Sherwin-Williams and PPG TumbleBy
Sluggish results at big-box retailers offset contractor sales
Sales lag at PPG; Sherwin cuts profit outlook on Valspar costs
Sherwin-Williams Co. and PPG Industries Inc. fell the most in nine months after the two largest coatings makers sold less house paint to consumers last quarter and painting contractors struggled to find workers.
“There is a common theme running through all of our core businesses in the second quarter: Not enough volume,” Sherwin Chief Executive Officer John Morikis said on a conference call after the company reported earnings.
Sherwin is facing weak demand from do-it-yourself customers, he said Thursday. The Cleveland-based company meanwhile is trying to raise prices to offset higher costs for raw materials such as titanium-dioxide pigment.
Company-owned stores are getting more business as homeowners increasingly hire contractors, said Bob Wells, a Sherwin vice president. But painting companies are facing “chronic labor supply shortages,” particularly in the Southwest, Southeast and West.
PPG reported “continued sluggishness” in sales to independent paint retailers and said “mixed demand” at U.S. chain stores offset higher sales at company-owned stores.
PPG slid 6.3 percent to $106.42 at 2:16 p.m. in New York, while Sherwin dropped 2.3 percent to $351.35. Each had tumbled more than 6 percent, the most intraday since October.
Sherwin last month completed its $9.3 billion purchase of Valspar Inc., leaping over PPG and Akzo Nobel NV to become the world’s biggest coatings maker. PPG, meanwhile, abandoned its bid to acquire Akzo after the Dutch company refused to negotiate.
Pittsburgh-based PPG posted second-quarter sales of $3.81 billion, missing the lowest analyst estimate tracked by Bloomberg. Adjusted earnings from continuing operations were $1.83 a share, beating the average estimate by 1 cent. Sales volume was unchanged from a year earlier as the company turned away some business to raise prices.
“Sales to the big-box retailers are weaker for both of them,” said Bloomberg Intelligence analyst Christopher Perrella. “People were looking for a turnaround in sales volumes at PPG, and it didn’t happen.”
Separately, PPG agreed to acquire Crown Group, a Warren, Michigan-based coatings-application services business, from High Road Capital Partners and Charter Oak Capital Partners. Terms weren’t disclosed for the deal, which is expected to be completed in the third quarter.
Sherwin’s second-quarter sales of $3.74 billion were in-line with estimates. Jefferies & Co. said adjusted earnings were 25 cents a share less than estimated. The company cut its full-year forecast because of expenses related to the Valspar acquisition.