Sherwin-Williams paints 31 percent profit in 4Q

January 25, 2007

CLEVELAND --Sherwin-Williams Co. on Thursday reported earnings increased 31 percent in the fourth quarter even though the maker and retailer of paint and wall coverings is seeing slowing demand in its new-home market and do-it-yourself businesses.

Its shares rose 3.5 percent to close at $67.70, reaching a new 52-week high.

The Cleveland-based company said it earned $98.7 million, or 73 cents per share, on sales of $1.79 billion in the three months through Dec. 31.

Analysts surveyed by Thomson Financial expected profit of 67 cents a share.

In the 2005 final quarter, Sherwin-Williams earned $75.1 million, or 54 cents per share, on sales of $1.71 billion.

For all of 2006, the company earned $576.1 million, or $4.19 per share, up nearly 24 percent from earnings in 2005 of $463.3 million, or $3.28 per share. Sales for the full year were $1.8 billion, 8.6 percent higher than sales of $7.2 billion in 2005.

Christopher M. Connor, Sherwin-Williams' chairman and chief executive, said the company's paint stores group increased profitability by more than 20 percent while absorbing costs associated with opening 48 stores during the fourth quarter and 117 during the year. It now has 3,046 stores.

He said the improvement came in spite of slowing in the new-home market and softness in the do-it-yourself business.

"We're pleased with this performance, particularly in light of the difficult comparisons we face from 2005 and the significant market headwinds that emerged during the year of 2006," Connor said in a conference call with analysts.

Connor said sales over the first half of 2006 grew by more than 11 percent and then slowed to about half that rate over the last half of the year.

The company, among defendants in lead paint litigation in Rhode Island, is still waiting on a judge's decision on defense motions that might mean a new trial.

A jury in February found Sherwin-Williams Co. and two other companies, NL Industries Inc. and Millennium Holdings LLC, liable for creating a public nuisance by manufacturing and selling a toxic product. Rhode Island estimates that cleaning up contaminated properties could cost $1.37 billion to $3.74 billion.

Connor said Sherwin-Williams expects to make 80 to 85 cents a share in the quarter, compared with 82 cents a year ago. For all of 2007, the company expects earnings of $4.55 to $4.65 per share.

Sherwin Williams shares rose $2.29 to $67.70 Thursday on the New York Stock Exchange, topping the old 52-week high of $65.65. The shares have traded as low as $37.40 the past year.

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