The paragraph discusses a conference call for The Sherwin-Williams Company's first-quarter 2025 financial results and outlook for the rest of the year. Key executives, including the CEO, CFO, Chief Accounting Officer, and SVP of Investor Relations, are present. The call is webcast and available for replay. Forward-looking statements are made, with a disclaimer on their validity. The company's first-quarter performance showed solid results despite challenging demand, with growth in the Paint Stores Group, improved gross margin and profit, reduced SG&A expenses, and an increase in EBITDA margin and adjusted earnings per share, which rose by 3.7% to $2.25.

The company is executing its capital allocation strategy by spending $352 million on share repurchases and increasing its dividend by 10%. Heidi Petz, addressing the first quarter results, thanked the company's 64,000 global employees for their determination amidst short-term challenges. The company is adhering to its strategy of delivering innovative solutions to improve customer productivity and profitability, amid a predicted volatile 2025. In the Paint Stores Group, sales grew modestly, with price increases partially offsetting volume declines. The Protective and Marine segment saw the highest growth, driven by sectors such as oil and gas and infrastructure projects. Despite weak existing home sales, Residential Repaint sales grew, aided by past investments, while new residential sales saw slight increases through new customer relationships. Commercial and property maintenance sales faced challenges due to weak commercial construction and delayed capital expenditures.

The company expanded its segment margin by 120 basis points to 18.4% and opened 18 new stores during the quarter. Consumer Brands Group sales met expectations despite adverse effects from foreign exchange and soft DIY demand in North America, resulting in a segment margin increase to 21.3% due to supply chain efficiencies and expense control. The company expressed enthusiasm about acquiring Suvinil, anticipating it will enhance the Latin America business. Performance Coatings Group sales fell short of expectations, with declines in FX, price mix, and volume offset slightly by acquisitions. Regionally, sales decreased in Europe, North America, Asia, and Latin America. The packaging division performed well with high single-digit growth; however, coil and industrial wood sales decreased. General Industrial sales faced pressure due to reduced heavy equipment demand.

The paragraph discusses challenges and strategic responses in the auto refinish business and overall operations. Negative foreign exchange impacts contributed significantly to a sales decline, although new account wins show promise. Core accounts are facing softness due to fewer insurance claims. SG&A expenses in the segment decreased slightly due to cost control, while adjusted segment margin dropped by 60 basis points to 16.5% because of lower sales. Administrative SG&A costs saw a significant reduction, partly offset by higher non-operating costs. The company plans to continue simplifying and digitizing to enhance efficiency. Demand is expected to remain unpredictable until at least 2025, with tariffs adding uncertainty. However, a large portion of the company's revenue comes from the U.S., minimizing tariff impact. Sherwin-Williams aims to leverage its strategic strengths to outperform the market. The paragraph ends with a reference to a slide deck outlining future sales expectations.

The paragraph highlights the company's reaffirmation of its full-year sales and earnings per share guidance, with no changes to other data points provided earlier in January. The company expects to update its full-year outlook in July, once it has a clearer view of the paint and coating season and the global economy's direction. Despite market uncertainties, the company remains committed to its strategy and adaptability, having successfully navigated past challenges like the pandemic, supply chain crises, and inflation. It emphasizes its strong track record of delivering value regardless of economic conditions. The company is focused on above-market growth, targeted investments, cost control, and executing priorities, aiming to be a reliable partner for its customers. Finally, during the Q&A, John McNulty from BMO raises a question about the company's capacity to adjust pricing in response to potential increases in raw material costs, given their low tariff exposure.

In the paragraph, Jim Jaye and Al Mistysyn discuss the impact of tariffs on raw materials for their company, particularly affecting applicators, pigments, extenders, industrial resins, and packaging. While raw material costs are projected to rise at the higher end of low single-digits by 2025, they are looking to manage these impacts through various strategies. Al explains that they try to push back against cost increases, seek offsets, and consider price hikes if tariffs persist. Although raising prices in peak seasons is not ideal, past circumstances like the hyperinflation in 2021-2022 have necessitated such measures, and they remain prepared to adjust strategies amid ongoing demand fluctuations.

The company has focused heavily on modernizing and digitizing its systems, which has resulted in improved efficiencies and reduced SG&A expenses in the first quarter. They are actively looking for opportunities to streamline operations, including right-sizing their footprint and being stringent with travel, entertainment, and third-party investments. The company is also concentrating on cash conservation by optimizing capital expenditures and managing working capital. The strategic measures aim to support efficiencies and reinvest in the company's stock. In the subsequent dialogue, Mike Sison from Wells Fargo inquires about the price mix at stores, which Al Mistysyn clarifies was mainly driven by price increases, crediting the stores team for effectively preparing customers for them.

The paragraph discusses the company's improved effectiveness in pricing and market share growth due to additional training, particularly in the residential repaint segment, despite a downturn in the overall market. Vincent Andrews from Morgan Stanley inquires about the company's cost of goods sold (COGS) and gross margins, given lower volume across three segments and stable raw materials costs. Al Mistysyn explains that the selling price increase, especially in the Paint Stores Group, primarily boosted gross margins, aided by supply chain efficiencies. Additionally, questions about SG&A expenses project a rise later in the year to address current volume challenges.

In the paragraph, the speaker discusses their team's ongoing efforts to improve operations through simplification and efficiency as volumes increase. They mention that despite not specifically reducing SG&A in the first quarter, they had previously anticipated pressure from the demand environment and proactively addressed SG&A across all segments. The company plans to continue expanding by adding 80 to 100 stores and associated staff, along with making strategic investments. They will provide a clearer outlook for the second half of the year in July, adjusting investments based on demand and gross margin forecasts. Lastly, a question is raised about expectations for the residential end market, considering homebuilders' lowered forecasts and potential share gains, to which Heidi Petz responds optimistically about the long-term outlook.

The paragraph discusses a strong position in the market, particularly during challenging times, by focusing on strengthening partnerships with customers aimed at simplifying product offerings and solving affordability issues. Despite high 30-year mortgage rates, the company aims to innovate in partnerships with builders to prepare for market recovery. Patrick Cunningham from Citi asks about market trends and consumer pressure, to which Heidi Petz responds that the residential repaint segment is performing well despite a flat and choppy market. The company is strategically investing in SG&A to capture market share, and while projects may be smaller, overall activity is positive and growing.

The paragraph discusses efforts to enhance productivity by partnering with new contractors and ensuring teams are well-trained and equipped. The focus is on improving efficiency at job sites, addressing immigration and labor challenges, and capitalizing on growth opportunities within the repaint segment. Additionally, there's a conversation between Duffy Fischer from Goldman Sachs and Al Mistysyn regarding pricing and cost dynamics. Fischer inquires about the pricing strategy, noting an early price increase in Q1. Mistysyn responds that while there's potential for further price increases, much depends on managing tariff impacts and future expectations.

The paragraph discusses a company's strategy for dealing with potential cost increases related to tariffs, including possibly raising prices if needed. The company is cautious about predicting tariff changes due to their volatility. Outside of paint stores, the company has implemented price increases in various segments to offset costs. John Roberts from Mizuho inquires about high single-digit growth in the Protective and Marine segment, where Heidi Petz confirms the company's strong performance and potential market share gains in areas like oil and gas, water, and wastewater. Petz attributes this success to the company's industry-leading portfolio and execution amid market disruptions. She notes a strong pipeline of projects, indicating confidence in continued momentum and growth.

In the paragraph, Christopher Parkinson from Wolfe Research asks about PCG in the current global context and specifically about wood refinish and P&M. Heidi Petz responds by highlighting that while there are FX-related challenges, the team is focused on acquiring new accounts and expanding their share of wallet. Despite macroeconomic pressures, particularly in the general industrial and heavy equipment sectors where demand is weak, the team is showcasing their value proposition. She mentions positive developments in the coil and packaging sectors, with new business leads and regained market share, respectively. The industrial wood segment is tied to the U.S. new residential market, and overall, the company expects to see growth despite current challenges.

The paragraph discusses how the market remains inconsistent, but the focus on acquiring new accounts and customer engagement is helping offset weaknesses in core markets. Despite the uncertainty in consumer behavior within the market, especially related to existing home sales, there is still strong interest in home improvement projects like painting, which remains a robust sector. The company has been successful in maintaining its position by being strategic and data-driven in engaging with customers and supporting their growth through new innovations, such as the gallery series.

The paragraph discusses a company's strategy in a challenging market. It highlights how the company has expanded its product offering for contractors working in homes by providing a comprehensive system from primers to top coats to enhance productivity. Despite flat market conditions, they focus on equipping their team and contractors with the right tools. Jim Jaye mentions that, on the industrial side, there's a cautious consumer behavior, particularly in auto repairs, so the company is targeting new accounts to counterbalance this. Heidi Petz adds that the company's scale in certain segments helps mitigate consumer hesitation. The operator then introduces Arun Viswanathan from RBC Capital Markets, who congratulates the company on a good first quarter despite challenges and asks about the impact of colder weather on the results for March and April.

The paragraph discusses the performance and outlook of a company in the context of market conditions and potential influences on sales, such as weather, mortgage rates, building costs, and tariffs. Al Mistysyn notes that April started as expected, with March performing better than January and February, and the first quarter was not significantly impacted by weather. Jeff Zekauskas from JPMorgan inquires about the effect of high mortgage rates and building cost inflation on the market, and whether building cost inflation might affect business. Heidi Petz responds by suggesting that mortgage rates are a significant factor for the building market, while tariffs, particularly on steel and aluminum, are the main concerns expressed by customers.

The paragraph discusses various aspects of the housing market, highlighting concerns about HVAC systems, garage doors, and window frames from the perspective of homebuilders. Al Mistysyn mentions that while they won't give specific guidance for April, they are satisfied with the month's start and it aligns with their second-quarter expectations. He comments on the impact of higher mortgage rates, noting that despite them, people continue with life events like marriage and starting families, prompting them to consider options like smaller homes or different locations for affordability. As existing home inventories remain low, the option of building new homes or buying newly built homes becomes more attractive. Mistysyn believes that while there's strong demand, mortgage rates don't need to drop to 5% to see market movement, as rates between 6% and 6.5% have already spurred activity. Greg Melich then initiates a question about gross margin expansion.

The paragraph involves a discussion about gross margin improvements and factors influencing them throughout the year. Al Mistysyn suggests that while the first quarter likely saw the most significant expansion in gross margin due to historical comparisons and low margins last year, further improvements are expected in the second half of the year. This is attributed to various simplification efforts and internal strategies, alongside anticipated price increases in additional segments. While paint stores may not see the same level of benefit in the second quarter, these other factors could compensate. In the following Q&A, Steve Byrne from Bank of America asks about the timing of residential repaint project backlogs and whether the company's residential repaint volumes were up year-over-year, but the paragraph doesn't provide the answer to this question.

The paragraph discusses a conversation during an earnings call or investor meeting about the company's performance and strategy in the residential repaint market. Heidi Petz and Al Mistysyn explain that despite a flat or declining market, their company is gaining market share in residential repaint through focused investments in their paint stores and sales representatives. Al Mistysyn notes that their volume has increased in a challenging market environment. Heidi Petz adds that they have opened 18 new stores in the first quarter and plan to open 80 to 100 stores throughout the year. They use a strategic approach to determine store locations based on current and future market density to support contractors effectively.

The paragraph discusses the company's strategic focus on staffing and talent retention, with a low turnover rate of 7% to 9% in its stores. Efforts are led by Justin Binns in the Paint Stores organization. Additionally, Heidi Petz responds to a question about the company's acquisition of BASF's architectural business in Brazil, highlighting the strategic appeal of the acquisition due to its complementary fit with the existing strong business in Latin America. The deal is expected to make them market leaders in a key region, though the timing of the closure and inclusion in financial guidance is not specified.

The paragraph discusses the company's positive outlook regarding growth and market share in Brazil's architectural coatings market, emphasizing the strength of their brand, assets, and leadership. It mentions that Brazil's GDP has been growing slowly, but architectural coatings, specifically Suvinil, have been growing faster. Furthermore, the company plans to accelerate growth with minimal channel or brand conflict. In response to a question from Josh Spector about share gains in the commercial and property maintenance sectors, Heidi Petz explains that while they anticipate some short-term gains, it is largely a longer-term process due to the competitive landscape and the nature of the projects, which can span multiple years. Al Mistysyn adds that they are focusing on exclusive agreements to continue gaining market share.

The paragraph discusses the Suvinil acquisition by Sherwin-Williams, highlighting potential operational synergies and cross-selling opportunities, particularly in Brazil and South America. Heidi Petz refers to the integration playbook used in the previous Valspar acquisition to emphasize their aggressive approach to realizing both top-line synergies and operational improvements. While specific investment details are not provided, the integration team is already working on ensuring business continuity with a focus on customers and employees.

The paragraph is a discussion from a Q&A session about the company's investment strategy and market outlook. Al Mistysyn highlights their focus on investing in businesses that can grow above market rates and yield returns, citing packaging and coil capacity expansion as examples. Garik Shmois asks about potential changes in customer inventory behavior in response to tariffs, but Heidi Petz notes that it's not a significant issue currently. Aron Ceccarelli inquires about PSG's future volume growth and Al Mistysyn responds that they expect continued momentum and improvement in protective and marine, residential repaint, and anticipate stable performance in commercial and property maintenance sectors.

The paragraph discusses the outlook for the company's second-quarter performance. Although the company doesn't provide specific quarterly earnings guidance, it anticipates flat sales year-over-year. Despite this, the company expects its adjusted operating margin to improve due to price increases, simplification efforts, and digitization efficiencies. However, there are significant headwinds from non-operating items, such as environmental credits and asset sales worth approximately $60 million from the previous year, which are not expected to recur. These factors may impact profit margin and earnings per share (EPS).

The paragraph discusses the potential impact of tariffs on raw materials for a company, specifically addressed by Al Mistysyn in response to a question from Eric Bosshard. Mistysyn states that the tariffs are not expected to push the raw material costs above the original outlook range. He notes that while the overall price might not need adjustment, some businesses might need to evaluate prices more granularly due to varying impacts of tariffs and raw material environments. Additionally, Heidi Petz briefly comments on labor availability, indicating no significant changes regarding labor inflation or competition for salespeople.

The paragraph discusses a company's approach to labor sourcing and talent management, emphasizing their recruiting strategy and talent acquisition efforts. They focus on placing employees in the right roles, progressing talent, and ensuring employee engagement and retention. The program "Create Your Possible" helps the company’s 64,000 global employees explore opportunities within the organization. Talent and culture are prioritized as essential to achieving the company’s goals. An operator then transitions to a question from Emily Fusco, on behalf of David Begleiter from Deutsche Bank, about the North American DIY market and its current challenges. Heidi Petz responds, indicating the importance of the DIY segment in the company's long-term strategy, accounting for more than 30-35% of available gallons.

The paragraph is a concluding segment from a call, involving Jim Jaye from Sherwin, discussing the company's current operations amidst a challenging macroeconomic environment. Jaye emphasizes that the company is experiencing ongoing pressure but sees opportunities to display its unique strengths and differentiated solutions. He highlights the focus on stability, predictability, and reliability, and mentions leveraging different strategies to outperform the market while ensuring customer satisfaction and shareholder value. He concludes by opening the floor for follow-up calls with Eric Swanson and himself to provide further information.

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