Sherwin-Williams Company (the) · NYSE:SHW
Sherwin-Williams Company (the) — The Sherwin-Williams Company — Investor Presentation (2010)
38 slides from Sherwin-Williams Company (the)'s investor presentation, 2010
Slide 1: Investor Presentation
Investor Presentation n-4 THE SHERWIN-WILLIAMS COMPANY
Slide 2: Forward Looking Statements
Forward Looking Statements Forward-Looking This presentation today will contain certain “forward forward-looking looking statements” statements , as defined under U.S. federal securities laws, with respect to sales, earnings and other matters. These forward-looking statements are based upon manageme
Slide 3: Discussion Outline
Discussion Outline • Coatings Market Overview • Sherwin-Williams Overview • Sherwin-Williams Sherwin Williams Investment Rationale – Diversified Customer Base – Controlled Distribution – Channel/Brand Strategy – Leading Technology – People Development & Retention – Growth from Acquisitions q – Finan
Slide 4: Coatings Industry: Global Demand
Coatings Industry Global Demand (US$) Total Coatings Architectural Coatings 2009 2009 6.4 Billion Gallons (-7.2%) 2.6 Billion Gallons (-5.3%) 82 Billion Dollars (-7.9%) 32 Billion Dollars (-2.1%) Asia Pacific Asia Pacific Americas Americas A i 39% 26% 31% 24% Europe Europe 29% 36% ROW ROW 7% 7% Sour
Slide 5: Coatings Industry: Top Manufacturers 2009
Coatings Industry Top Manufacturers - 2009 Worldwide United States 1 Akzo Nobel/ICI 1 Sherwin-Williams 2 PPG/Si PPG/SigmaKalon K l 2 PPG 3 Sherwin-Williams 3 Valspar 4 Dupont 4 Masco 5 BASF 5 Akzo Nobel/ICI 6 RPM 6 DuPont 7 Valspar 7 RPM 8 Sika 8 Comex 9 Kansai 9 Benjamin Moore 10 Nippon 10 BASF Sou
Slide 6: U.S. Coatings Industry
U S Coatings Industry U.S. Sales ($) Mix by Category 2009 Special 988 Million Gallons (- 18.7%) Purpose 15 05 Billion 15.05 Billi D Dollars ll ((- 18.3%) 18 3%) 16% Architectural Coatings OEM 59% Finishes s es 25% Source: U.S. Department of Commerce; Segment Percents Based on Dollars The Sherwin-Wil
Slide 7: U.S. Construction
U S Construction U.S. Growth Rate of Starts (Sq. Ft.) 2004 2005 2006 2007 2008 2009 2010 YTD Residential Commercial/Ind. Institutional Source: Dodge Construction Potentials Bulletin – Full Year 2009 / Sept 2010 The Sherwin-Williams Company – 3rd Quarter 2010
Slide 8: Positive Demand Potential
Positive Demand Potential Housing Units: Actual vs Potential 160.00 +25.7 25.7 Million New Units 150 00 150.00 1.2 Million/Year e Family & Mullti-Family) 140.00 Units 130.00 Miillions of U 120.00 +400k - 600k 110.00 Replacement Units/Year 100 00 100.00 (Single 90.00 80.00 70.00 00 02 04 06 08 10 12
Slide 9: U.S. Existing Home Sales
Sales in T Thousands o of Units 0 1 000 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 . Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 U.S. Dec-02 Mar-03 Jun-03 Source: National Association of Realtors Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec
Slide 10: Favorable Customer Mix
Favorable Customer Mix DIY Contractor Shift will Continue 45% 59% 55% 41% 19 19 0 19 1 19 2 19 3 19 4 19 5 19 6 19 7 19 8 19 9 19 0 19 1 19 2 19 3 19 4 19 5 19 6 19 7 19 8 20 9 20 0 20 1 20 2 20 3 20 4 20 5 20 6 20 7 20 8 8 8 8 8 8 8 9 9 9 9 9 9 9 0 0 0 0 0 09 8 8 8 8 9 9 9 0 0 0 0 Contractor DIY So
Slide 11: Favorable Customer Mix
Favorable Customer Mix DIY Contractor Shift will Continue • DIY Contractor Shift Driven by Demographics- Primarily Aging U.S. Population 2007 2030 Under 65 65+ 65+ (12%) Under 65 (88%) (21%) (79%) Source: U.S. Census Bureau The Sherwin-Williams Company – 3rd Quarter 2010
Slide 12: DIY Channel Share, U.S.
DIY Channel Share Share, U U.S. S Most Recent Purchase by Store Type 2009 Home Centers 63% Mass Merchants 15% Paint Stores Hardware 15% 7% Source: Proprietary Paint Industry Data, S-W Marketing The Sherwin-Williams Company – 3rd Quarter 2010
Slide 13: Contractor Channel Share, U.S.
Contractor Channel Share Share, U U.S. S Primary Outlet by Store Type 2009 Paint Hardware Stores 1 7% 1.7% 90.1% Home Centers 4 6% 4.6% Discount / Other 3 6% 3.6% Source: SW Marketing: 2009 The Sherwin-Williams Company – 3rd Quarter 2010
Slide 14: Global Coatings Market: Other Emerging Trends
Global Coatings Market Other Emerging Trends • Low-VOC “Green” Product and Practices • Growing Impact of Global Industrial Product Specifications • Increasing Automobile Ownership and Use in Developing Countries • Continuing g Global and Domestic Consolidation The Sherwin-Williams Company – 3rd Quar
Slide 15: Company Overview: Financial Highlights
Company Overview Financial Highlights 2008 2009 Net Sales $7.980M $7.094M EBITDA $946M $834M Income $477M $436M % Sales 6.0% 6.1% Earnings Per Share $4.00 $3.78 Net Operating Cash $876M $859M Dividend Per Share $1 40 $1.40 $1 42 $1.42 Return on Assets 10.8% 10.1% Return on Shareholder Equity 26.7% 2
Slide 16: Revenue & Profit by Segment - 2009
Company Overview Revenue & Profit by Segment - 2009 Consumer Sales: $1.23 Billion Profit: $157.4 Million Paint Stores Profit %: 12.8 12 8 Global Sales: $4.21 Billion Profit: $600.2 Million Sales: $1.65 Billion Profit %: 14.3 Profit: $65.0 Million Profit %: 3.9 Controlled Distribution Accounts for 75
Slide 17: Paint Stores Group
Paint Stores Group 3 354 St 3,354 Stores The Sherwin-Williams Company – 3rd Quarter 2010
Slide 18: Top Paint Store Chains – North America
Paint Stores Group Top 10 Paint Store Chains – North America 2009 Est. Est Count 1 Yr Change 3,354 +8 Akzo Nobel/ICI/Glidden 491 -87 PPG 389 -20 Comex/Pro Paint, Inc. 258 -61 K ll M Kelly-Moore 163 -2 2 Dunn Edwards 103 1,690 0 Cloverdale/Rodda 102 0 Diamond Vogel 69 -10 B j i M Benjamin Moore 67 -2
Slide 19: Store Penetration
Paint Stores Group Store Penetration Households per Store Over 50,000 40,000 - 50,000 30,000 - 40,000 Under 30,000 The Sherwin-Williams Company – 3rd Quarter 2010
Slide 20: Controlled Distribution Advantages
Paint Stores Group Controlled Distribution Advantages • Direct Relationship with Customer / End-User • Control Over Brands, Pricing, Inventory, Staffing • Control Pace and Place of Growth The Sherwin-Williams Company – 3rd Quarter 2010
Slide 21: Recognized Employer of Choice
Paint Stores Group Recognized Employer of Choice The Princeton Review “Best Entry Level Jobs” 2005, 2006, 2007 & 2008 BusinessWeek FORTUNE “100 Best Places to “100 Best Companies Launch A Career” to Work For” 2007 & 2008 2005, 2006 & 2008 The Sherwin-Williams Company – 3rd Quarter 2010
Slide 22: Voluntary Turnover
Paint Stores Group Voluntary Turnover Manager 4.4% Assistant Mgr. 9.3% Sales Rep 6.9% The Sherwin-Williams Company – 3rd Quarter 2010
Slide 23: Consumer Group: End to End Supply Chain
Consumer Group End to End Supply Chain • 26 Manufacturing Sites • 10 Distribution Service Centers • 400 Tractors / 1 1,200 200 Trailers • More than 6,000 Employees The Sherwin-Williams Company – 3rd Quarter 2010
Slide 24: Raw Material Breakdown
Consumer Group Raw Material Breakdown Containers (16%) Metal or Plastic Solvents (10%) Resins/Latex (37%) Acrylic (Latex Paints) Alkyd (Oil Paints) Epoxy (Epoxy Paints) Pigments (27%) Titanium Dioxide Pigments Paint Fillers Extenders Additives (10%) The Sherwin-Williams Company – 3rd Quarter 2010
Slide 25: Total Technical Expenditures
Consumer Group Total Technical Expenditures 120 110 101.3 102.0 105.9 101.8 95.4 100 86.2 88.7 88.3 91.3 83 6 83.6 90 78.2 73.4 80 62.6 $ Millions 70 60 50 40 30 20 10 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 The Sherwin-Williams Company – 3rd Quarter 2010
Slide 26: Strong Brands in Every Category
Consumer Group Strong Brands in Every Category DIY Professional Aerosol Automotive Paints Paints Paints Finishes Industrial Professional Wood Commercial Coatings Applicators Finishes Coatings The Sherwin-Williams Company – 3rd Quarter 2010
Slide 27: Diverse Channels of Distribution
Consumer Group Diverse Channels of Distribution Mass Warehouse Craft Auto Merchandisers Home Center Supply Aftermarket Industrial Paint & Decorating Cabinet Construction Supply Retailers Supply Supply The Sherwin-Williams Company – 3rd Quarter 2010
Slide 28: U.S. Outlet Penetration
Consumer Group U.S. Outlet Penetration 56,000 Total U.S. Paint & g Outlets Coatings 38,000 Consumer Segment Customers Sherwin-Williams Stores 3,400 The Sherwin-Williams Company – 3rd Quarter 2010
Slide 29: Global Finishes Group
Global Finishes Group Automotive Aerospace Architectural Protective Marine OEM Finishes The Sherwin-Williams Company – 3rd Quarter 2010
Slide 30: Expanding Global Platform
Global Finishes Group Expanding Global Platform • Automotive • OEM Product Finish • Protective & Marine • Architectural • OEM Product Finish • Industrial Wood Coatings • Automotive • Aerospace • Architectural • Protective & Marine • Protective & Marine • OEM Product Finish • OEM Product Finish • Aut
Slide 31: Consolidated Gross Profit
Consolidated Gross Profit $G Gross Profit P fit 3 598 3,499 3,598 3 499 3,700 3,413 3,263 % to Sales 3,080 3,200 2,701 2 700 2,700 2 455 2,455 2,249 2,308 2,220 2,339 2,130 $ Millions 2,200 1,700 , 45.4 44.9 46.0 44.9 45.1 44 2 44.2 44.3 43.8 43.7 43.8 43.2 42.8 1,200 700 200 -300 1998 1999 2000 200
Slide 32: Selling, General & Admin Expense
Selling General & Admin Expense Selling, 3,000 $ SG&A 2,597 2,644 % to Sales 2,513 2,535 2,326 2,500 2,069 1 882 1,882 2,000 Millions 1,500 35.7 34 8 34.8 $M 33.8 32.4 32.4 33.1 1,000 32.2 500 0 2003 2004 2005 2006 2007 2008 2009 The Sherwin-Williams Company – 3rd Quarter 2010
Slide 33: Working Capital Ratio
Working Capital Ratio (Accounts Receivable + Inventory – Payables)/Sales 20% 15% 13.8% 13.8% 12.5% 12.7% 11.5% 11.7% 11.2% 11.0% 10.7% 10% 5% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 The Sherwin-Williams Company – 3rd Quarter 2010
Slide 34: Net Operating Cash
Net Operating Cash 900 874.5 876.2 859.2 Uses of Cash 800 815.8 700 • Acquisitions 716.7 600 • Capital Expenditures 500 593.9 605.3 546.4 • Buy Back Stock 400 460.0 470.5 300 • Manage Debt 200 • Pay Dividends 100 0 2005 2006 2007 2008 2009 Net Operating Cash less Cap. Ex. & Dividends Net Operating C
Slide 35: Stock Repurchase
Stock Repurchase 14.00 13.20 12.00 10.00 9.00 Shares 7.98 8.10 7.25 8 00 8.00 Millions of S 6 70 6.70 6.60 5.60 6.00 4.00 2.00 0.00 2002 2003 2004 2005 2006 2007 2008 2009 Avg. Common Shares Outstanding 152.4 147.0 144.7 141.1 137.3 130.9 119.3 115.4 (fully diluted / in millions) The Sherwin-William
Slide 36: Total Debt : EBITDA Ratio
Total Debt : EBITDA Ratio 84% 83% 1200 88% 98% 73% 1148 ns) 1047 ($ in Million 1000 1148 834 946 800 848 965 834 875 818 600 621 400 200 0 2005 2006 2007 2008 2009 T t l Debt Total D bt EBITDA The Sherwin-Williams Company – 3rd Quarter 2010
Slide 37: Dividends Per Share 1979 – 2010E
Dividends Per Share 1979 – 2010E 1.44 $1.50 1.401.42 $1.40 $1.30 1.26 $1.20 $ $1.10 1.00 $1.00 $0.90 .82 $0.80 .68 $0.70 .60 .62 54 .58 .54 $0.60 .48 $0.50 .40.45 $0.40 .32.35 .25 .28 $0.30 .16 .18 .19 .21 .22 .13 .14 $$0.20 .05 05 .06 06 08 .10 .12 .08 $0.10 .01 .04 $0.00 1979 1980 1981 1982 1983 1
Slide 38: Summary
Summary • Sherwin-Williams Investment Rationale – Diversified Customer Base – Controlled Distribution – Channel/Brand Strategy – Leading Technology – People Development & Retention – Growth from Acquisitions – Financial Strength The Sherwin-Williams Company – 3rd Quarter 2010
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