm the And quickly out levels. supply at TAG Should kind the that highest can land time John, was still you that of mentioned April is you and chains now can assume of architectural manufacturing hoping volume you history. for Are July First, give

Allen Mistysyn

on the related inventory absolutely Yes. Truman, quarters, capacity. second TAG And that are know, both million say as see we production in was architectural, would and quarter. I to utilizing inventory first our historically, are gallons middle CBG, we -- quarters. X as built our where in we inventory of our we and XX you And John fourth quarter, quarter highest reduction volume build mentioned, in actually we our architectural in our

sales, be also able point, that first and be next also raws quarter we're for we quarter And of we're we're from confident the issues, to half the architectural and TAG second meet So that to meet in may inventory build not availability selling keeping this confident spring tells with year we be high the strong the season. and level feel getting demand can the pace to John's ready need to our demand. you, our fourth very next single-digit ideal, although and year's year we'll summer

Truman Patterson

and a to goes your definitely look would just you downturn. remodel But we bit? of stores? net don't time Or it, data. couple XX if are And of kind into trying the XXX up look anywhere, you understand call I next we'll at New to Okay. period, that the store to at call and try according thinking to Residential, as I'm dynamics. you And different little back I know, market it's back years. all you decelerated. all to if our see we'll builder orders, maybe Would how see see trying of then, an did Just well. economic about open But that repair kind XXXX-XXXX if look, you guys clearly openings if all slow continue

John Morikis

good it's a Truman, Yes. observation.

what's lowered around XX stores. of this, I market particularly think, that And we count I if our have time I would that recall, now new store in the in with we confidence right happening changes. at the some model, say to that

Some of our choosing their terrific competitors creates us. model change to for opportunities

Maybe. a And so Might opportunity the disciplined not to on X you mean room, stores, she's while we and in leverage should we're down with the Al, going mean conversations bit? runs Justin guy along those take expect our are to us, I I Heidi, our Right-hand fullest. us here, a to that approach. adjust the to regular that a of continue COO, that have basis. little

done I movie something not done. that to think of seen we've I'd without is have in we've this like takeaway that Investing you discipline. is it for We've before. face adversity the the

value TAG XX, term. a getting might that, little if We And drips do it long we bit will invest. actually Justin that new given, we've contributing get that teams, drive that stores. continue can all so we and continue to focus We're faster below stores but we faster. and down division opening see profitability The invest better continually his rate the is at to -- in to at the those

down of answer those is, it drift guess I bit, some be the quick by in yes, So might but we a much. little won't

Allen Mistysyn

weighted XXXX, Truman, and heavily through low Yes. compounded I last expense think add the And average not that double 'XX, new res XXXX was were new double which growth coming rate res out would but smaller is XXXX that digits was to base. only on you more our low to the repaint about of digits. a if of -- That we at also XX-year thing was over to commercial. res,

So year our 'XX because into of maybe of new aggressive than the and in at even fastest of mix segment, and our segments. forward next we being invest a back just stores this were view new year those more that and if going 'XX repaint slightly res you in today, #X is different our growing, -- we maybe mix does look offer how

John Morikis

It's a point. great

at business business resi better now much is stronger, repaint was than part It's great is that our of much Our a it Al. point, time.

Operator

is for at from Your Josh Spector next coming today UBS. question

Joshua Spector

down Europe. Consumer on on follow-up a a quarter, U.S. the China Just I But sales at Brands. Obviously, XX%. more. if I comment were a factor there. is the the bit ex look you in in if your down could Volume's performance mean curious maybe

or of to more, I the would difference? much more? be that think some similar XX% volumes volumes peers' the Were down down maybe And if were mid-teens-ish. your it's what down in Europe

John Morikis

impacted. And pressure, in same certainly we we there. we're by that read similarly energy were the the with inflation the were the news, they all impacted war. you everything believe say as I'd issues costs, from Despite partner right to

TiOX there's not the that But continue immune to. in very share. has some been Our we're to program to clearly received, pressure we'll grow market there and fight well

Operator

at Your Zelman. next coming Adam Baumgarten question for today is from

Adam Baumgarten

of sense have a Just or you something in related much demand how home? their just addition refresh, curious, in kind versus repaint, painting a such remodel just do a larger projects a to renovation res a rooms for kitchen few is of as like an someone

John Morikis

be to a exterior TAG going big interior I largest percentage the exterior would say those that repaint. -- to ticket. it's remodel, jumping participate -- projects, on small business, larger It's Certainly, pulling more an off in either repaint. -- percentages but major for kind much likely, is a in or up res our the relatively are it's home tied or painters a paint interior we of knocking of the

Adam Baumgarten

then given slowdown demand... in And DIY it. Got the Okay. just

John Morikis

we in of consumer The focus maybe percentage. some in are like to If see be side. areas where just program be through as our the would our painters remodel other would We on our to think and that is gals largest painting that you Pros on of stores customers of we Adam, Paint painting on talked focused would percent that more through on our the the XX-plus coming I Who stores. about the may, that -- focused guys are kitchen that

Adam Baumgarten

just you promotional helpful. DIY, That's do just to up see forward? it. on And activity pick Got given then going expect the slowdown,

John Morikis

No.

of and awareness. the I area think there's more branding of kind in

the cost get more be everyone it's with will levels. I issues pretty cost supply disciplined inflationary total But is the of that there promotional industry keeps a honest. of some facing, of and percentage everyone normalized pretty back into because goods levels think

So not that's is going floor out, it's likely to would I to the going -- something fall suspect.

Operator

for coming next Credit Suisse. John Your today from Roberts is question at

John Roberts

TAG year-over-year in quarter. Gallons the down were in

do per effect sales record down? on? Is there So and going gallon that record job Or other is the with customers that's how the you square average some calls? of number number mix of

John Morikis

to results, the I'd there's part those, say call don't strong the in Al, can ability that what the us head. it I'd of that the really if John, more you about that we people focus and we have fact top get X,XXX on my we -- we reps, model that had activity is first But those distribution this what activity. a POS the would glad I think on say results is that Justin that over want effort be gives controlled store talk accounts lot Well, do. up that do and manager and comparisons -- last be it's of more into that of with great. year. have John, year have a seen I'm gives our half data, us to as event, going challenge. the going at only see now that was because part to have the But they confidence from why the we But -- have I standpoint, brought our well. a of comp But we call knew easily have you we is logged fact not analyst mentioned the we this the as then actual

and we're accounts taking points of the calls is can And really the so of in number the that going team. proud active and "Hey, place not do we the have fact this of of this." say, go wonderful to really people execution impact level we're number the the what really I'm results only to of seeing But

Allen Mistysyn

up highlight, Same-store new commercial Yes. XX%. the in was maintenance, year XX.X%. were was were up all would second last double quarter, sales just up tax res repaint sales John, high XX%. property And Res up digits. I

press actually our in were we on releases, So commented comp. volumes what single digits. pro really And our up architectural low tough

points activity year-over-year and us So I happening volume. that goes on help think to that's that the the calls and drive

John Roberts

And Is the might a then, And but be It have that in weather, or bigger didn't was mix I Interior John, I think, a essentially. would quarter? was anything. of seasonally hot, just the I we you think TAG June bigger in quarter. that was part mentioned unusual in rains think exterior that June quarter. uneventful unusual

John Morikis

is Yes. It right you're gallons. up. but gallons. larger John, the during by But does that of you're a in up that does during percentage the -- exterior the exterior is recognizing total is interior year, of right for pretty season, this of a ramp load far ramp significant interior much time

Operator

Garik Your coming Loop at next is question from Shmois Capital.

Garik Shmois

I'm sorry if this is done, but just on DIY.

initial just DIY the demand. Or just it come did clear, there in not your quarter? be a did in weakening wondering to expectations? Just if slow material sequentially was in Just the late it

John Morikis

would trying I bounced kind had it working of that. that to say around. We been drive Garik, on

We expected a gallons than actually positive little saw. more we

bouncing around it without gain we that was had so the And projected.

Garik Shmois

Got portfolio the review you it. Follow-up just question cited. on

of regularly? Just macro look be challenges are popping to some that just at may be course given the portfolio Or business either is you this of your up? clear, normal plans perhaps some you accelerating

Allen Mistysyn

targets, term. And each No. programs, targets, businesses, of because and regions, has what improvement targets flow cash ongoing Garik, of set part share the processes. growth longer an thing changed. sales our customer even and normal or market programs ROS operating We our it's and midterm significant targets environment for is RONA this

even at today. in the X.X differences the from just XXXX beginning look You years, the to last of

how plans of how businesses macroeconomic to then our environment. and what's macroeconomic trends and at still their So meet investments and happened impacting look forward impacting trying those to the that's targets that's path different regardless in and action

have businesses. the share opportunities tremendous growth Asia in market across and of Europe each We for

example. that use So one as

attaining an if Okay, are believe clear Ace label commitment longer program those value a what's hit term. line to the our programs an proposition private we're example. these better gives we That an the can I And somebody highlighted we for Australia those was example, as goals. sight to was don't Maybe those midterm of example, presenting and customers? us goals, that else.

Operator

Research. Cerankosky question next is coming Your at from Northcoast Chuck

Charles Cerankosky

John and in architectural. you on inventories with talk when all do professional mainly and I'm DIY markets? and material getting that different things limited these the other ROS you architectural randomly be some of well, Al, the and back to deal about seem between chain how interruptions supply allocating raw track, the thinking inventory shortages the the And transportation

John Morikis

we're find are materials we what the Chuck, that the products for. oftentimes, have raw we making Well,

business our we of would we most our an in have -- than some in Consumer Brands our resin example, of as a products. So primarily TAG Group different system

we've to rail. So But XXX able diminished. of raw rail, we those would ordered number point, X go maybe highlight and architectural really gotten where and has materials mentioned what's -- The Al back it are converting I'll concern, If TiOX most and think tried available, point of transportation those possible the is as -- becoming I the we're -- to that as what XXX. that on previously impacted to availability of issue earlier is made tanker wagons I on to raws by on a now I the available. area quickly And an To the front. brought we your as think we we to point be mainly -- that areas be then we've bioresin. to

able be -- that's we gaps. We the any given be that ordered able tank fleet positioned industry our to think to have. do uniquely think bridge I we're to in we to wagons that XXX

worst-case And we as to need get it it to our quickly try can there, as work so it make our get tankers what we possible. convert as them we what through plant possible suppliers make Chuck, get and it We ship we the own quickly quickly scenarios. to whatever as as possible send as in have. from to and We with

Allen Mistysyn

and quarter, would within add TAG. versus segment only into certainly within the our material the DIY the TAG quarter Pro be as in experiencing that we fourth emphasized first Chuck, raw were shortages we clearly severe our to

when consumers. can specific decisions And certainly we're to in business. it So had in we a do kind be similar made of

raw a calls, those make the did, of you a group, utilization So best we get segment you're to precious within those or and had. when can materials we

Operator

Your Byrne America. next at question is coming Bank of from Steve

Stephen Byrne

necessary those this do you services that from to who of -- grow to you necessary? John, some initiative do call large Pros pros without yours the feel Paint, to that in the to it's functions in consumer TAG the such business volume that of site, offer provide orders place Lowe's to the having considering Are those or you're job shipments you store? as consider ability with not the

John Morikis

No. to Steve, win this we're in it.

Lowe's and the that be with working more help that will fulfillment targeted we're so services on successful. customer And

it's Lowe's the And say, of so align consumer the needs I brands initiative our the entire with is to customers. customers their

those and pricing things, types we that. So of control don't

innovation to in offering, a But them the customers ensure attract to working the Our that. can everything customers the with have would that itself. control that we're complete they brands power from

their and reps that have. working loyalty to they initiatives with have drive their are that teams We programs other

want segments, are So likely of help attract that we wonderful we're yes, to for our win those through us. broader to it's if and products I customers we'll in win, available are a steps both great They home the stores. mean, that. selection we're And do partners a to centers. things Those can we that penetrating trying of help have own do to that take not

Stephen Byrne

end quarter? the challenging a just is question maybe trends Or those the as any And that concern year-over-year it from -- underlying as markets. improvement markets improvement those you're end a quarter. was more in are or third in the table? in pro the do on those for pushback on your Is expecting, volumes in the comp underlying And expectations those drill an increase the that in isn't one that any Is about from into -- so have for the third challenge improvement second about that's in the you price second? TAG

Allen Mistysyn

increases. believe price Yes. -- as also it's going and to Steve, And sequential no, be do growth, growth. effectiveness in similar improvement both expect the about a price in expecting year-over-year case. increase And improvement significant our not we it's gallon be to gallon we that's talked I a a previous

John Morikis

agree. I

increase need you on price that XX-minute have a earn effectiveness on price we day. of have discussion judge the every don't the increase. You to a we -- It's

do to And feel to right that, metrics the there, help And we so have our back to And well that reps make to there's well get It's go we make complacency activities no delivering think point store which the day in environment every that the experiencing, we and, hard if better have. here, are we're that every day, efforts. is support in think that for is want we our more the day sure to seeing though and need. that are the I people working answer Every it. do are fact single our no are out earlier, deserve as and products made we as which we then increase we that obviously. the we as don't But we the money? really you bodes the we're I the taking will that activity We though. we're -- we

Operator

Research. Your Cleveland next from question for today at is Bosshard Eric coming

Eric Bosshard

in -- of clarification. point if the this I'm being that earlier pricing a paid right. about sure Can the quarter I just in heard Al, thought not up expectations to pricing not you realization about relative call, talk you Is just talked I expectations. your you quarter? the how to on like again,

Allen Mistysyn

Yes.

I glad just asked -- what question you as say that Eric, So I'm clarity.

be the where not wanted to we wanted expected our If it actions them -- was not to where we themselves differential we expectations. pricing be to were be. was Our quite quite price-cost on

were were bit costs higher. little raws higher, a Our

customers. things cost those Our serve and cost types higher transportation, were freight, to of our the then of labor,

we'd As quarter our second than network the and of at we into getting came actually around distribution thought that we our see inventories the quarter, saw. the movement gallon end built of coming first less we into

there's higher So to that. related costs

dynamic, So second that's what in our quarter actually thought it price-cost better would I drove was. than that be

Eric Bosshard

you And in than pricing for And the was coming this on was in trend. the not experience think commented then the better effectiveness, the historic same I quarter that, that least, earlier at if is expectation the increase. within pricing That the quarter?

Allen Mistysyn

get we on pricing quarter all we to was just on top did expectation and the the not those better got actually And in have. -- of second costs, our right. top That's

Operator

from Your at next coming is question Zener Ken KeyBanc.

Kenneth Zener

believe think X, on $X.XX earlier I North parts that reduction. equal said for you Is comment I America was then you correct? you a share Europe, was and said demand, made XX% and softer the the Slide China. it

Allen Mistysyn

accurate, That's -- directionally yes. it's

Kenneth Zener

Yes, Okay. is this of with outsized it I and just your lower-multiple And pricing, piece have obviously roughly seems on not what non is $X.XX because different about say, it line tied a is to much. something revision, I consumer, of kind as DIY? the that half guidance. that to costs which seems it the consider TAG, not large with not there Is the in Europe exactly. to U.S. of core businesses, would though X% earnings leverage that seemed revision on Because impact really operating hit the on higher is China input the raise but in

Allen Mistysyn

Yes. The Coatings well. within as on includes but only certain impact Asia our an Europe Group and not consumer businesses our has Performance comment

It's a the combination of it's Asia. not just So and Europe consumer X. in

Operator

at is Your from Berenberg. Tamagno next coming Adrien question

Adrien Tamagno

$XXX HX. So like seems M&A repurchased little in you to it more leave million HX, leverage and Xx your for in of shares space target end-of-year looks very

So with not current better your you growing business? and view complexity adding the are to are you taking that the organically environment, off

Allen Mistysyn

cover leverage think we aren't our and debt-to-EBITDA mean what -- John pay about But The I our in we in half you interest talked acquisitions that. But talked amortization second buybacks. as ticked down share to with using be and down. with year, offset cash we've because lot not cash our option cash just we we're to And available doing debt because know, different committed will debt second excess that that pay going for experienced more inventory opening is highlight the his the due a will to we slightly to a the to is half what -- would be about what in us goes operating past. what I in than net increase able step-up, we're acquisitions. only to net debt, going ratio up, the have half Adrien, comments, X.X:X, Yes. have dilution to

maybe and and first flow of in As inventory to our you'll flips our you it -- know, half. half to more our aggressively see so we of first in because that in second a so first the we generate inventory build half year. our almost year much from in little this the cash And even had built much half second half, really XX% in second

half So prior you will see a years. stronger than even flow flip a much in in seen cash second in maybe you've

Adrien Tamagno

a the one, million. And cash CapEx around just seen right. flow by you $XXX All still. second I've reduced

So how the harming to without are these savings you future work? able find

Allen Mistysyn

capacity are expansion. part moving CapEx capacity absolutely is just projects. rate packaging of can with Yes. in keep the We've so due primarily and we That's that, to expansions up we're R&D forward another the forward And growth core that our because -- packaging with mid-teen our seen the volumes. compounded right, that we've we average headquarters you're new maintained architectural moving with we're

investment. final global and continued a going around labor labor be the labor as the automation investment challenges and chain. that's activities talked we've continued one, to And in rates within the So about our then market, the our is supply

Operator

to Jaye in There like the would Jim to remarks. further questions over are turn I back floor no closing queue. for

James Jaye

Holly, expect led for by manage of we deliver growth you, that think with We're Thank a about invest in TAG. determined, hope pressures And continuing to listening I to architectural delivering across. confident came ongoing in going call. responding to and all really everybody, a seeing to pricing continue little challenging, very in our we're cost to and costs We're value. business to tightly. the additional strong initiatives, our across very And of our we're segments. Pro the strong We're our that's thanks, we're I quarter, bit year. but Obviously, second and second half demand

a thank we'll So us, day. and great for Have you for calls. your available follow-up be joining

Operator

ladies you, today's This conclude and conference gentlemen. Thank call. does

Thank a disconnect this day. for time, lines at wonderful have phone participation. may You and your you your

The Sherwin-Williams Company (SHW) 27 Jul 222022 Q2 Earnings call transcript