Sherwin-Williams Company (The)

Q4 2021 Earnings Conference Call

1/27/2022

spk_0: the morning thank you for joining the sherwin williams companies review with fourth quarter two thousand twenty one results and rally for the first quarter and full year of twenty twenty two with us on the call or today's call our january his chairman president and ceo almas titian cfl jane cronin senior vice president corporate controller and gym j senior vice president investor relations and communications this conference call is being with here simultaneously enlist only mode by issue or direct by the internet at www dot sherwin dot com an archive replay of this web castle be available at www dot share with dot com beginning approximately two hours after this conference call includes this conference call will include certain forward looking statements as defined finder us federal securities laws with respect to sales earnings and other matters any for that and save and speaks only as as a date on which such statements made and the company undertakes no obligation to update or revise any forward looking statements weather as a result of new information future events or otherwise before declaration regarding forward looking statements is provided in the company's earnings release transmitted earlier this morning after the company's prepared remarks will have been the session the questions are now to the call over to jim jay
spk_1: thank you and good morning everyone while our fourth quarter sales were within our guidance earnings result fell short of our expectations and then your year a disappointing note as we described on our january fourteenth call raw material availability did not improve as meaningfully as anticipated in the quarter and the i'm a cranberry variant put additional pressure on her company particularly in the americas group and our global supply chain organization as well as on our suppliers in
spk_2: customer
spk_1: we also faced the highest inflation of the year in the fourth quarter which we're combating with continued pricing actions these are near term headwinds the good news is that demand remain strong across our and markets we are seeing raw materials supply issues improve sequentially we also continued to strengthen our customer relationships and take action during the quarter that strongly position of for the long term and we remain very confident in our strategy and above all our people let me briefly summarize the quarterly numbers before turning to january is the will provide commentary on a full year and our outlook for twenty twenty two starting with the top line fourth quarter twenty twenty one consolidated sales increased six point one percent to four point seven six billion dollars raw material availability negatively impacted sales by an estimated hi single digit percentage with about sixty five percent of the impact in the americas group the remaining impact was largely in the consumer brands group with an immaterial impact performance coatings group pricing in the quarter was in the high single digit percentage range consolidated gross margin decrease to thirty nine point five percent driven by lower sales volume raw material cost inflation outpacing or price increases near term and supply chain inefficiencies sg and a expense decreased to thirty point two percent of sales consolidated profit before tax decreased the three hundred and eight point nine million dollars the quarter included seventy point one million dollars of acquisition related amortization expense deluded net income per share in the quarter decreased to a dollar fifteen per share the quarter included acquisition related depreciation and amortization expense of nineteen cents per share excluding these items fourth quarter adjusted deluded earnings per share ware dollar thirty four per share moving on to our operating segment sales in the americas group increased three percent as high single digit pricing offset lower volume related to raw material availability segment margin decrease to fifteen point one percent resulting primarily from lower sales volume and higher raw material costs partially offset by selling price increases
spk_3: segment sg in a was up slightly as a percent of sales as we continued investing in strategic growth initiative
spk_1: sales in the consumer brands group decreased seven point eight percent against a double digit comparison a year ago sales were flat excluding the impact of the lot of divestiture adjusted segment margin decreased to six point three percent of sales resulting primarily from lower sales volume and higher raw material costs and supply chain inefficiencies which were partially offset by selling price increases and good cause control sales in the performance coatings group increased eighteen point seven percent driven by price and volume increases adjusted segment margin decrease to eight point nine percent of sales as operating leverage from the higher volume selling price increases and good cause control were more than offset by higher raw material costs were inflation with the highest among the company's three operating second let me throw the call over to john now for additional commentary on twenty twenty one long with our outlook for the first quarter and for your twenty twenty two
spk_4: the your gym and good morning everyone i'll provide some additional call on the fourth quarter in a moment but first i'd like to summarize our full year
spk_3: for the second year in a row with a series of challenges that no one could have predicted the natural disasters a winter storm uri and hurricane either cripple the industry's raw materials apply to you for most of the year
spk_4: the lack of raw material availability coupled with strong demand the do a rapid an unprecedented raw material cost inflation labour and transportation costs also escalated throughout the year and do it all we continue to bow various complications brought on by the continuation of the pandemic especially in the fourth quarter
spk_3: the sixty one thousand and dedicated employees have shown lambs our greatest asset responded with determination we did not use any of these challenges as an excuse but as an opportunity to get even closer to our customers we focus on supporting our customers businesses do innovation value added services and differentiated distribution
spk_4: this delusions based approach resulted in our customer loyalty metrics a new account activity growing significantly during the year
spk_3: these trends bode well for years to come while we focused on meeting customers' needs we also attacked rising costs with aggressive pricing actions and all businesses
spk_4: nurture pressure on our margins was significant a we remain highly confident they will recover just as they have and past cycle
spk_3: as we grow the business as a commodity cost moderate overtime
spk_4: we also continue to invest in multiple long term growth initiatives during the year
spk_5: a mentioned just a few bull year metrics
spk_3: consolidated sales increased eight point six percent including the amid single digit headwind related to raw material availability to a record nineteen point nine billion dollars
spk_4: it was the eleventh consecutive year we have grown the business
spk_3: pricing for the year was in the mid single digit range
spk_6: and a segment bases
spk_5: the americas group deliver a percent sales rose
spk_3: and twenty percent pbt margin for the full year
spk_4: dodd performance given that sounds in aberdeen environment pricing was in the mid single digit range
spk_3: or largest customer segment residents are reaping grew by a double digit percentage for the six year in a row bills and all other customers segments with the exception of the i why room mid to high single digits in the year we also have and eighty five net new stores during the year consumer brands sales were down ten point nine percent for the year including a four percentage point impact from the dusted wild asthma this was against the mid teens comparison there was driven by d i y projects related to consumers nesting during the pandemic
spk_5: pricing was a little less than what we saw in tag
spk_3: performance coding sales were up twenty two percent for the year every region and every business unit increased by a double digit percentage price realization was in the mid single digit range
spk_4: amidst the highest cost inflation in the company this segment preserve the vast majority of adjusted profit before tax dollars was decreased eighteen point one million or two point five percent from the prior year
spk_3: even with the increase in consolidated sales we were not able to fully overcome the impacts of raw material and other cost inflation raw material availability and the am a crime variant and the year
spk_4: as a result net income and deluded net income per share were below last year's levels
spk_3: adjusted ebitda for the full year was three point two seven billion dollars or sixteen point four percent of sales they're operating cash for the year was two point two billion or eleven point three percent of sales we put our cast to work returning a little over three point three billion dollars to our shareholders in the form of dividends and share buybacks we invested two point eight billion to purchase ten point one million shares at an average price of two hundred seventy three dollars the eighteen cents
spk_4: we distributed five hundred eighty seven million in dividends an increase of twenty point three percent
spk_3: we also invested three hundred seventy two million in our business to capital expenditures including approximately fifty six million or a building our future project
spk_4: we ended the year with a net debt to adjusted ebitda ratio of two point nine times
spk_3: additionally when asked three acquisitions and will add to our capabilities the coatings business of a tenant company the european industrial coatings business of seeker agee and specialty polymer think total return to shareholders and twenty twenty one was forty four point nine percent which outpaced the snp five hundred and up here hook finally i'd also like to mention are he has she ever
spk_4: we announced and made good progress on our next generation targets this year
spk_5: we were recognized for various aspects of our program this year by week orbs and investor's business daily
spk_4: given the balotelli of the macro economic environment over the past two years are combined results over the period or perhaps a better illustration of the underlying strength of our business
spk_3: does the end of two thousand and nineteen consolidated net sales do two billion dollars or eleven point four percent gross profit increased five hundred and seven million or six point three percent adjusted ebitda increase two hundred eleven million or six point nine percent
spk_4: gap deluded net income per share increased twenty six point nine percent to six dollars ninety eight cents per share
spk_3: and adjusted deluded net income per share increased fifteen point eight percent to eight dollars and fifteen cents per share over the two year period we returned approximately six point three billion dollars to shareholders in the form of dividends and share buyback
spk_4: the far as or fourth quarter aki my comments brief in order to get to our twenty twenty two outlook the key themes remain the same as in our third quarter demand was strong and nearly all of our and market raw material availability remained a challenge there were some improvement but recovery was not as quick as we would have liked commodity and other costs remained elevated and we continue to implement price increases the new wrinkle or the impact of the i'm a cranberry it which was meaningful as we discussed on our call earlier this month
spk_3: the americas group sales growth in the fourth quarter was led by protective a marine which is up by a double digit percentage you residential and property management were up in the mid single digit range
spk_4: where's repaint and commercial where up in the low single digit rain
spk_3: the i was down double digits against an extremely strong double digit comparison from a product perspective exterior pain sales performed better than interior sales with interior been the larger part of the max
spk_4: the realized they high single digit increase in price and the fourth quarter resulting from our february one in august one twenty twenty one price increases in our mid september twenty twenty one surcharge as we mentioned a new twelve percent price increase is effective february one it this year we open thirty five net new stores in the fourth quarter
spk_3: along with these new stores we continue to make investments in sales reps management trainees innovative new products e commerce and productivity enhancing services
spk_4: moving on to our consumer brands group
spk_3: fourth quarter sales were basically flat to last year excluding the impact of the while divestiture
spk_4: dell's were up low single digits in north america that was offset by softer sales and europe and asia were covered restrictions were more pronounced
spk_3: pricing was positive in a quarter and in the high single digit range
spk_4: last twenty comment on the fourth quarter trends in our performance coatings group we continue to see momentum as this is the sixth grade order of growth for this business
spk_3: with sales increased by a high teens percentage and a quarter price realization was in the low double digit rains and all regions and all divisions generated growth
spk_4: regionally fails in a quarter grew fast as in north america alibi europe latin america and asia
spk_5: every division in the group grow with nearly all by double digits
spk_4: jen by robust underlined a man new customer lands share of wallet games and pricey
spk_5: packaging was strongest followed by coil general industrial industrial would and auto refinish respectively turn into are trying to outlaw
spk_4: with the and operating environment with strong demand across architectural and industrial and markets customer labour will likely continue to be a governor on growth in some areas we expect raw material availability to continue improving the clumsily oh the trajectory remains uneven as supply improves we stand ready with ammo capacity to quickly convert those raw materials a paint we believe the impact of the am a crowd variant on the supply chain should moderate do the first quarter
spk_3: any additional impacts from covered over the remainder of twenty twenty two are hard to predict let's not hard to predict is our determination
spk_5: our goal is to influence results
spk_7: not to simply report them
spk_4: looking ahead we expect to bend the curve in our favor to the very deliberate steps we than taking
spk_5: these include arrangements and agreements with existing and new suppliers prioritizing our product offering to our customers
spk_4: investments in additional capacity the acquisition of a resin supplier and actions to retain employees to produce and distribute product
spk_5: as the year goes on we expect to be talking less and less about raw material availability and supply chain issues and more and more about volume growth to quench oh gross margin improvement and sequential margin improvement in each of our operating segment
spk_3: our outlook also assume that the market rate of inflation for a raw material basket will be up by a low double digit to mid teens percentage and twenty twenty two compared to twenty twenty one we expect to see year over year inflation and arc or quarters with the largest impact likely occurring in the first quarter and gradual reduction each quarter of the year progresses we expect our commodity categories to be meaningfully elevated we expect other costs including wages and transportation to be up in the mid to high single digit range we are currently implemented additional price increases in all businesses and will continue to do so as necessary for the first quarter twenty twenty two we anticipate are consolidated net sales will increase by a low to mid single digit percentage compared the first quarter of twenty twenty one inclusive of a low double digit price increase partially offset by ongoing raw material availability issues
spk_4: we expect the americas group to be up low to mid single digits with north america paint stores at or above the high end of that range
spk_3: we expect consumer brands to be down by hi single digit to load double digit percentage and we expect performance coatings the up by mid to high teens percentage i pull your guidance is heavily second half waited due to stronger volume the impact of pricing action and weaker second half twenty twenty one comparison as you'll recall we began twenty twenty one with great momentum including first half sales growth of fourteen point seven percent and adjusted mps growth of twenty six point four percent before the natural disasters supply chain and issues derail the second half of the year but the four year twenty twenty two we expect net sales to increase by a high single digit to load double digit percentage we expect the americas do have to be up a mid to high single digit percentage again with north american pain stores at or above the high end of the range we expect consumer brands to be up a low to mid single digit percentage in performance coatings group to be up a high single digit to load double digit percentage we expect deluded net income per share for twenty twenty to be in the range of eight dollars and forty cents to a dollars eighty cents per share compared to six dollars and ninety eight cents per share earned and twenty twenty one oh you're twenty twenty two earnings per share guidance includes acquisition related amortization expense of approximately eighty five cents per share on an adjusted basis we expect four year twenty twenty two earnings per share of nine dollars and twenty five cents to nine dollars and sixty five cents an increase of sixteen percent at the midpoint over the eight dollars and fifteen cents we deliver and twenty twenty one let me quote some additional data points and an update on our capital allocation priorities
spk_4: given volume growth pricing actions in our ongoing continuous improvement initiatives we would expect for year goes margin expansion
spk_3: we expect to see estrogen a leverage and twenty twenty two by controlling cost tightly in non customer facing function will continue to make investments across the enterprise our hands our ability to provide differentiated solutions to our customer we expect open between eighty and one hundred new stores in the us and in canada and twenty twenty two we'll be focused on sales reps capacity and productivity improvements distance as well as product innovation we also plan additional incremental investments in our digital platform and the home center channel
spk_4: these investments are embedded in our for your guidance
spk_3: we expect currency exchange will be a headwind of about one point five percent on consolidated sales
spk_4: we expect our twenty twenty two effective tax rate be in the low twenty percent range
spk_3: our core cap x guidance for the years approximately four hundred and fifteen million dollars in addition to this poor callbacks we expect to make investments of approximately four hundred and fifty million dollars in twenty two related to our new headquarters and are are indeed facility project oh depreciation and amortization should be about three hundred million dollars each interest expense should be about three hundred thirty million dollars we have two hundred sixty million of long term debt do and twenty twenty two historically we've targeted dividends at about thirty percent of prayer gap earnings next month at our board of directors meeting we will recommend an annual debited increase of nine point one percent to two thousand and forty cents per share up from two dollars and twenty cents last year we expect to continue making opportunistic share repurchases will also continue to evaluate acquisitions that fit our strategy
spk_4: as we begin twenty twenty two we remain confident in our strategy our capabilities and the differentiated product and service solutions we bring to customers
spk_3: above all my confidence in our people has never been higher our business remains extremely well positioned and were emerging as an even stronger shown lambs following the challenges that we've faced the last two years
spk_4: we remain steadfast in our focus on creating shareholder value
spk_5: that concludes our prepared remarks
spk_3: was that i'd like to thank you for joining us this morning and will be happy to take your questions
spk_0: thank you at this time of the conducting and question and answer session as he like to ask a question please press star one from your telephone keep had a confirmation town indicate your line of the question que can you press start to feel a to movie heightened on here obsessions really think her equipment maybe nothing to pick up your handset before pressing the star starkey my mom please highly poll for question from watching that star one
spk_8: thank you and our first question is from the line of chris parkinson with as you how this is unique question parkinson factionalism a denier ally for question say about that a half hour or it it seems like me multiple steps to rebuild your margin structure and strive toward back towards your long term goals especially considering performance just given near term raw material shortages guild probably getting better sequential basis of raw material place and logistics costs etc etc you're all hopefully be to be helps offset by pressing house we think about what's actually embedded the or twenty two guidance on margins are based on those factors and then perhaps more importantly
spk_9: lee and house investors recalibrate agitation for the cadence of improvement i and twenty three and back toward your long term goals are any get color will be appreciated thank you
spk_3: yeah sure christmases that l a station
spk_9: as the twenty twenty one one old it with a strong very strong first half an hour and a softer second half hour say are twenty trying to budget this is exactly the opposite way that continue dad had when says john mentioned in raw materials heavily i waited to the first half
spk_3: but incremental pricing we talk at tackling out with it not february first four percent increase and we're going out across the all divisions and troops with with pricing so when you look let me start with that when you look at our gross margin
spk_9: our first half you'd expect to see a slight contraction ah but six to twenty will improve and as the at the quarter goes on and then you start seeing burst margin recovery and our second half and that expectation is across each of the segments and really volume traveling on them on the architectural side continued pricing catch up on that performance coding style along with that continued strong demanded by him and what i would expect to see some contraction in the first half and operating margins among the segments but i would expect to see recovery starting in our second half on the operating margins and all segments are drawing operating margins your we're in our second half and even a including if fire even including tagged and have the potential to get on a top of a previous years and and as you know in an inflationary environment and dead it is are in any look back at our history as with the raw material increases we opponent price thought that those raw material increases and as the price the fact and just continues to improve with start to see recovery and then as raw materials moderate and rollovers see gross margin expansion i can fight back and the have in the past ten eleven twelve his father a grown up and titanium dioxide bizarre margins get the contract and then we thought route are from thirteen the sixteen
spk_10: almost that six hundred basis points we expect to see a similar environment today that's very helpful and just aren't as a quick followed just in terms of twenty demands there's been bitten what they were more recently there's been a little bit of skepticism just given rates now housing affordability just that young defender the broader inflationary environment just from the show and specific angle and what you're hearing on your specifically from
spk_4: your stores or whatnot really truly underscores your volume confidence are on the macro for tag get out and as was your for ability to further when share on both on pro and they bought his just any additional insights i will be very helpful thank you
spk_3: because i think you hit on to very important points that one of his the market be in our position in that market that would be the second point though we believe in the first indicator would be the close relationship that we have with our customers or less gym to talk to them macro indicators of give us confidence in the in a moment that a so what gives me the most confidence the nearly three thousand five hundred sales reps and over four thousand store managers that we have out there everyday preview or crm system with data
spk_11: that plays back the incredible confidence that our customers have done this market
spk_5: we've had we believe that a pretty strong run here in a challenge the market but our customers are telling us that as a look forward demand continues to grow the if you look across the segments in every one of those architectural segments the feedback and were getting is exactly that this is going to be a terrific year
spk_3: many of the our customers or would say they're there pipeline is pretty much all right now and they're looking out into the second third quarter taking those right now so it's it's it's very solid that the me as gym to give you
spk_1: little bit on the macro numbers at reinforce what we're hearing from our customers yeah thank you john a good morning chris and knows you look across the various indicators that we've always talked about for years now they're all pointing in a very positive direction press imo go through all of them but and the residential repaint side we look at lira the leading indicator remodeling activity that was up high single digits in the fourth quarter and they see strong double digit growth throughout twenty twenty two remodeling market index also is that near record levels going forward think on the new red side near look there in addition to john comments about what our customers are saying you know permits and trends are permitted start have been trending very well since the summer other still up big backlog of of homes that need to be built both the at the entry level and at the at that the luxury level as well mortgage rates while may be taking up a little bit still are largely support of i think
spk_3: on a commercial construction side you've got other indicators that dodge momentum and next the architectural billing index all of those pointing and really strong directions
spk_5: and proper maintenance what we're seeing good activity there so the matter where you look on our tech business it feels very strong your tag and and we've we've also our consumer brands business as well as lot of opportunity there for pricing in the market as well but one additional point that i'd make in addition of the pricing availability of consumer brands
spk_3: here's what we're seeing from our contractors in a way we talk about gross margins and i go to a push that pricey through this is a market where our customers have confidence in their ability to put pricing and because it supply demand and dynamics know where up putting price in to customers who have confidence in their ability to put
spk_5: price the the market i've often said we typically don't receive thank you notes for putting price increases through and i don't expect to receive any and this round but i will tell you our teams are very confident that our customers are almost and the mindset as okay
spk_12: i need to know what the price increases going to be so i could push it through and at the same time they're they're deciding which projects they're going to take him which ones are not so the dynamics are very powerful
spk_13: topple thank you very much
spk_0: a stress
spk_14: an expression is for nine of cancer punjab me with that
spk_15: aggie good morning everybody
spk_14: yeah i get somewhat of a followed in i know it's by the and is a lot going on
spk_9: anyway be weak are the key break out for us what you see assuming in terms of rangel availability for two thousand twenty two as last year pacific earnings guidance i guess i'm referring to buying catch up and then in our your own and metairie levels at the or on false yeah so i've gotten that you know that the availability expectation that we make the some our first quarter we talked about our first or down a little bit of shopping and fifteen a little that a in it than are ah availability it yeah i could be loathing all the mid single digits but that take that commitment that we've we've gotten across our existing supply or base or or and our new supplier base really good us great confidence that will have the raw materials available to to meet the stronger demand man have that in our first quarter and i should say stronger production and our first quarter so with that prioritize product line at at john mentioned we are going to build him at significantly more him and tory ah to to the end of our first quarter compared to year and twenty twenty one and vs last year but not to what i would say more historic levels so that that the additional and and tory for tag that we put an
spk_3: at the into the year because the the to the sales shortfall were helpless early on but your talk and you know ten to fifteen day that inventories the real world and that because of the excess capacity that we have put an end up being filled up with with the raw material supply and really getting ourselves and a better and and toy decision you guys are very good at i feel terrific response by our a creepy looking long term i you know there's some shopping is here and short term we understand that but when we look long term and why we we feel our company is going to really outperform and we often talk about this coils free
spk_16: you know i look at the point that i'll just mention and in a like did at a couple of i could go there certainly are opportunities to his point about the additional capacity that we've just brought on we've got more that's coming on
spk_3: we're that a that it is important
spk_4: the a thing that i think it's important to understand that we're not complacent in have a look at how we get more efficiency and more productivity out of our plants there's work to be done here but we're well underway and in a simplification process of our products to ensure that our responsiveness and and i think
spk_3: it would be a question some shareholders might have you know as we come through this how do we ensure that if anything like this were to happen again that that where the horse to bet on and we're not sitting here waiting just trying to get out of the current situation who we are looking at how do we build in the response as a result of this experience to ensure that we have
spk_17: why these types of issues going forward so it does include the resin a company that we bought it does include the capacity that we just bought been equally important one is a simplification of many of our product lines to allow us to be more responsive more adaptive to the to the situation if it be from raw material suppliers a raw material
spk_3: products or to be able to move different resins around to be able to supply our customers so there's a lot of really good work heavy heavy lifting the taking place that we're not going to see today but it's going to help us to help us not only in situations like this in the future but to be more responsive to our customers' needs
spk_15: in in in more reacted to opportunities going forward and that's where i'll pull and then in i'm realizing this and a difficult question answer but on you know all the various not and supply chain are so many different issues that you customer side and in on their earnings calls and it's on sale for it i'm just trying to gauge you know if you are able to produce more pain and you just wave a magic wand and know yeah
spk_4: able to get what you need from around just and point he had his they're so gonna be a fair amount of shopping as you think in terms of binds on a quarterly basis because of the other countries that customers or side including appliances labored cetera fighting
spk_3: we're going to have raw material
spk_4: ironically opposition is going to improve it's improving now and as i'll mention between our current and new suppliers we got confidence that this is going to improve as i made the comments earlier
spk_3: in our at at it this way we've always hated talking about whether i i would i would associate that our feelings with what we're talking about regarding raw materials to feel like whether will i get this behind us
spk_4: in and start talking about growing our business and talking about incredible results were going to post and and we're going to have a rise to be able to do that now are there other issues that were going to face like transportation and and lifted the fact that we're going to be in a race to build product through the first quarter but we're not going to build a build the inventory that
spk_9: we typically build in the first quarter to be as responses at response as we'd like to there is going to be some hand to hand combat if he well as we get through the year is going to get better that we're going to be racing the to to fill the pipeline here and we would have liked if possible to have built more inventory in the fourth and first quarter the but we're we're going to be in a position to have more raw materials and more capacity to be able to respond will build something i'm a tory coming out of the first quarter but but it won't be that to the traditional level that we would like going into a been season at batch of in the get a that they're at a think when you look at that the past two years and really challenging and and week because we've got a long tenured experience management team the been able to meet those challenges of produce the i followed results yeah we we we believe were paid influence results and not simply report them i believe our management team is doing and if you look at the midpoint of our twenty twenty to adjust dps that yielded attempts percent on three your on an average growth rate and while doing that we continue to invest in the future growth that the company and were and returning a significant portion to our shareholders in the form of evidence and share buybacks so i think what you're gonna see it are by him out and i'll look at it may the architectural volume and our first half my expectation is because we had such a strong first half of twenty twenty one that architectural volume will be you know slapped down low single digits it's really our second half an expectation at
spk_18: yeah all the things that are global supply chain team is doing to get past and procurement teams get past raw materials apply on get more consistent transportation and logistics
spk_19: set up our second half were expecting her up to the up mid the high single digits and by and that's really what's gonna drive that operating margin and for a minute across architectural ministers tag an anti gamer
spk_0: thanks so much
spk_20: cancer or next question comes on the line of bob court with common set pieces he the question ignore much on county fallen off onto the phone the make for an it properly think he said maybe or architectural business would be down the first half i think you're implying revenues and i'm wondering given them right thing came through twenty one and then and new again the february price hike coming
spk_9: why would be a week and then even more broadly of twenty two i think that guidance you gave on tag revenues didn't match our honestly you'd expect and pricing so effective maybe not a whole lot of net volume and we could give a slow more color on and why that would be yeah he has no huge range of production the here yep a pit to clarify i was i was the highlighting architectural volume and our first half the be flagged down and in it because we had such a strong start to our first half last year if you look at our our first quarter consumers that twenty five
spk_21: the north america paint stores or up high single digits
spk_9: and the have of that pie single digits up at a in our first place i was referring of i am and are in our are are full year
spk_20: ah tag being admit i've single digits with the comment being that are north america paint sort of the at or above the high end in that range it if you and your life the price increases
spk_22: you're gonna get to a amid i'd single digit so by am i would expect to the up an art north america paints doors to be load a man
spk_5: that mckechnie help library that men i'm just curious have you guys have any insight on my to figure out if they would gobble ordering if there were maybe some you have both booking throughout when he wanted your customers were scrambling you know in a scarcity noted is ernie risk your head he it the have calculated
spk_22: there wasn't from aladdin and maybe the underlying demand is slightly weaker than than you'd expect and it had he get that comfort the about as not a concern for me at all and we got tremendous comfort in confidence that the demand is real
spk_23: in the he was we look at the bidding activity is taking place to the job request that are taking place we can we can verify that some the demand israel with outbreak happened
spk_0: at claire think again
spk_24: that up ah ha
spk_22: our next question to line of to and patterson with what research is is either way
spk_10: a good morning everyone thanks for taking my questions
spk_1: it first at it like i understand raw material inflation is is kind of a moving target by it if we took a snapshot as we said today in january i'm hoping you can discuss the you know by fourth quarter twenty two whether raw material inflation imbedded in guidance is still up year over year or down and then three or four year twenty two ah low double digit to mid teens inflation could you just break out expectations by by your segments yeah true and what i would say is you know for the full year were expecting as we said that low double digits in the teens inflation he should be the highest in the first quarter and i would expect it to sequentially improve as the or goes on and comparisons it a little bit
spk_9: easier but i think even our fourth quarter you're likely to see us up low and mid singles in the fourth quarter
spk_25: i think the strong demand it's out there is helping to support the the inflation that's out there i would again expect to find by segment probably to still see
spk_9: pretty highest inflation in our performance coached group yet you have any other time and i would make on that debt that just reiterate now still and we talked about last year the trees and raw materials with heavily weighted to are performed total nightmare about sixty percent we expect to see yeah a little bit less than that this year
spk_10: but also it just yeah you said it or line of sight on on raw material inflation is probably at that two quarters out so looking after their second half of the sheer yeah we'll continue continue to monitor the back as we have throughout twenty twenty one and if we see any change or increase in inflation will will react with pricing quickly like we did last year
spk_9: okay okay thanks for that men i'm in the fourth quarter tag margins fell six hundred and sixty deaths a year over year and i i know that leverage it is a volume leverage in the key component to your operating model and i'm hoping he can help us parse out how much of this was due to to volumes declining will call it high single digits vs this price costs dynamic that's going on yeah true and a in iowa as that that in a path by him at the singer thing of biggest driver of operating margin improvement and added especially the kids are tiger innovation and i would say that is the almost not the hundred percent driven by by the find decline and and if i may i just like a recap the fourth quarter across each of the segment disturb you know kind of bomb talk about this year levels that and and and move on to twenty two but if you look at tagged as i mentioned at all by a german that margin and we look at consumer you know it better than our sales guidance but primarily due to non paint sales increasing and if you look at the paint gallons of being left than what we expected that it that again at via really impacts are operating margin but we also had a because global supply chain it embedded in our consumer brands group because of availability we didn't need the production plant them yet planned so the supply chain and efficiency and wrong ironic the costs are equally impacted the consumer segments of by him at the number one driver of that impact of than the other two are probably equally related in any get into our performance coatings group nice that i said sales game but again the raw material increase quarter to quarter that we saw an for the full year was really about sixty five percent of those when she will increase so they took the front of the incremental increase in raw material that that really drove what the impact on margins and in athlete that
spk_26: this is the one segment that has more work to do on on pricing to chase the increase in raw material they're out as i mentioned earlier with additional pricing in our first quarter an expectation that we'll in a top raw materials
spk_24: this year and see stagnant operate segment margin improvement on our second
spk_27: hey hey i'll for clarity i lost you a little bit on the tag segment commentary that for clarity
spk_28: the majority overwhelming majority almost all that was entirely due to that the the margin decline not dollar decline was due to that last volume leverage but that's right
spk_0: that's right true and okay well okay thank you
spk_29: extra with
spk_9: and if question comes in line of jeff the classes with jp morgan is soothe your question
spk_30: ah thanks very much the want to pursue that attack guidance or two thousand twenty two of up to high single digit percentage i think he said earlier that your volume might be up load of single digits mean if if your prices are going to be up some high single ticket number i realize this
spk_9: bet
spk_31: a negative currency
spk_29: i don't see how your attack range should be mid to high single digits
spk_9: unless you expect in a flat or negative volume growth
spk_32: yeah don't know
spk_9: got triumph i played back yeah it out it would we talked about it or the north america stores being up
spk_32: at the high end or above the eye and a that range and if you look at third you think in eight to the thirteen taller eight to twelve percent he look at the
spk_29: panthers jerk price increase yeah the cadence of the increases the think about how he in your life the price increases and pains stores were going to be at yeah low double digit our first or hi single digit in our in our first half and and that are moderated as
spk_33: go to the second half to get to amid the i think edges so that's how i get to
spk_9: canada loader to mid mine
spk_29: yeah i don't see why up with moderate billion third quarter and may be maybe with my i mean to to that level
spk_9: but that to to put that aside you your as to necklace i think we're up to percent you know for the year so was it that there was a lagging effect
spk_34: it to whatever inflation you're experiencing and as chin a and you expect the a much more or or can you keep talk about your as chennai inflationary expectations on that board the detail
spk_9: sure it will get yolo we don't really provide the full guided by line but the to give you some directional we do expect to get leverage er es una as as the year but rapids will continue to invest as john mention and in eighty two hundred new stores attack that's our digital platform will continue to look for up to invest in the pro paints within our consumer segment another key initial there and then he has services programs job performance coatings true but we're still gonna be very focused on controlling our non customer facing ah
spk_29: sg and i and i would say if you look at how are buying a month will unfold throughout the year
spk_35: not the first half will be
spk_0: slower than our second out like i mentioned so we expect to see more leverage in our second half on unanimous the in our first
spk_36: thank you so much
spk_37: a step
spk_38: only question is from line of my son with while fargo the city of your question
spk_5: hey guys the morning
spk_3: i'm just curious n n and tag given an easy don't have as much volume mark or gallons as you on a power he start allocating those amongst customers and are are there particular areas or country are profitable can you maximize next and and profitability as as you think about you know where to put
spk_39: limited volume at this point
spk_3: if you have a lot of really good worker taking place mike is pretty good observation of it on your part because you know we've had to make some decisions and some of those decisions include paring down the product line to ensure that we have the products that need that were needed
spk_5: we'd really i think done a terrific job and in utilizing the resources or that the the raw materials that i have become available and we treat those precious raw materials just as that's where manufacturing products it could best fit the needs of our customers and there are times when we're good
spk_3: the customers
spk_4: they are a product that that will fit their needs but it may not have been a product that they came in to get into we're working with them and and i would say this that as we exited the line of sight and we've established in the relationships that we've dealt with our customers is one of the reasons that were so excited about you know how to turn something bad into something good
spk_3: the relationships are are stronger because our teams are working with our customers in a very unique way they may come in talking about wanting a product and our teams work with and understand what is the project what are you doing let me get this product product for you and him were keeping our customers in feet and has been a of of a mantra within the tag organization is keeping our customers and that responsiveness particularly at the store and rep level is appointed differentiation we've got a number of stores out there and we're leveraging the inventory availability in those stores
spk_5: in a way that quite frankly most companies couldn't do and i'm really proud with we talk a lot about one sure when i'm at mentality of doing what's best for the company and so there's a sharing of inventory as close to the customer possible to be as response of as possible so we're not for try not to get to the disappointed to make about which to switch customer to serve
spk_37: what we're trying to do is get to the point where we're were answered a question of what product can we get this customer to keep them moving keep them making pain and keep them providing for their families and as a result of that our our view of their projects has improved their sharing more information with us and that's why when we asked we were asked earlier about the confident that we haven't and demand why we think it's it as solid as as we believe is our customers as we work through this are sharing more with us than they ever have before they trust us we're working with them and and were partners and so were given and products that get them off
spk_40: their projects onto the next ones that and next project and and are making money doing it
spk_3: god gotta an effect follow up have given that are cavs a surprise to the upside one game at first place but you're i see upside are at of what are you think he got a surprise to the upside and and twenty tail and why do you think you can do that and and and and practically what are to your control to do that we're going to surprise ah i would say this if if you look back or last two years while we've generated over five point six billion dollars in net operating cash and we returned six point three million a billion dollars to our shareholders in the form of dividends and share buybacks we've also been invested in this business mike
spk_5: so in our north america pay stores with open one hundred and thirty three new stores net new stores and hundred and eighty new wraps with added
spk_4: probably over twenty eight hundred management trainees to make sure that we are have a really strong future a pipeline with
spk_5: we've invested in our pro who paints with our consumer brands partners
spk_3: on the performance code inside we're adding services and solutions that that we really believe our customers are willing to pay for because it's it's helping them make more money and that's what we're focused on
spk_4: would it would not talked about this yep that we've been invested in innovation
spk_3: some might say well jeez you know how can you invest in innovation the your first question you know what we were sitting here with raw materials having to make tough decisions about which products were going to make it would you be investing in innovation in the answer's yes we are investing in innovation in fact if you look over last ten years we've there's probably over twenty new products per year in and that's really important as important part of our strategy and i and i know that first hand because i can remember what our the store manager and just learning to sell a product and and those new products made a a pretty average sales person a much better salesperson i would i would tell you it helped me a lot and i think it gave me confidence and he gives our people confidence most importantly i think it gives our customers confidence and so we're investing in these products in the these products are solutions our customers used to help their business and we think we're uniquely positioned to be responsive to those customers needs in both to try that the and needs they have that they can articulate and sometimes the unarticulated the things that they they may not know and so it should be no surprise that one of the surprises that we have coming down the pipe include breakthrough technologies and areas and durability scuff resistance my resistance
spk_5: in in it's claire you know with a surgeon covered variance a key emphasis in the market right now is keeping surfaces queen
spk_3: it's a you'll be hearing about some of these surprises as you say of our self cleaning technology platforms as we move forward but right now naturally we're focused on on that precious raw material allocation and service in our customers
spk_5: but rest assured that that that's an important part of what we're doing
spk_3: i think the other areas that you should expect that might surprise as the dead the output of the capital expenditures that were making we talked about capacity utilization
spk_4: in in the incremental capacity that we've added with at six hundred seventy million dollars over last two years we're gonna we're gonna get every ounce of money out of those were the put those assets to work and we're going to use them hard
spk_16: i also think the in it is a bit longer term but he knows you're asking about surprises i i think people will be surprised as we've invested in art new aren't the facility and i just mentioned innovation while that's not gonna be in a short term it's going to be an important part of what helps drive our company for because i think the
spk_5: collaboration that we're going to get from our wonderful technology people is really going to be exciting
spk_3: and then i guess is think our time i had the last thing that i would would add would be the utilization of this specially palmer's asset that we that we acquired
spk_41: for the and our ability to respond in our ability to to to the really am outperform the market in in really d risk some of the what comes inherent from the gulf coast
spk_0: is is we believe going to be a differentiator as well so those are things mike i want wanna talk about there's a lot more to we have up our sleeve we're pretty excited over here about what we're working on you know we could talk about themes like what's coming down the pipe and digital and then the other areas but i got a lot of confidence that while we're excited of
spk_42: what we've accomplished the now with his quarter we would like to that of their fourth quarter but i'm really excited about where we're headed and i really do believe that the best does i had were just getting started
spk_3: i thank you
spk_5: mike
spk_4: our next question comes from a line of the of park or think i have a hit your question
spk_3: johnny just mention this pros who paints oh what exactly is not an issue how can you help loans or capture more paint contractor business and do you senior us from our recent initiative at home depot to be something similar
spk_4: but we respect all our competitors steve so that you know we we don't just stick our head of the sands a don't not nothing's arrest in fact we often talk about a healthy paranoid life which be his we take we take everything
spk_3: as serious and nothing for granted but what the with the pro who pays as an initiative for that really drives effort towards these contractors who who hate as a part of a project to our stores are focused on the painting contractor those that wake up every day with a goal of applying pain as a whole host of contractors out there that could be remodelers or could attack i would say nearly every project out there nearly every project ends with paint on a project and so they're our customers that prefer a different shopping environment then a paint store and the reason they they might want to pick up drywall they might want to pick up cabinet they might want to pick up on mean whatever my be and so they choose their preference to be a home center platform without a terrific relationship with a number of
spk_4: our
spk_22: consumer brands customers that to focus in on this approach who paints and we believe that am
spk_42: there's a terrific opportunity in many cases to apply what we've learned through our our tag business
spk_3: both in in services and actions as well as product technology to bring and to help our customers better penetrate those customers that prefer that format and while we have had some very limited success in that through our stores
spk_4: i'd say that that terrific opportunity for us is to have much greater penetration to our homes and a partners just as they may have had some success with haters we think by kind of looking at the market and finding these opportunities and really putting the effort in products services than that of all other different unique nuances on helping those customers make more money will ultimately benefit everyone
spk_3: alleges just one more honest with your we year issue with respect to tag ah me you noted the the year ago volumes were very strong and yeah that year over year headwind is there is there a components of that year over year volume ah
spk_7: drag that is also has a makeshift impact on price if if the year ago volumes work in a more d i y and tag i did that result in our in our a price benefit that is a year over year drag that is also something that's been reflected in the guide
spk_9: no i wouldn't say that the case to eat that and when you when you bring up makeshift i were i jumped to his wanted to clarify that what we are experiencing is a very positive makeshift
spk_43: our highest quality products are the ones and greatest a man and you know you could talk about a lot of issues one would not talk about yet as labor and when you talk about painting contractor is trying to get as much done as possible they are all of a very well aware that you're getting the most out of a project getting in and out with less
spk_44: call backs been able to go back in touch up if you will get a the lowest price canopy is not the answer is back just the opposite in we do believe that your part of the specialty store experience and quite frankly in many cases where were you are either now or will be bringing to our homes and our partners
spk_0: allows our contractors to be more productive so again we're looking at helping our contractors make their labor some of whom may not be as experienced as they would like we're helping to make those laborers much more productive in more professional and their output or their finish
spk_45: products and the they would in a lower call i've gotten paid yet the dining evidence is just as a reminder d i y related i'll attempt at paint stores as cry about temper sat when i was talking about architecture all my am in our first half or so that difficult top that included of tag and consumer end of summer at twenty five percent twenty five percent growth and are and her first quarter last year
spk_46: okay thank you
spk_3: i just gave
spk_47: and ask questions you a line of around this when with was obviously capital markets but here's a question
spk_3: right thanks to my clashing morning and
spk_5: lot of the questions i guess i have been ass cell and maybe i'll just as a couple questions are at a particular couple vertical cell and could you update us on what you're saying and that commercial construction and mrl am i know those are markets that had can alive during and and i am has there been any improvement there are a imagine not is given kind of the lingering effects but now may be punished address that first
spk_3: ah under line the man i'd say commercial is a solid sales and we've been challenge in some of these areas as you know we've been pumping through availability but a product that i would say it feels pretty good in the reason i say that iran is that these projects are beginning to come
spk_5: back online
spk_4: in reaching the paint stage in many cases and our customers in the space have reported some of the labour constraints that we've talked about you know they're not really impacting the paint doesn't so disaster waiting for drywall or who may be fighting for more labor to get in
spk_3: the drywall done sooner and you keep moving up the food chain so that having an impact on the an entire flow of the project that as gym mention the if you look at the dad's momentum index it's it's strong and we have a lot of lot of confidence that it will continue
spk_16: i'm sorry the other side you asked about was over and morrow from a
spk_3: well i i i i'd say maybe and a broader sense we can answer emerald is and you get it also fits this but maybe i can help you with protective a marine because it it fit underneath that very well
spk_4: our our business here was up in very strong europe double digits
spk_3: and there's a lot of really good work here
spk_1: we have spoken about the are strengthened petro cam
spk_45: in the opportunities there the work that we've been doing in the adjacent markets is beginning to pay off were excited about that and you know is that never been spending on infrastructure continues of work it's way through while it may not be immediate if you look longer term were really well positioned for that and working hard to capture that as well so a really good if you look at the professional side of every take segment that we have without tremendous conferences
spk_9: it's it's a very strong market and from a demand standpoint in as i mentioned in our i know that from my years of experience you know that when pricing is flowing through from our customer from us to our customers it as well as it is and from them to their customers because the their customers simply want to projects done in they're willing to pay to get it it it's an indicator for us have the strength of the market thanks and than just as far back maybe i can just ask about than three cash flow and and used as their ass out in l a it appears that may be working capital me i could be a drag as you as you can ask am in our cell higher priced inventory and roz is that right it ah or is it building inventory that would actually and yeah maybe benefit work and capitalism the to twenty tail and sell am could you just help us understand the ab free cash flow growth and twenty two expectations and damn and then uses thereof i mean every scene
spk_48: valuation multiples remain elevated i'm and thus that in our most excess cash for be used for by back to that act how we should think about and precast on and it's is here
spk_9: like the around eight you know i think what were they expecting it will generate a finally iron and out like operating cash toy trying to with with the and man and in any time your point partially offset by the increasing working capital weeks that the and a year with significant lead more architectural inventory out and twenty one a sheer are some inflation there
spk_1: it it's five cap accept that john talked about expected to be about one point nine percent or for fifteen million
spk_9: plus another four hundred fifty nine for the building our future projects at did not include senate seat and
spk_1: cash out less than that for fifty at given and to expect and and at nine percent increase to two forty at the battle of six hundred thirty million dollar number of paper sack
spk_49: so your free cash flow and some gonna go backwards
spk_0: but as far as emanates is concerned i yeah we'll get her get even a leverage ratio that to two point nine in the sheer our our forecasts is really for the death even approach the high end our range south
spk_50: two to two and a half times with that get to be flat and really much driving at leverage ratio at the increase in even itself from us balance sheet standpoint are going to have to path to to acquire and we're going to continue to pursue acquisitions
spk_3: that that our strategy and and we expect to close the previously announced seek acquisition in our first quarter but and then you're right after an additional am and i were going to buy or start back way to be continued be very consistent in our capital allocation philosophy and were not at all cash
spk_1: thanks a thorough an expression from the line of my harrison was he put research mississippi where ah good morning
spk_3: who was wondering if you can break down the raw material situation little bit further for us how do you see somebody specific raw material baskets behaving this year as you look at resins pigments solvents additives and packaging are are are you still seeing some of those go up significantly wow
spk_51: while others are are stable or maybe moderating
spk_3: yeah my cat a couple of comments their i would say you know and twenty two i think the biggest increases your we're still expecting will be monomers rather than solvents and packaging no we look at propylene as we've often talked about that really is critical to about sixty percent or so of our raw material ask it oh bit of a disconnect here recently we've seen propylene ticking down but we haven't necessarily seen it in there in the things that were mine it come from that feedstock and part of that is because of the the strong demand environment that were in
spk_40: you know i think that also on a t i o two side were seeing that take up as well inventories remained tight given a strong demand that we feel very good about our supply of t i o two given that the really strong relationships that we have with our suppliers
spk_16: i'm the now my other questions on the kobe situation it seems like two weeks ago was that was gonna dominating the conversation maybe just give us an update on and how your seen that the or micron ah impact playing out or relative to where you were two weeks ago
spk_5: but they improving
spk_52: you know we're no different than what you would you what you would see in the
spk_53: and the marketplace itself so we saw the same spike in in and kind of decline that the rest of the country saw solely
spk_0: are excited to try to get this you know behind us as we mentioned earlier my
spk_54: retire talking about this stuff
spk_55: and we'll talk of ago that i would i buy raw materials out over growing sales and growing profit so we can try to give you a forgotten and what's happening but we're just gonna do what we do without
spk_9: a lot of determination on the side and that have a lot of skill and scar tissue in i'd rather really not even answer this just tell you we're going to fight do this that's what we do all right fair enough and pretty much thank you mike our next question comes online of david begleiter attachment was here to question
spk_34: thank you get an end
spk_9: to try out a fucking a q one out of something about the improvement when growth and tag earnings forces que for yeah so david if you look at our fourth quarter and and tag it i talked about the lions and and an impact their and yet when you look at it coming into our first quarter now we're still gonna see elevated raw material costs really the highest and in our i had past quarter for the year did our expectation out weekly do expect our tag at
spk_55: fails to be op
spk_4: by at male loudmouth single digit which tells you what the the higher price than our minds are going to be backwards which again it and up of pressure on our margin but when you look at sequentially
spk_3: we do except expect to see improvement in our in our our our dollars and and our margin you know it's a it's a small quarter though any trap driver of i am yeah specifically when we looked talk about the first quarter fourth quarter we talk about exterior sale in the southeast southwest driving a the performance and sending those hit the the forecast we we need to hit and expect them the here yeah we should be ahead of fun
spk_4: or fourth quarter tank that he that margin in profit out granted the briefly i'm john looking at a price will nation ah
spk_3: i announced price increase the cycle prices by cycles and can be doable but better out why that and sustainable going forward by the for other reasons they've that we just talked about in on and but and actually maybe a little more it's a it's certainly a market where supply and demand is such that our customers have the confidence that speaks to the demand but
spk_4: i would also say that our teams if it's in owner consumer business with todd ray and his team working really hard to help rt our customers be more successful or in our tagged business with heidi pets and her team that you aligning to make sure that our customers i totally about you keep our cost
spk_56: mers in peace
spk_0: working hard to develop products and services that have the right place with the right time to be able to that are just impinge on our performance going side
spk_57: mean we're we're not just simply reporting were not just responded customer ones as we don't have it as not who we are what we're trying to do is influences great it greatly as possible so were lining close with closely with our customers were we often talk about running to the center the fire running to our customers were trying to understand what is it that they need how do we respond the best as we can the others challenges
spk_58: what do we do to keep you in paid to keep you moving it as a result of that i think while we're trying to help our customers to be successful and it if it's you know have a public company helping them to reach their goals and you know their their numbers or a private company whose just trying to feed their family who are are
spk_4: our goals are aligned with their goals and when we do our jobs we don't have to get fat and in crazy with money with we ask for our fair share for our shareholders well we're helping them and that's the focus of we have and because i think we're working really hard to do that and focusing on their success reading more success in do price increases thank you very much x david and if question comes in atlanta pd as you have a car city to hear the question
spk_57: yeah i good afternoon
spk_59: i'm john last year and how many projects got a made reprising lumber and still crisis and lumber after declining second half of last year and other prices are on the move again and have gone up the seer so you think that's a concern for a stretch and they modeling as as as a price
spk_0: the costs have gone up significantly know
spk_60: i don't you look at the lyra as an example one in other indicators of that we look at pj
spk_0: there's a very strong demand have a strong backlog and in i've i've actually heard people including one of my my staff in my cfl who bought in the an item that was going to be a slight delay in getting it in the price was variable know neither one may
spk_60: i have that patients or ability to just say okay i won't do not pay whatever the market is at that time but there are lot of people out there that have been pushing off the me mom of their whom or the addition of they need or you know an area that that that that requires remodeling because it's either a
spk_9: eighteen and place or that the home itself needs to be fixed in may have them quite right there looking at with the idea that prices are going up i want to get this done in get the best price like him right now because it looks like this may continue
spk_1: that i would tell you that you i think the question that are asking once again that back to demand demand is very strong
spk_9: great and light of time i'll pass it along thank you
spk_1: like evening of media
spk_61: honest question comes in line of kevin mccarthy with medical research partner see their question
spk_9: if thank you for taking my question an allied i think you addressed sequential earnings and in tag already better i'm tempted to ask about performance coding ah in that regard so for q until one q we look at history and a great example so far of that sag meant trending in a flat up and down and in one key versus for qt to have a strong feeling of directional sequential trained them performance for one que twenty two
spk_60: yeah can i do believe we're going to see sequential improvement i think that team for cutter cutlery and first a team has done a terrific job of up for putting a price increases rapidly throughout twenty twenty one and the need to go again and white i to there's no backing up in a team's discipline around
spk_9: knowing they need to get a crack get the pride in getting it ah they are along with the
spk_4: by and that that we're seeing yeah we talked about our first quarter being at mid to high teens with that
spk_60: hi
spk_8: i love doubled low double digit increase in price and our in our first corner
spk_20: the challenge of i am should be loaded mad and and i think that gonna help drive
spk_22: damn for him as well
spk_60: excellent and then i wanted to follow up on the three acquisitions that you referenced kit can you talk through the financial impact of those deals recognizing that they're in various stages of closing for it for example one it's a contribution to sales that you're thinking about
spk_1: that's embedded in your guidance for the first quarter
spk_9: yeah for the first quarter you know i i will again at net he look at the and the divestiture net of acquisitions be an immaterial had one the you know the seeker we don't have on our first quarter expect at our first course you're really talking about canada and as giant and nana up and defamatory tenant ten it was more of a technology by were going to will player that to try to take that technology in in grow throughout the company but it's a it's pretty small acquisition but it does give us an opportunity and into a house point especially bombers is more internal manufacturing k thank you very much a an next question comes in line of craig malik with a requires i miss receive their question thanks some a lot of follow up on me the impact of volume and rise i'm i'm a gross margin
spk_20: we look at last year holistically
spk_46: how would you say that that rise were half of the four hundred fifty bip pressure and volume was the other half
spk_62: yeah i think if it maybe a little or
spk_9: you'd on raw material it and hurt by would say that great we thought raw materials really ramp up in the second half of the year and and not having pricing really built and the cover that until you know we get into august first we got into it september thirtieth the in and on tag and then it was heavier on our for hatcher combat get and and really impact performance coding said i think rods really impacted a little bit mark yeah because the dollar we we we couldn't off that dollar for dollar were close the book cannot that and as that impacts us here you really see a market declines in the pacific the to like the fourth quarter that tag volume and tag in down i think or digits
spk_4: really what it then the that the heavier driver in our fourth quarter i think it's across the year of little heavier ra ra ra some stormy the driver and i get a follow up a sort of looking back in history and for know how we get back to the margins we hadn't twenty twenty i think when you unpack like that last like on twenty eleven and twelve it's have to you
spk_3: years to get back to where you are deal
spk_63: as though because the business of the company changed and for the world that you'd expect that to happen faster or slower
spk_64: the chance of recovery
spk_0: at a at a defect yeah we're we're the different different make of of a company than we were back then because the bath or acquisition but i don't think the you look at the businesses within our performance coatings group
spk_65: and a strategy around that and and where we can differentiate and get paid for that i still think that you know that to your cadence is is applicable the other thing i have a is tag is still over fifty percent of our sales and you look at
spk_4: the strong volume that we expect in our second half
spk_3: and with the pricing activity the taken place in what we're going in now we have a real opportunity not only to
spk_0: surpass we certainly feel like the second half of the sheer will surpass white wine or twenty twenty one but really approach the twenty twenty operating margin
spk_3: well i think tag with we can be there think the other two segments out more work to do with the guy got her over others that we learn an awful lot and i would say with that learning came incredible conviction is know
spk_4: when there were some of those delays and it took a little bit longer knew that it it becomes tougher together as time goes outside agree with our i think that's those are good guidelines but i'd also say that is a lot of determination conditioned room for says or with you
spk_3: as great good luck as expect
spk_66: next question comes from the line of john roberts with you via the with your question
spk_9: this just a quick one here guys new commercial construction paint his bid pretty far in advance of one the buildings are completed and painted have you been able don't go back and reprice that are as that just have to roll through over time
spk_67: ah there's not a single answer for that john in some cases there there are opportunities to adjust and in many of them but in some cases there's not an so it's a case by case basis
spk_0: thank you
spk_42: you can excel
spk_9: the next russians from the line of among martin with someone passes the in her car hey good afternoon guys am the you didn't expect to bring back some of the scuse your ash allies as the raw supply improves in the back half and if that's the case the sac the have a negative impact on margins but what i would say is that it's not just going to be going back to business as usual though go through a very disciplined approach them you know the questions going to be if we survived this long without at why do we need to bring it back so we we want to manage our inventory
spk_4: and and are working capital very closely so my answer be that
spk_3: the there's a disciplined approach and if in fact you see a work working working capital investment is because there's the proper return comes along with them
spk_4: added thanks and then just they have a cat back say the on twenty two doing to speak any additional headquarter related cap backs and twenty twenty three
spk_68: i yeah i think gum you look at what what we're spending so far we we're gonna see another similar amount twenty twenty three and and at a drop off in a twenty twenty four
spk_69: they thank you
spk_0: ex
spk_70: and a question from the line of gang action white with blue capital pacific ocean
spk_65: i think saab just one question for me just to be clear on the for your guidance and pricing items are you assuming any additional pricing is needed beyond what human announce for the first quarter
spk_3: i'm a fan and had the the assumption that there's no additional ah
spk_65: i think with them consumer
spk_71: yeah that all that on role and but i don't expect i and our there's not an organic additional performance during a little different just because of the way
spk_65: they roll pricing in and twenty twenty one they may have some in a first quarter they may have some rolling in the second quarter but you know we're not certainly planning today to have second half price increases though and i think our approach it is is this that we we try to keep the increase to a minimum
spk_5: and when you approach it that way there can be a little more volatility in we don't want to be out in front of our customers asking for more than what we really absolutely can see
spk_4: with the hopes of covering what might be a future price increase and so that introduces a little more volatility if in fact that numbers moved or the prices move we to respond to them but we think it's the best approach to our customers the try to keep the pricing to a minimum in in have an open discussion with them about the volatile bottle environment that in
spk_3: got it thanks so much like scared a final question from the line of the jedi and yet with i feel research and specifically oh thank you
spk_4: it's really just around and many actually i mean considering what had happened in the raw materials industry he ah and if you want to sort of you look at it from a point of view of bulking up and a increasing your size using a large ticket consolidation
spk_70: you know on a into regional basis is is an answer to this or is it really how you're going about in housing some of the resin
spk_0: our capacity and you know
spk_1: verifying are either
spk_3: i'm putting more suppliers on your list is the way to go back to of different way of asking but youth you see lodge the contents on nation in this industry cause generally rama to crashes have brought coating consolidation thank you
spk_0: well that if i may just start with your first point about our our our desires the bulk up i'd say that what is really the driver for our him in a strategy is our strip it is in fact our strategy
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