Sherwin-Williams Company (the) · NYSE:SHW
Sherwin-Williams Company (the) — The Sherwin-Williams Company — Investor Day (May 2015)
41 slides from Sherwin-Williams Company (the)'s investor day presentation, May 28, 2015
Slide 1: Industry Overview
Industry Overview Chris Connor Chairman & Chief Executive Officer
Slide 2: 2014 Coatings Industry
2014 Coatings Industry Global Mix by Category (Based on $) OEM Product Special Purpose Finishes 20% 40% Total Coatings Architectural 2014 40% ~8.7 Billion Gallons (+4.8%) ~126.6 Billion Dollars (+5.5%) Financial Community Presentation – May 28, 2015 Source: KNG – February 2014
Slide 3: Coatings Demand by Region
Coatings Demand by Region Share of Global Revenue by Category EMEA North America 28% 21% 28% 24% 27% 19% 29% Asia-Pacific 22% 41% 34% South America 6% 48% 41% 9% 4% 4% ROW ~ 4% All Coatings OEM Product Finishes Architectural Coatings Special Purpose Coatings Financial Community Presentation – May 28
Slide 4: Coatings Industry: Top Global Manufacturers - 2014
Coatings Industry Top Global Manufacturers - 2014 PPG • Top 10 Suppliers Account For ~57% Global Share All Others • More Than 7,500 (>7,500 firms) Companies Make Up The Balance Financial Community Presentation – May 28, 2015 Source: Company Estimates
Slide 5: U.S. Coatings Industry
U.S. Coatings Industry Sales ($) Mix by Category OEM Product Finishes 34% Total Coatings Architectural Special Purpose 2014 45% 21% ~1.38 Billion Gallons (+4%) ~25.9 Billion Dollars (+4.5%) Financial Community Presentation – May 28, 2015 Source: KNG, February 2014, Company Estimates
Slide 6: Architectural Coatings Gallons (Millions)
U.S. Coatings Industry Architectural Coatings Gallons (Millions) 850 800 Millions of Gallons 750 ~ 740 – 760 Million 700 ~ 701 Million 650 600 550 500 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Estimate of Normalized, Sustainable Industry Volume Financial Co
Slide 7: Architectural Coatings Gallons (Millions)
U.S. Coatings Industry Architectural Coatings Gallons (Millions) 850 800 Millions of Gallons 750 ~ 740 – 760 Million ~ 720 Million 700 650 +2.8% 600 550 500 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Estimate of Normalized, Sustainable Industry Volume Financ
Slide 8: Favorable Customer Mix
Favorable Customer Mix DIY Contractor Shift Will Continue 41% 59% 59% 41% Contractor DIY Financial Community Presentation – May 28, 2015 Source: USDOC, Company Estimates
Slide 9: U.S. Architectural Paint Market: Current Breakdown by Segment
U.S. Architectural Paint Market Breakdown by Segment (Current) Residential Repaint (Pro) 26% Non-Residential (188M Gal) Repaint New Non- 16% Residential (115M Gal) 6% (43M Gal) DIY New Residential 41% 11% (295M Gal) (79M Gal) 720 Million Gallons Financial Community Presentation – May 28, 2015 Source
Slide 10: U.S. Architectural Paint Market: Normal Breakdown by Segment
U.S. Architectural Paint Market Breakdown by Segment (Normal) Residential Non-Residential Repaint (Pro) Repaint New Build 26% 17% +16M (200M Gal) (125M Gal) Repaint (Pro) New Non- +22M Residential 6% (48M Gal) DIY 39% (297M Gal) Repaint (DIY) New Residential +2M 12% (90M Gal) 760 Million Gallons Fin
Slide 11: U.S. Architectural Paint Market: Peak Breakdown by Segment
U.S. Architectural Paint Market Breakdown by Segment (Peak) Residential Non-Residential Repaint (Pro) Repaint New Build 25% 17% (205M Gal) (135M Gal) +46M Repaint (Pro) New Non- +37M Residential 6% (50M Gal) DIY 37% (302M Gal) Repaint (DIY) New Residential 15% +7M (118M Gal) 810 Million Gallons Fina
Slide 12: Demand Outlook
Demand Outlook FY 2014 vs 1Q 2015 • Architectural Paint (Domestic) • OEM Product Finishes • Automotive Finishes • Protective & Marine Positive Neutral Negative Financial Community Presentation – May 28, 2015
Slide 13: Architectural Paint: Domestic Economic Backdrop
U.S. Architectural Paint Domestic Economic Backdrop FY-2014 1Q 2015 GDP Growth Consumer Confidence Household Formation Home Ownership Rate Financial Community Presentation – May 28, 2015
Slide 14: Residential Market - Existing
U.S. Architectural Paint Residential Market - Existing FY-2014 1Q-2015 Pending Home Sales Existing Home Sales Existing Home Inventory Financial Community Presentation – May 28, 2015
Slide 15: Residential Market - New
U.S. Architectural Paint Residential Market - New FY-2014 1Q-2015 New Home Sales New Home Inventory Permits Starts Financial Community Presentation – May 28, 2015
Slide 16: Non-Residential Market
U.S. Architectural Paint Non-Residential Market FY-2014 1Q-2015 Occupancy Contracts (Sq. Ft.) Contracts (Value) Starts Financial Community Presentation – May 28, 2015
Slide 17: Latin America Architectural Paint: Residential Indicators
Latin America Architectural Paint Residential Indicators FY-2014 1Q-2015 Brazil Mexico Colombia Argentina Financial Community Presentation – May 28, 2015
Slide 18: Industrial Coatings: OEM Product Finishes
Industrial Coatings OEM Product Finishes FY-2014 1Q-2015 U.S./Canada Latin America Europe Asia/Pacific Financial Community Presentation – May 28, 2015
Slide 19: Industrial Coatings: Automotive Finishes
Industrial Coatings Automotive Finishes (CR/VR) FY-2014 1Q-2015 U.S./Canada Latin America Europe N/A N/A Asia/Pacific Financial Community Presentation – May 28, 2015
Slide 20: Industrial Coatings: Protective & Marine
Industrial Coatings Protective & Marine FY-2014 1Q-2015 U.S./Canada Latin America Europe Asia/Pacific Financial Community Presentation – May 28, 2015
Slide 21: Industry Overview Appendix
& A SHERWIN-WILLIAMS. industry Overview Appendix
Slide 22: Household Formation Rebounding
U.S. Coatings Industry Household Formation Rebounding 1Q-15: (000) +1.48M 4Q-14: 1700 +1.6M 1200 700 200 -300 2011 2012 2013 2014 2015 • Supports Strong Rental Demand in the Short Term • Drives Single Family Home Sales in the Longer Term Financial Community Presentation – May 28, 2015 Source: U.S. C
Slide 23: Home Ownership Rate
U.S. Home Ownership Rate Possible Overcorrection? Percent of Households Lowest Rate in Over 20 Years Recession Home Ownership Rate Seasonally Adjusted Home Ownership Rate Financial Community Presentation – May 28, 2015 Source: U.S. Census Bureau
Slide 24: Pending Home Sales vs. Existing Home Sales
U.S. Architectural Paint Pending Home Sales vs. Existing Home Sales (SAAR) 120 50% 40% 100 30% 20% % Change vs. Previous Year Pending Home Sales Index 80 10% 60 0% -10% 40 -20% -30% 20 -40% 0 -50% Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Jul-13 Jul-09 Jul-1
Slide 25: Existing Home Sales (SAAR)
Sales in Thousands of Units 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 0 . Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 EH Sales Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Financial Community Pr
Slide 26: Existing Home Inventory
Inventory in Thousands of Units 2,000 3,000 4,000 5,000 6,000 7,000 8,000 1,000 0 . Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Existing Home Inventory Dec-05 Mar-06 Jun-06 Financial
Slide 27: New Home Sales
Sales in Thousands of Units 1,000 1,200 1,400 1,600 0 200 400 600 800 . Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 New Home Sales Sep-03 Dec-03 Mar-04 Jun-04 NH Sales Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 NH Sales Financial Community
Slide 28: New Home Inventory (SAAR)
Inventory in Thousands 100 200 300 400 500 600 700 0 . Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Financial Community Presentation – May 28, 2015 Jun-06 Sep-06 NH Inven
Slide 29: Residential Starts - 1 Unit
000 Units 1,000 1,200 1,400 1,600 1,800 2,000 0 200 400 600 800 . Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Residential Starts – 1 Unit Mar-07 Financial Community Presentatio
Slide 30: Residential Starts - Structures with 5+ Units
000 Units 50 0 150 200 250 300 350 400 450 500 100 . Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Financial Community Presentation – May 28, 2015 Jun-07 Sep-07 U.S. Archi
Slide 31: LIRA Index
U.S. Architectural Paint LIRA Index $200.0 20.0% $190.0 15.0% $180.0 8.3% 8.3% 10.0% 7.7% 7.7% $170.0 6.6% 7.0% 6.3% 6.3% 5.5% 5.6% 5.0% 4.2% 4.2% 2.3% 3.4% 5.0% $160.0 2.1% 1.6% Billions of $ 0.5% 0.3% -0.4% $150.0 -1.3% -1.5% 0.0% $143.4 $142.4 -4.4% $140.1 $137.9 $140.0 $137.0 -5.0% $133.1 $134.0
Slide 32: Non-Residential Construction Contracts
U.S. Architectural Paint Non-Residential Construction Contracts for New, Addition and Major Alteration Projects Cumulative to date thru December % Change % Change % Change 2014 Num ber of over last Square over last over last Projects year Feet year Value year Total Construction 767,644 0% 2,837,047
Slide 33: Non-Residential Construction Square Feet
U.S. Architectural Paint Non-Residential Construction 160,000 2006 vs. 2005: 2007 vs. 2006: 2008 vs. 2007: 2009 vs. 2008: 2010 vs. 2009: 2011 vs. 2010: 2012 vs. 2011: 2013 vs. 2012: 2014 vs. 2013: 1% -5% -19% -46% -18% -2% 4% 6% 7% 140,000 120,000 Tepid Non-Residential Recovery Gaining Momentum Non-
Slide 34: Latin America Housing Indicators
Latin America Architectural Paint Housing Indicators Source: ^ globalpropertyguide.com Financial Community Presentation – May 28, 2015 * tradingeconomics.com
Slide 35: Latin America Housing Indicators
Latin America Architectural Paint Housing Indicators Source: ^ IHS Global Construction Report Financial Community Presentation – May 28, 2015 * tradingeconomics.com
Slide 36: Manufacturing Activity
U.S. Manufacturing Activity 65 60 Index (>50=Expansion) 55 50 45 40 28 Consecutive Months of 35 Expansion in U.S. Manufacturing 30 25 20 Jan Sept Feb Nov Dec Sept Nov Dec Sept Nov Dec Sept Nov Dec Mar Jan Feb Mar Jan Feb Mar Jan Feb Mar Jan Feb Mar Apr May Aug Apr Aug Apr Aug Apr Aug Apr Jun Jul Oct
Slide 37: Positive Manufacturing Outlook
U.S. Manufacturing Activity Positive Manufacturing Outlook April March Index 2015 2015 Change Direction Rate of Change PMI 51.5 51.5 0.0 Growing Same New Orders 53.5 51.8 +1.7 Growing Faster Production 56.0 53.8 +2.2 Growing Faster Employment 48.3 50.0 -1.7 Contracting From Unchanged Inventories 49.
Slide 38: Eurozone Industrial Production
Eurozone Industrial Production Early Signs of Improvement Rate of Expansion/Contraction 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% -2.5% A14 M J J A S O N D J F15 Y-o-Y M-o-M Financial Community Presentation – May 28, 2015 Source: Eurostat
Slide 39: Light Vehicle Sales
Light Vehicle Sales United States Mexico 1,800,000 140,000 1,600,000 120,000 1,400,000 100,000 1,200,000 1,000,000 80,000 800,000 60,000 600,000 40,000 400,000 200,000 20,000 -- -- Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
Slide 40: Vehicle Miles Driven
U.S. Vehicle Miles Driven Moving 12-Month Total Vehicle Miles Traveled 3,500,000 3,000,000 Millions of Miles 2,500,000 3.6 % Increase in Annual Miles Driven Since 2010 2,000,000 1,500,000 1,000,000 Moving 12-Month Total Vehicle Miles Traveled Financial Community Presentation – May 28, 2015 Source: w
Slide 41: U.S. Infrastructure Investment
Protective & Marine Coatings U.S. Infrastructure Investment 15% 10% 5% 0% -5% -10% -15% 2012 2013 2014 2015P Manufacturing (Iron & Steel) Mining Water/Waste Water Power/Communications Financial Community Presentation – May 28, 2015 Source: IHS Global Insight
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