Sherwin-Williams Company (the) · NYSE:SHW
Sherwin-Williams Company (the) — The Sherwin-Williams Company — Investor Day (September 2020)
125 slides from Sherwin-Williams Company (the)'s investor day presentation, September 2020
Slide 1: 2020 Financial Community Presentation
2020 FINANCIAL COMMUNITY PRESENTATION
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation may contain certain "forward-looking statements," as defined under U.S. federal securities laws. These forward-looking statements are based upon management's current expectations, estimates, assumptions and beliefs concerning future events and conditions.
Slide 3: Industry Overview
2020 F I NANCI AL CO M M UNI TY P RE S E NTATI O N INDUSTRY OVERVIEW JOHN MORIKIS C H A I R MA N & C H I E F E XE C U TI V E OF F I C E R
Slide 4: U.S. Architectural Coatings
2020 F I NANCI AL CO M M UNI TY P RE S E NTATI O N U.S. ARCHITECTURAL COATINGS
Slide 5: U.S. Architectural Paint Industry
U.S. Architectural Paint Industry Architectural Paint Gallons Non-Residential & Residential Square Footage 260,000 Non-Residential & Residential Sq. Ft in Thousands 900 2019 ~831 Million (~2.0% YoY) 850 PRIOR PEAK 250,000 Millions of Gallons 800 240,000 750 700 230,000 PRIOR PEAK 650 220,000 600 210
Slide 6: U.S. Architectural Paint Industry
U.S. Architectural Paint Industry ~831 Million Gallons in 2019 New Residential Non-Residential Repaint (Pro) 6% 30% (50M Gal) (247M Gal) Non-Residential Repaint (Pro) 15% New Residential (126M Gal) 12% (100M Gal) DIY 37% (308M Gal) SHW is Well-Positioned in All Architectural Coating Segments FINANCI
Slide 7: U.S. Architectural Paint Industry Trends
U.S. Architectural Paint Industry Trends NEW RESIDENTIAL PROPERTY COMMERCIAL DIY RESIDENTIAL REPAINT (PRO) MANAGEMENT • Robust recovery in starts • Rapid return of exterior • Projects resuming – • Slower recovery • Unprecedented demand projects; interior gaining pace of completions driven by consume
Slide 8: U.S. Demographics
U.S. Demographics SILENT BABY BOOMERS GEN X MILLENNIALS iGEN (GEN Z) 1928-1945 1946-1964 1965-1980 (GEN Y) 1997-2012 1981-1996 - Transitioning to Senior Living - Aging in place; driving - Move up creates churn and - Forming households - Will further extend Facilities remodeling spend drives remodeli
Slide 9: New Residential Housing Starts
New Residential Housing Starts Painting Begins ~3-4 Months After Start Housing Starts in '000s (Seasonally Adjusted Annual Rate) & YoY% Change Strong Starts Strong Starts 1,700 Wave 1 Wave 2 50% 42.1% 27.1% 1,600 37.8% Rapid 40% Recovery 1,500 23.1% 30% 13.9% 2.8% 1,400 7.6% 11.0% COVID-19 5.5% 20%
Slide 10: Housing Supply Not Keeping Pace
Housing Supply Not Keeping Pace Housing Surplus/ Deficit Housing Surplus/Deficit (thousands) & Vacancy Rate (RHS) Homeowner Vacancy Rate We have Underbuilt Since the Great Recession and Inhabitable Vacancies have Largely Been Absorbed FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020 Sources: We
Slide 11: Repaint & Remodel
Repaint & Remodel Leading Indicator of U.S. Remodeling Activity Homeowner Improvements & Repairs Four-Quarter Moving Four-Quarter Moving Totals Historical Estimates Rate of Change LIRA Projections: Standard Methodology Billions LIRA Projections: Downside $450 10% 6.7% 6.8% 6.5% 6.1% 6.0% 6.3% 6.2% 5
Slide 12: Remodeling Drivers
Remodeling Drivers Existing Home Sales Existing Home Sales '000s - SAAR (YoY % Change) Rapid Recovery Existing Home 15% Sales Momentum 10.5% 8.7% 10.4% 10% 7.1% 5,800 3.2% 4.2% 8.8% COVID-19 3.1% 0.8% Pause 5% 0% 5,300 -5% -11.7% -10% 4,800 -17.2% -15% 4,300 -20% -26.6% -25% 3,800 -30% Jan Feb Mar A
Slide 13: NAHB Remodeling Index
National Association of Home Builders (NAHB) Remodeling Index NAHB Remodel Index - Quarterly (50+ = expansion) 80 70 60 50 40 30 20 10 2005 2010 2001 2002 2003 2004 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Current and Future Indicators Quickly Returned to Positive FINANC
Slide 14: Repaint Drivers
Repaint Drivers Aging Housing Stock Median Age of Housing Stock 45 41 40 40 39 38 37 35 35 34 32 32 31 30 30 30 28 28 27 25 25 25 23 20 15 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 The Median Age of the Nation’s 137 Million Homes is 40 Years Old FINANC
Slide 15: Repaint Drivers
Repaint Drivers Change in U.S. Home Values S&P/Case-Shiller Home Price Appreciation Index - YoY % Change 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Price Appreciation Gives Homeowners Confidence to Remodel FINANCIAL COMMUNITY PRESE
Slide 16: Repaint & Remodel: Baby Boomers Aging in Place
Repaint & Remodel Baby Boomers Aging in Place “What I’d really like to do is stay in my current residence for as long as possible” 76% OF BABY BOOMERS OWN THEIR HOME 86% 76% 17% 88% 66% 64% 21% 53% 23% 24% 69% 55% ARE LOOKING TO BELIEVE HOME 41% 29% RENOVATE VALUES ARE (and borrowing an GOING UP ave
Slide 17: DIY to Contractor Shift Expected to Continue
DIY to Contractor Shift Expected to Continue in U.S. & Canada 37% 59% DIY/ Remodeler Paint Contractor 63% 41% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Slide 18: Commercial Construction
2020 F I NANCI AL CO M M UNI TY P RE S E NTATI O N COMMERCIAL CONSTRUCTION
Slide 19: Commercial Construction Starts
Commercial Construction Starts Painting Begins ~12-18 Months After Start T3M Avg - Sq Ft in '000s and YoY% Change Strong Starts Strong Starts 85,000 Wave 1 Wave 2 30% 11.4% 22.6% 80,000 12.8% 15.0% 11.5% 13.3% 10.8% 20% 13.2% 11.0% 7.3% 75,000 9.6% 10.5% 6.7% 7.1% 10% 70,000 COVID-19 Pause 0% 65,000
Slide 20: U.S. Commercial Construction Put in Place
U.S. Commercial Construction Put in Place Projects Will Resume as Maintenance Cannot be Delayed Indefinitely Annual Commercial Construction Put in Place (Millions of Dollars) $349,597 $352,846 $342,707 $328,362 $309,635 $286,383 $273,611 $247,875 $222,622 $227,033 $227,961 $217,384 2008 2009 2010 20
Slide 21: Industrial Coatings
2020 F I NANCI AL CO M M UNI TY P RE S E NTATI O N INDUSTRIAL COATINGS
Slide 22: Industrial Demand by Region
Industrial Demand by Region Purchasing Managers Index (PMI) - Manufacturing US PMI - IHS MARKIT (50+ = expansion) EUROZONE PMI - IHS MARKIT (50+ = expansion) 70 70 60 60 50 50 40 40 30 30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec BRAZIL PMI - IHS
Slide 23: Global Paints & Coatings Industry
Global Paints & Coatings Industry Paint & Coatings Industry Top Global Manufacturers Global Mix by Category (Based on $) Coatings Industry 2019 Total Coatings 2019 Global Market ~ 9.8 Billion Gallons Top 10 Suppliers ~51% ~132 Billion Dollars Special Architectural Purpose Paints Coatings 40% 20% All
Slide 24: Industrial Coatings
Industrial Coatings Technology Driven, Specialty Solutions That Drive Customer Throughput and Productivity Slower Pace of Global Recovery Faster FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 25: Industrial Coatings: Faster Recovery
Industrial Coatings Faster Recovery • Shift from plastic to cans – environmental concerns • Growing new categories – spiked seltzer and energy drinks • Shift to non-BPA technology • Customer investments in capacity expansion “Up-cycle for beverage cans to be robust and supply/demand to likely PACKAG
Slide 26: Industrial Coatings: Moderate Recovery
Industrial Coatings Moderate Recovery • Strong recovery of new residential construction a driver for key end markets: furniture, flooring, cabinetry, doors, molding • Heightened consumer interest in customized finishes and colors • Manufacturers relocating from China to SE Asia beginning to ramp up
Slide 27: Industrial Coatings: Slower Recovery
Industrial Coatings Slower Recovery • Asia-Pacific showing strongest recovery • Long-supply chains slowing some larger OEM recovery • COVID-19 limiting access to some facilities • Focus on deeper segmentation, new account activity GENERAL “Industrial production improving sequentially in most major r
Slide 28: Industry Overview Appendix
2020 F I NANCI AL CO M M UNI TY P RE S E NTATI O N INDUSTRY OVERVIEW APPENDIX
Slide 29: Repaint & Remodel: Employment & Consumer Sentiment
Repaint & Remodel Employment & Consumer Sentiment U.S. Monthly Unemployment Percentage Rate U.S. Consumer Confidence Index (1985=100) 160 16 140 14 120 12 100 10 80 8 60 6 4 40 2 20 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1990 1992 1994
Slide 30: U.S. Non-Building Construction Starts
U.S. Non-Building Construction Starts U.S. Seasonally Adjusted Annualized Non-Building Starts – Thousands $ and YoY % Change Nonbuilding Starts YoY % Change 27.4% 27.6% 29.8% 30% $235,000,000 17.1% 15.5% 14.1% $225,000,000 20% 10.7% 10.6% $215,000,000 3.1% 2.0% 0.5% 4.6% 10% $205,000,000 0.7% 0.0% $
Slide 31: Packaging: North America & International Trends
Packaging North America & International Trends International Markets Remain Inflection Point in the North American Can Market Healthy & Growing …with Multiple Factors Driving This Demand Global Beverage Can Market Growth Expected Inflection… in the 3-5% Range FINANCIAL COMMUNITY PRESENTATION – SEPTE
Slide 32: Company Overview
2020 F I NANCI AL CO M M UNI TY P RE S E NTATI O N COMPANY OVERVIEW D AV I D S E W E L L PRESIDENT & C H I E F OP E R A TI N G OF F I C E R FINANCIAL COMMUNITY PRESENTATION – JUNE 5, 2019
Slide 33: About Us
ABOUT US 61,000+ FOUNDED IN EMPLOYEES 1866 120+ 2019 REVENUES SALES BY $17.9 billion GEOGRAPHY COUNTRIES 80% 4,750+ US / CANADA THE AMERICAS 15% GROUP STORES PERFORMANCE 28% 57% COATINGS GROUP 20% 147 REST OF WORLD MANUFACTURING CONSUMER (ROW) & DISTRIBUTION BRANDS GROUP FACILITIES INDUSTRY-LEADING
Slide 34: Consistent Track Record of Success
Consistent Track Record of Success Over 150 Years of Sustainable Growth ECONOMIC GLOBAL GROWTH & CONTINUOUS LONGEVITY SOCIO-POLITICAL EXPANSION IMPROVEMENT THROUGH RESILIENCY THROUGH ROBUST STRATEGIC FOCUS ON INNOVATION & DEPRESSIONS, UNCERTAIN M&A & SUCCESSFUL AVOIDING COMPLACENCY RECESSIONS & WORL
Slide 35: COVID-19 Response
COVID-19 Response Employee Response Customer Response Community Response Flex Manufacturing Safety, Safety, Safety Supply Critical Coatings Personal Protective Equipment Donations: Flexible Work Arrangements Curbside Pickup Options 250,000+ Masks, Delivery Options Gloves and Lab Coats Enhanced Benef
Slide 36: Core Commitment
CORE COMMITMENT Delivering Solutions To Our Customers FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 37: Solution Video
SHERWIN-WILLIAMS Solution Video FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 38: Uniquely Positioned to Deliver Customer Value
Uniquely Positioned to Deliver Customer Value IMPROVING CUSTOMER SUCCESS SOLUTION DRIVEN SERVICE INDUSTRY LEADING INNOVATION DIFFERENTIATED PRODUCT DISTRIBUTION Providing Unique and Differentiated Solutions for Our Customers FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 39: Acquisition Execution & Integration Adds to Our Solutions
Acquisition Execution & Integration Adds to Our Solutions INNOVATION TALENT MANUFACTURING DISTRIBUTION PROCUREMENT GLOBAL SYNERGY 14 Acquisitions Successfully Integrated Over the Last Decade FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 40: Driving Performance
Driving Performance ARCHITECTURAL INDUSTRIAL SEGMENT MARGIN AT ACQUSITION SEGMENT MARGIN AT ACQUSITION 20% 13% 13% 20% TARGET TARGET ~20% ~20% 1H2020 1H2020 In Process: • Top Line Growth 20% • Europe/Asia Footprint Exceeded And Still Improving… • SKU Rationalization Driving Performance is a Continuo
Slide 41: Industry Leading Innovation: US Patent Activity
Industry Leading Innovation US Patent Activity 2,000+ (2015-2018) R&D EMPLOYEES WORLDWIDE ARCHITECTURAL INDUSTRIAL • 105 Filed • 83 Filed • 80 Granted • 63 Granted Patent activity includes Valspar Corporation-owned patents and applications prior to Sherwin-Valspar merger. Continuous Innovation Under
Slide 42: Innovative Solutions
Innovative Solutions valPure® V70 Twist & Pour® Kem Aqua® POWDURA® ECO non-BPA Epoxy Container BP Siding Plus Coatings CONSUMER SUSTAINABLE TECHNOLOGY SOLUTION: PRODUCTION SOLUTION: SOLUTION: SOLUTION: Speeds Tinting Times & Recycling 16 Plastic Durable Waterborne Provides Consumer Limits line chang
Slide 43: Environmental, Social & Governance
Environmental, Social & Governance The Employer The Citizen The Steward Providing a safe & inclusive work environment Making a difference in our communities Growing our business with care FOUNDATION CONTRIBUTIONS SUSTAINABLE PRODUCTS & BUILDING SOLUTIONS FORBES®: AMERICA’S BEST EMPLOYERS FOR NEW GRA
Slide 44: Driving Shareholder Value
Driving Shareholder Value DRIVE DRIVE DRIVE CASH DRIVE GROWTH ROS GENERATION RONAE • Above Market Growth • Volume Growth • Earnings Growth • Asset Utilization • Customer Solutions • Profit Improvement • Working Capital • Working Capital Management • Product Innovation • Pricing Actions • Consistent
Slide 45: The Americas Group
2020 F I NANCI AL CO M M UNI TY P RE S E NTATI O N THE AMERICAS GROUP PETE IPPOLITO PRESIDENT TH E A ME R I C A S G R O U P
Slide 46: Who is TAG?
Who is TAG? # 1 # 1 # 1 BRAND PREFERRED BRAND SPECIFIED IN PAINT BY PROFESSIONAL PAINTERS* BY DESIGNERS** BRAND AWARENESS* Leading Paint Brand FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020 *2019 LRW RESEARCH | **2020 MARKETVISION RESEARCH
Slide 47: Stores | Reps | Employees
Stores | Reps | Employees 4,750 3,675 26,315 STORES SALES REPS EMPLOYEES 90% 91% 88% RETENTION RATE AMONG RETENTION RATE AMONG RETENTION RATE AMONG STORE MANAGERS SALES REPS MANAGEMENT TRAINEES Recruit, Train & Retain FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 48: Our Business
Our Business OUR CUSTOMERS OUR SOLUTIONS STORES & SALES REPS ONLINE ACCOUNT CAPABILITIES DATA COMMERCIAL NEW PRODUCTS COLOR TALENT ACCOUNTS NATIONAL SERVICES DELIVERY FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 49: Residential Repaint
CUSTOMER DRIVEN SOLUTIONS Residential Repaint CONVENIENT WAYS TO BUY SALES REP UNDERSTANDS CUSTOMER'S NEEDS I HAVE A COMPLEX You’re EXTERIOR hired! S-W DELIVERY ONGOING RELATIONSHIP PROJECT. PAINTER USES S-W PROJECT BIDDING TOOL SALES REP RECOMMENDS SELF-CLEANING TECHNOLOGY NEW NEW PAINTER USES QUIC
Slide 50: DIY
CUSTOMER DRIVEN SOLUTIONS DIY HOMEOWNER SEEKS COLOR CONVENIENT CURBSIDE PICKUP INSPIRATION GETS ADVICE AND MAKES PURCHASE NEW THRILLED WITH THE RESULTS, SHARES USING #SWCOLORLOVE AND INSPIRES COLOR CHIPS DELIVERED TO PAINTS THEIR SPACE OTHERS FREE VIRTUAL COLOR CONSULTATION THEIR HOME NEW NEW Delive
Slide 51: Commercial
CUSTOMER DRIVEN SOLUTIONS Commercial CONVENIENT WAYS TO BUY BUILDING MANAGER ARCHITECTURAL ACCOUNT SALES REP RECOMMENDS UTILIZES CUSTODIAN TO EXECUTIVE WORKS WITH EQUIPMENT TO MAXIMIZE HIRE PAINTING COMPANY S-W DELIVERY PAINTER PROVIDES CUSTODIAN TO ARCHITECT TO SOLVE PRODUCTIVITY FOR MAINTENANCE BU
Slide 52: New Residential
CUSTOMER DRIVEN SOLUTIONS New Residential CHECK PRICING, PURCHASE HISTORY PRODUCT SOLUTIONS AND STORE INVENTORY BUILDER AND HOMEOWNER SATISFACTION NEW CONVENIENT WAYS TO BUY SALES REP SUPPORT COLOR SOLUTIONS SALES REP VISITS JOB SITE S-W DELIVERY Comprehensive Service and Support FINANCIAL COMMUNITY
Slide 53: National Accounts
CUSTOMER DRIVEN SOLUTIONS National Accounts PROPERTY MANAGEMENT NEW RESIDENTIAL CONVENIENT WAYS TO BUY ONGOING RELATIONSHIP National Coverage, Local Support FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 54: Interconnected Customer Experience
Interconnected Customer Experience STORES NEW PRODUCTS SALES REPS COLOR ONLINE ACCOUNT CAPABILITIES DATA DELIVERY Delivering Customer Centric Solutions. Our Customer is at the Center of Everything We Do. FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 55: TAG Video
THE AMERICAS GROUP TAG Video FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 56: 2020 J.D. Power
2020 J.D. Power # 1 # 1 # 1 # 1 CUSTOMER SATISFACTION CUSTOMER SATISFACTION CUSTOMER SATISFACTION CUSTOMER SATISFACTION WITH EXTERIOR PAINT WITH EXTERIOR STAIN WITH INTERIOR PAINT WITH PAINT RETAILERS FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020 For J.D. Power 2020 award information, visit
Slide 57: Success By Design
Success By Design FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 58: Consumer Brands Group
2020 F I NANCI AL CO M M UNI TY P RE S E NTATI O N CONSUMER BRANDS GROUP HEIDI PETZ P R E S I D E N T, C O N S U ME R B R A N D S G R O U P FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 59: What is the Consumer Brands Group?
What is the Consumer Brands Group? Industry Leading Brands Strategic Retail Partners FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 60: Business Overview
CONSUMER BRANDS GROUP Business Overview Value Proposition Sherwin-Williams Consumer Brands Group provides our strategic channel partners with access to a portfolio of industry-leading brands, supported by best-in-class, high-touch service. Consumer Focused Customer Driven FINANCIAL COMMUNITY PRESENT
Slide 61: Consumer Focused & Customer Driven
CONSUMER BRANDS GROUP Consumer Focused & Customer Driven Sell Every Gallon Twice The Right Brands The Right Segments The Right Solutions FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 62: Hero Brands that Drive Traffic to Retail Partners
CONSUMER BRANDS GROUP Hero Brands that Drive Traffic to Our Retail Partners Product Over 10,000 points of Focused on #1 Selling #1 Applicator A Trusted Name Trusted by Pros for Distribution “Design it Interior Wood Brand Preferred in Spray Paint Over 100 Years Yourselfers” Stain* by Pros** A Recogni
Slide 63: CBG Video
CONSUMER BRANDS GROUP CBG Video FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 64: Deliver Product and Digital Innovation
CONSUMER BRANDS GROUP Deliver Product and Digital Innovation Simplify Color Decision Organizational Storage Expansive Color Palette Extreme Weather With Direct to Home System to Drive Designed to Offer Protection in One Coat Solutions Productivity Limitless Looks Our Brands Deliver Innovative Soluti
Slide 65: Associate Training & Field Support
CONSUMER BRANDS GROUP Associate Training & Field Support ASSOCIATE TRAINING & FIELD SUPPORT OPPORTUNITIES Enhance Vendor Color Expert Premium Improve Draw/ In-Store Event Service Focused Training Brands Focus Close Rates Execution Models Training Program Helping Consumers and Associates to be Succes
Slide 66: Superior Category Management
CONSUMER BRANDS GROUP Superior Category Management SUPERIOR CATEGORY MANAGEMENT OPPORTUNITIES Store Level and Multi-Brand Inventory Multi-Brand Promotional Regional Cross- Optimization Cross-Promotions Enhancement Optimization Merchandising The Right Product, The Right Place, The Right Time FINANCIA
Slide 67: Digital Leadership To Empower Consumers
CONSUMER BRANDS GROUP Digital Leadership To Empower Consumers Websites Online Videos Social Media E-Mail Search Marketing Seamless Shopping Experience to Help with Faster Project Completion FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 68: Best-in-Class In-Store Experience
CONSUMER BRANDS GROUP Best-in-Class In-Store Experience to Drive Conversion BEST-IN-CLASS IN-STORE EXPERIENCE OPPORTUNITIES Consumer Tools Simplify Color Clear Focus on All Along Purchase In-Aisle Selling Tools Decisions Premium Journey Focus on Simplifying the Selection Experience FINANCIAL COMMUNI
Slide 69: Consumer Focused & Customer Driven
CONSUMER BRANDS GROUP Consumer Focused & Customer Driven Sell Every Gallon Twice The Right Brands The Right Segments The Right Solutions FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 70: Performance Coatings Group
2020 F I NANCI AL CO M M UNI TY P RE S E NTATI O N PERFORMANCE COATINGS GROUP AAR O N E R T E R P R E S I D E N T, P E R F O R MA N C E C O A TI N G S G R O U P FINANCIAL COMMUNITY PRESENTATION – JUNE 5, 2019
Slide 71: Differentiated Solutions
PERFORMANCE COATINGS GROUP Differentiated Solutions CUSTOMER-FIRST CULTURE Innovative Products Flexible Service Segment & Technology Model Expertise Solutions Developed for Our Customers’ Dynamic and Changing Needs FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 72: Core Competencies
PERFORMANCE COATINGS GROUP Core Competencies CUSTOMER-DRIVEN INNOVATION CONNECTED GLOBAL EXPERTISE SUPPLY CHAIN EXECUTION RESPONSIVENESS COLOR & DESIGN ECOSYSTEM COATINGS TECHNOLOGY Depth of Experience and Global Footprint Form the Foundation for New Solutions FINANCIAL COMMUNITY PRESENTATION – SEPT
Slide 73: The Right Industrial Segments
PERFORMANCE COATINGS GROUP The Right Industrial Segments PROTECTIVE COIL AUTOMOTIVE GENERAL INDUSTRIAL PACKAGING & MARINE & EXTRUSION REFINISH INDUSTRIAL WOOD COATINGS Solutions that Provide Valued Differentiation in Dynamic, Complementary Segments FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 20
Slide 74: Our Mission
PERFORMANCE COATINGS GROUP Our Mission Protecting Assets Sealing Reputations Innovation Product Availability Consistency First Impressions Service Protecting Assets. Sealing Reputations. Performance Sustainability Trust Safety Protecting Customers’ Products and Brands, and Helping Them Keep Their Pr
Slide 75: Innovation
PERFORMANCE COATINGS GROUP Innovation DESIGNHOUSESM CARCLAD® 4200 COLLISION CORETM HIGH-PERFORMANCE FROM TREND-TO-STORE REDEFINING A CUSTOMER COMPREHENSIVE FLOORING PROBLEM BUSINESS SUPPORT SUSTAINABLE, DURABLE, & BEAUTIFUL Innovation from Niche & Customized to Forward-Looking & Industry-Wide FINANC
Slide 76: Consistency
PERFORMANCE COATINGS GROUP Consistency APPLICATION WEB-BASED COLOR VIRTUAL TECH VALPURE® NON-BPA CENTERS COLOR HARMONY ACROSS SERVICE TECHNOLOGIES PEACE OF MIND WITH SITES AND BORDERS GLOBAL EXPERTISE SCALING PRODUCTION TO ZERO DOWNTIME SOLVING LOCAL PROBLEMS MEET NEW CONSUMER DEMANDS Consistent Ser
Slide 77: Flexible Service Models
PERFORMANCE COATINGS GROUP Flexible Service Models GLOBAL LOCAL GLOBAL LOCAL CUSTOM SOLUTIONS FOR …WITH IN-STOCK COMPANY-CONTROLLED …RESPONSIVE SERVICE & LARGE OEMS… SOLUTIONS & VMI DISTRIBUTION… TRUSTED 3RD PARTY DISTRIBUTORS Differentiated Distribution that Aligns with Our Customers and Our Missio
Slide 78: Sustainability
PERFORMANCE COATINGS GROUP Sustainability RECYCLABLE METAL POWDURA® SOLAR-REFLECTIVE SHER-WOOD ULTRA 9K® PACKAGING ECO COATINGS GUARDIANTM LEADING SHOP MEETING NEEDS OF A RECYCLING 16 REDUCING ENERGY ZERO-FORMALDEHYDE, CONVERSIONS TO CHANGING WORLD BOTTLES/LB CONSUMPTION NON-ISOCYANATE WATERBORNE Su
Slide 79: Safety
PERFORMANCE COATINGS GROUP Safety CLEANABILITY FIRETEX® M90/03 SLIP-RESISTANT MILITARY COATINGS SAFETY BY DURABILITY FOR NEW UP TO 150 MINUTES OF FLOORING TYPE IV PRIMERS MEET NEW DESIGNTM RIGOROUS STANDARDS PASSIVE PROTECTION SEAMLESS APPLICATION DOD SPECS FUNDAMENTAL TO OUR AIDS CLEANING INNOVATIO
Slide 80: Our Value Proposition
PERFORMANCE COATINGS GROUP Our Value Proposition FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 81: Global Supply Chain
2020 F I NANCI AL CO M M UNI TY P RE S E NTATI O N GLOBAL SUPPLY CHAIN J O E L B AX T E R P R E S I D E N T & G E N E R A L MA N A G E R , GL OB A L S U P P L Y C H A I N
Slide 82: Global Footprint
Global Footprint RUSSIA CANADA UNITED STATES CHINA INDIA BRAZIL AUSTRALIA SOUTH AFRICA FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 83: Global Supply Chain
Global Supply Chain One Focused Organization Share Best Practices Worldwide End-to-End Supply Chain FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 84: Global Supply Chain: End-to-End
Global Supply Chain END-TO-END SUPPLY CHAIN Research & Global Supply Chain Manufacturing Distribution Transportation Customer Development Procurement Management DRIVE CONTINUOUS IMPROVEMENT FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 85: End-to-End Supply Chain
Global Business Management System Management Continuous Accelerated Time Review Improvement Root Cause Management End-to-End Supply Chain PEOPLE SYSTEMS TOOLS PROCESSES FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 86: Accelerating Operational Excellence
Accelerating Operational Excellence Continuous Improvement Culture Leveraged Globally Sustainable Results OPERATIONAL EXCELLENCE FOCUS AREAS SAFETY QUALITY SERVICE COST PEOPLE FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 87: Safety
Safety Recordable Case Rate COVID-19 Response Consistent Focus on Employee Safety Manufacture Hand Sanitizer for Internal Use & Donations 2019 Source: The North American Industry Classification System (NAICS) Focus on Safety Source: The North American Industry Classification System (NAICS) FINANCIAL
Slide 88: Operational Excellence Savings
Operational Excellence Savings 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 10+ Years of Increase in Operational Excellence Savings FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 89: Global Procurement Benefits
Global Procurement Benefits Assured Global Internal Raw Material Supply Visibility Development Efficiency Global Procurement Focus Areas FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 90: Customer Solutions: New Product Launches
Architectural New Product Launches Customer Solutions 23 40 25 39 2014 2016 2017 2020 2013 2015 2016 2019 21 24 33 35+ Over 10+ Years of Consecutive Double-Digit New Architectural Product Launches FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 91: Customer Solutions: Innovation Stages
INDUSTRY LEADING INNOVATION Customer Solutions STAGE 1 STAGE 2 STAGE 3 STAGE 4 Concept Definition Technology Assessment Technology Development Commercialization Market Differentiating Innovations FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 92: Customer Solutions: Supply Chain Capabilities
GLOBAL SUPPLY CHAIN Customer Solutions Technology Global Differentiated Capacity Transfer Footprint Distribution valPure® V70 FIRETEX® Sherwin-Williams non-BPA Epoxy Optimization M90/03 Fleet Coatings Global Supply Chain Capabilities Aligned with Business Units & Geography FINANCIAL COMMUNITY PRESEN
Slide 93: Customer Solutions: Differentiated Distribution
DIFFERENTIATED DISTRIBUTION Customer Solutions <take Fast, Efficient, away> Deliveries Touchless FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 94: Customer Solutions: World Class Supply Chain Model
WORLD CLASS SUPPLY CHAIN MODEL Customer Solutions Delivering The Right Customer Experience FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 95: The Future of Work
The Future of Work ERP DIGITAL EMPLOYEE AUTOMATION COLLABORATION TRANSFORMATION ENGAGEMENT Operations of the Future FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 96: Summary
Summary Focused Global Supply Chain Organization Leveraging Systems, Tools & Processes Deliver Best in Class Service Future of Work FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020
Slide 97: Financial Overview
2020 F I NANCI AL CO M M UNI TY P RE S E NTATI O N FINANCIAL OVERVIEW AL M I S T Y S Y N SENIOR VICE PRESIDENT FINANCE & C H I E F F I N A N C I A L OF F I C E R
Slide 98: Consolidated Sales
Consolidated Sales In Millions of Dollars Consolidated Sales $ In Millions $17,901 $17,534 $14,984 $11,856 -1.9% $11,339 $8,919 $8,751 1.9% 4.6% 26.4% 17.0% 2.1% 2015 2016 2017 2018 2019 6MOS2019 6MOS2020 FINANCIAL COMMUNITY PRESENTATION – SEPTEMBER 29, 2020 Refer to Financial Appendix 1: Income Sta
Slide 99: Consolidated Gross Profit
Consolidated Gross Profit Excluding Acquisition Related Costs & Other Adjustments Adjusted Gross Profit $8,072 Adjusted Gross Margin $7,513 Proforma Gross Margin $6,886 $ In Millions $5,925 $5,559 +4.6% $4,104 $3,925 49.0% 50.0% 46.0% 45.1% 46.9% 42.8% 44.0% 45.9% 44.6% 44.4% 2015 2016 2017 2018 201
Slide 100: SG&A Expense
SG&A Expense Excluding Acquisition Related Costs & Other Adjustments Adjusted SG&A Adjusted SG&A % to Sales Proforma SG&A % to Sales $5,244 $ In Millions $4,969 $4,694 $4,102 $3,914 +1.9% $2,561 $2,609 34.5% 34.6% 31.3% 28.7% 29.8% 30.1% 31.1% 29.9% 29.3% 28.3% 2015 2016 2017 2018 2019 6MOS2019 6MOS
Slide 101: Operating Income
Operating Income Excluding Acquisition Related Costs & Other Adjustments Adjusted Operating Income Adjusted Operating Income % to Sales Proforma Operating Income % to Sales $2,828 $ In Millions $2,544 $2,191 +9.6% $1,824 $1,495 $1,647 $1,364 15.4% 15.8% 14.5% 14.6% 14.5% 17.1% 15.3% 14.6% 14.3% 14.8
Slide 102: Profit Before & After Tax
Profit Before & After Tax Excluding Acquisition Related Costs & Other Adjustments Adjusted Profit Before Tax Adjusted Profit After Tax Continuing Operations $2,440 $ In Millions $2,186 $1,290 $1,957 $1,974 $1,184 $1,729 $1,761 $1,032 $1,549 $952 $1,430 $1,214 $1,054 2015 2016 2017 2018 2019 6MOS2019
Slide 103: EBITDA
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) Excluding Acquisition Related Costs & Other Adjustments % to Sales $3,057 Adjusted EBITDA $ In Millions $2,822 $2,423 +7.0% $2,007 $1,602 $1,809 $1,497 16.9% 17.1% 16.8% 18.3% 16.0% 16.2% 16.1% 2015 2016 2017 2018 2019 6MOS2019 6M
Slide 104: Working Capital Performance
Working Capital Performance Accounts Receivable + Inventory – Payables % to Sales Working Capital $ In Millions $2,055 $2,102 $2,035 $1,971 $2,486 $2,413 14.0% 13.6% $975 12.5% 12.4% 11.6% 11.7% 8.6% 2015 2016* 2017** 2018 2019 2Q19 2Q20 Target FY Working Capital as a % to Sales of 11% to 11.5% *PRO
Slide 105: Cash Flow Performance, as Reported
Cash Flow Performance, as Reported In Millions of Dollars Net Operating Cash Uses of Cash Net Operating Cash Less Cap. Ex. • Capital Expenditures • Pay Dividends $2,321 • Manage Debt $1,884 $1,944 $1,992 • Acquisitions $1,661 $1,693 • Share Repurchases $1,447 $1,309 $1,213 $1,075 $1,070 $932 $758 $6
Slide 106: Consistent Capital Allocation Philosophy
Consistent Capital Allocation Philosophy WE WILL NOT HOLD CASH • Return Dividend to 30% of PY Earnings BALANCED CAPITAL KEY OBJECTIVES – FY20 Increase 18.6% ALLOCATION GOALS • BBB+ Target CAPEX Invest • Reduce Debt to EBITDA Leverage To Rating Approx. 2.5x – FY20 • Debt to Dividend 30% of PY EBITDA
Slide 107: Consolidated Net Operating Cash & Uses of Cash
Consolidated Net Operating Cash & Uses of Cash 5-Year Net Operating Cash: ~$8.9B 2015-2019 CASH DIVIDENDS USES OF CASH $2.4 DEBT REPAYMENT $3.1 • Capital Expenditures • Pay Dividends CAPITAL EXPENDITURES • Manage Debt • Acquisitions - $77M in 2019 SHARE REPURCHASES • Share Repurchases $1.6 $1.3 FINA
Slide 108: Debt to Adjusted EBITDA Ratio
Debt to Adjusted EBITDA Ratio Excluding Acquisition Related Costs & Other Adjustments Debt Adjusted EBITDA Debt to Adjusted EBITDA $ In Millions $11,755 $10,521 $9,344 $8,685 $8,850 4.5 4.3 3.3 2.8 2.8 2.5 $3,057 $3,162 $2,617 $2,822 $2,423 @ Close - 6/1/2017 2017 2018 2019 Q2 2020 2020F Targeting L
Slide 109: Maturities of Long-Term Debt
Maturities of Long-Term Debt $2,250 2017 As of June 30, 2020 $ In Millions $1,619 $1,619 $ 1,500 $1,250 $1,250 $800 $660 $650 $650 $650 $650 $545 $550 $500 $500 $500 $500 $350 $350 $300 $300 $300 $25 $4 $4 2018 2025 … 2042 … 2050 … 2017 2019 2020 2021 2022 2023 2024 2026 2027 2028 2029 2030 2045 204
Slide 110: Dividends Per Share
Dividends Per Share 2005 - 2020 +18.6% 2019 was 41st Consecutive Year of Dividend Increases $5.36* $4.52 $3.36 $3.40 $3.44 $2.68 $2.20 $2.00 $1.44 $1.46 $1.56 $1.40 $1.42 $1.26 $1.00 $0.82 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Dividend Returned to 30% of Pri
Slide 111: Capital Allocation: Strategic M&A
Capital Allocation Strategic M&A TARGET CRITERIA VALUE DRIVERS • Improve Technology Portfolio • Fit Core Competencies • Leverage Acquisitions Across Our Global Businesses • Strengthen Global Reach • Leadership in Key Technologies, Markets, • Supply Products Across • Fills Product or Capability Gap o
Slide 112: Share Repurchase History
Share Repurchase History 2011 – 6MOS 2020 (000s) Shares 6,925 Average Price Per Share $523.69 $464.98 4,700 4,600 4,300 $402.17 3,575 $278.57 $220.66 $178.90 1,675 1,700 $121.25 1,525 $78.16 2011 2012 2013 2014 2015 2016* 2017* 2018 2019 6MOS 2020 105,672 103,930 103,049 98,741 94,544 94,488 94,927
Slide 113: Summary Capitalization
Summary Capitalization Strong Financial Profile Provides Flexibility 6/30/2020 . • $3.0B Remaining Available at 6/30/20 Cash $188M • Expect to Maintain Balance Sheet Flexibility to Pursue Growth Opportunities Debt $8.8B • Annual Cash Generation Comfortably Supports Anticipated Funding Needs Revolvin
Slide 114: A Strong Foundation On Which We Will Continue to Build
A STRONG FOUNDATION • Track Record of Financial Performance & Focused Execution In All Economic Environments • Large, Stable Revenue Base with Improving EBITDA Margins • Strong Balance Sheet • Experienced & Determined Management Team …ON WHICH WE WILL CONTINUE TO BUILD • Grow Revenue Organically & t
Slide 115: Third Quarter 2020 Sales Guidance
Third Quarter 2020 Sales Guidance Original July 28, 2020/Revised September 29, 2020 ORIGINAL July 28, 2020 REVISED SEPTEMBER 29, 2020 THIRD QUARTER 2020 SALES GUIDANCE THIRD QUARTER 2020 SALES GUIDANCE Sales Guidance Up or Down Low Single Sales Guidance Up 3% to 5% Digits By Segment: By Segment: The
Slide 116: Full Year 2020 Guidance
Full Year 2020 Guidance Sales & EPS ORIGINAL July 28, 2020 REVISED SEPTEMBER 29, 2020 FULL YEAR 2020 SALES GUIDANCE FULL YEAR 2020 SALES GUIDANCE Sales Guidance Flat to LY Sales Guidance Flat to Up Slightly By Segment: By Segment: The Americas Group Flat to Up Low SD The Americas Group Flat to Up Lo
Slide 117: Financial Appendix
2020 F I NANCI AL CO M M UNI TY P RE S E NTATI O N FINANCIAL APPENDIX
Slide 118: Appendix 1A: FY Income Statement
Appendix 1A: FY Income Statement Excluding Acquisition Related Costs and Other Adjustments (in $ millions) FY18 FY19 AS Acquisition Other AS AS Acquisition Other AS REPORTED Related Adjustments ADJUSTED REPORTED Related Adjustments ADJUSTED Costs Costs Sales $17,534 $17,534 $17,901 $17,901 Gross Pro
Slide 119: Appendix 1B: YTD 2Q Income Statement
Appendix 1B: YTD 2Q Income Statement Excluding Acquisition Related Costs and Other Adjustments (in $ millions) YTD 2Q 2019 YTD 2Q 2020 AS Acquisition Other AS AS Acquisition Other AS REPORTED Related Adjustments ADJUSTED REPORTED Related Adjustments ADJUSTED Costs Costs Sales $8,919 $8,919 $8,751 $8
Slide 120: Appendix 2A: FY EBITDA
Appendix 2A: FY EBITDA Excluding Acquisition Related Costs and Other Adjustments (in $ millions) FY18 FY19 AS Acquisition Other AS AS Acquisition Other AS REPORTED Related Adjustments ADJUSTED REPORTED Related Adjustments ADJUSTED Costs Costs Net Income from Continuing $1,109 ($394) ($258) $1,761 $1
Slide 121: Appendix 2B: YTD 2Q EBITDA
Appendix 2B: YTD 2Q EBITDA Excluding Acquisition Related Costs and Other Adjustments (in $ millions) YTD 2Q 2019 YTD 2Q 2020 AS Acquisition Other AS AS Acquisition Other AS REPORTED Related Adjustments ADJUSTED REPORTED Related Adjustments ADJUSTED Costs Costs Net Income from Continuing $716 ($136)
Slide 122: Appendix 3: YTD 2Q Highlights
Appendix 3: YTD 2Q Highlights Regulation G Reconciliation SIX MONTHS THREE MONTHS 2020 ENDED ENDED 2019 (AFTER-TAX GUIDANCE) (AFTER-TAX GUIDANCE) GUIDANCE ACTUAL (AFTER-TAX GUIDANCE) June 30, 2020 June 30, 2019 September 30, 2019 (AFTER-TAX) LOW HIGH Diluted net income per share $9.93 $7.65 $6.16 $1
Slide 123: Appendix 4A: FY Segment Financial Metrics
Appendix 4A: FY Segment Financial Metrics Excluding Acquisition Related Costs and Other Adjustments (in $ millions) FULL YEAR 2018 FULL YEAR 2019 The Consumer Performance The Consumer Performance Americas Brands Coatings Admin Consolidated Americas Brands Coatings Admin Consolidated Group Group Grou
Slide 124: Appendix 4B: YTD Q2 Segment Financial Metrics
Appendix 4B: YTD Q2 Segment Financial Metrics Excluding Acquisition Related Costs and Other Adjustments (in $ millions) Six Months Ended June 30, 2019 Six Months Ended June 30, 2020 The Consumer Performance The Consumer Performance Americas Brands Coatings Admin Consolidated Americas Brands Coatings
Slide 125: 2020 Financial Community Presentation
2020 FINANCIAL COMMUNITY PRESENTATION
The Sherwin-Williams Company — Investor Day (September 2020) on 6ix