Sherwin-Williams ups raw material inflation guidance due to supply chain challenges

Author: Janet Miranda

2021/04/27

HOUSTON (ICIS)--Sherwin-Williams expects raw material inflation for 2021 to be in a high-single digit to low double-digit range, up from its earlier guidance in January, CEO John Morikis said in the company’s Q1 2021 earnings call.

Morikis cites the updated guidance arising from the challenges in the supply chain caused by the coronavirus pandemic and exacerbated by winter storm Uri, which hit the US Gulf Coast in February.

Although the situation is improving, with many plants reopening, Sherwin-Williams is anticipating moderation costs in the back end of the year. These costs will be elevated year on year.

Sherwin-William said that inflation in commodities takes about a quarter or so to be felt, so they expect significant raw material inflation in Q2, expecting it to be the highest of the year.

The company has been highly proactive in managing the supply chain disruption to minimise impacts to customers. It expects to be in a similar mode throughout the coming summer months.

“Reduced raw material availability resulted in lower than anticipated inventory build during our first quarter, our close working relationships with customers, and the strength of our global supply chain, give us great confidence in managing through any challenges that may occur,” said Morikis.

Sherwin-Williams said it was working with its customers through the challenges that have arisen due to inflation, adding that having its own fleet of tractor trailers and delivery vehicles has helped ease pressures from its customers.

The company has issued price increases in consumer brands, performance coatings and a price increase in the Americas.

“We likely will need to take further pricing actions if raw material costs remain at these elevated levels,” said Morikis.

While the company is not taking additional pricing off the table, it would rather put out price increases in the middle of the painting season, which kicks off during the summer.

Price inflation will likely result in some near-term margin pressure.

As a result, the paint and coatings major anticipates a consolidated net sales increase in Q2 year on year.

The company will provide more information on cost inflation trends and raw material availability in its virtual Financial Communities presentation, which is scheduled for 8 June.

“Raw material inflation is a transitory issue for us. We have demonstrated an ability to manage through this many times in the past,” said CFO Allen Mistysyn.

Thumbnail image shows paint. Image by Shutterstock