25 October 2011 22:23 [Source: ICIS news]
HOUSTON (ICIS)--Raw material costs will continue to take a bite out of Sherwin-Williams’ profit margins as rising titanium dioxide (TiO2) prices overshadow falling propylene prices, executives with the US paints and coatings manufacturer said on Tuesday.
Sherwin-Williams CEO Christopher Connor noted during the company’s third-quarter earnings conference call that raw material costs continued to rise rapidly.
A recent drop in propylene prices will help the company’s profit picture in the fourth quarter but TiO2 costs are likely to continue rising from now through to 2012, Connor said.
TiO2 makes up most of Sherwin-Williams’ raw material costs, he said. “The lag behind raw material costs inflation will impact us in the fourth quarter, as... in the third quarter,” he said.
Connor said he expected overall raw material costs to rise percentage-wise this year in the range of the high teens to the low 20s. TiO2 prices alone this year could rise as much as 40%, he said.
“Sherwin-Williams and our competitors are talking about replacement technologies but reality is we will depend on TiO2 for some time to come,” Connor said.
North American TiO2 prices were $1.80–1.94/lb ($3,968–4,277/tonne, €2,857–3,079/tonne), as assessed by ICIS, following a 15 cent/lb increase on 1 October. Several North American pigment producers have proposed price hikes for the 2012 first quarter.
Meanwhile, US propylene contract prices for October settled down 14 cents/lb from September. The settlement brought the polymer-grade propylene (PGP) contract down to 64 cents/lb and chemical-grade propylene (CGP) down to 62.50 cents/lb.
Sherwin-Williams announced an 8–9% product price increase in October, the fifth price increase in the last 20 months, Connor said.
Shares of Sherwin-Williams on Tuesday rose to $83.35, up by $1.77, on the New York Stock Exchange.
($1 = €0.72)
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