US paint market to worsen - Sherwin-Williams

18 July 2008 00:47  [Source: ICIS news]

HOUSTON (ICIS news)--US-based paint maker Sherwin-Williams said on Thursday that worsening conditions in second-half 2008 will bring further margin pressure and force another price increase across several of its markets.

Company officials made the assessment during an earnings conference call following Sherwin-Williams’ report of a second-quarter earnings decline of 15%.

Driving factors include rising raw materials costs, declining consumer confidence in the US economy, dwindling commercial construction rates and the US housing slump - particularly in the southeast - which the company said it expects will continue to deteriorate into 2009, CEO Christopher Connor said.

The paint manufacturer has an ongoing "trim-fat-and-build-muscle" strategy to deal with the market, including plans to implement an unprecedented third price increase later this summer and to close additional paint stores by year's end, Connor said.

The company said it expects raw materials to rise by 9-14% during second-half 2008.

"Raw materials continue to rise faster than we can offset them so we've announced more price increases across many of our businesses, effective in the July-August time frame," Connor said.  The hikes will be in the high single-digit range, he added.

"As we've said, we're operating in a rational industry," Connor said. "No customer wants three price increases in one year, and especially during the painting season, but our customers are passing costs along as best they can."

The non-residential market for paints and coatings includes commercial and manufacturing segments, both of which are down significantly, Connor said.

Although the non-residential market is down by 19%, he said, there are some pockets of growth including educational and public buildings.

Sherwin-Williams has opened 39 stores so far this year and closed 62. By year's end, about 80 stores will have been closed, Connor said.

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By: Larry Terry
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