Sherwin-Williams said this week that strong demand for paint isn’t enough to prevent it from having to trim its revenue and profit forecasts.
The company told investors it is facing some of the same raw material shortages dogging other industries, and that is driving up the cost of the supplies it needs to make paint.
“The persistent and industry-wide raw material availability constraints and pricing inflation we have previously reported have worsened, and we do not expect to see improved supply or lower raw material pricing in our fourth quarter as anticipated,” said CEO John Morikis.
Raw material cost increases are likely to be in the high teens on a percentage basis for the year, according to company executives, including a greater than 20 percent increase in the fourth quarter. The price of everything from resins and polymers used to make paint to the steel used to make paint cans are raising costs for the company.
The paint maker is responding to the higher raw material costs by raising its own prices.
“We rarely receive a thank you note when we raise prices,” Morikis said on a call with investors Wednesday morning. “For the most part, our customers understand the situation is what it is.”
There has been a lot of talk about the current spike in inflation being “transitory.” But Morikis and other Sherwin Williams executives don’t necessarily see that being the case.
“The reality is there’s a tight supply chain market, there’s a strong demand and we expect raw material costs will stay elevated for a period of time,” said CFO Allen Mistysyn.
“The actions we’re taking say we’re expecting them to be longer term rather than shorter term,” said Morikis.
The supply disruptions started earlier this year when the severe winter storm that hit Texas caused prolonged power outages and damaged some suppliers’ plants.
“Recovery of suppliers in Texas has consistently been slower than has been communicated to us all year, with some suppliers still not back to pre-storm operating levels seven months later,” Morikis said.
Damage to suppliers from Hurricane Ida only added to the problems.
“Our suppliers are now reporting that the impacts of Hurricane Ida are more severe and will be longer lasting than initially thought,” Morkis said. “Production of several key resins, additives, and solvents, expected to resume by late September, has been pushed out.”
Sherwin-Williams still plans to move ahead with bringing 50 million gallons of additional capacity online over the next six months. The company also announced that it will buy supplier Specialty Polymers in a deal expected to close before the end of the year.
“While the visibility of recovery in the supply chain is limited … we will continue to invest in our strategic growth initiatives,” Morikis said.