Profitability and Growth Differentiated Business Practices of the Strongest Coatings Companies

By Cynthia Arnold , Tyler Treat

The paints and coatings industry has shown strong resilience and a capacity for growth over the past decade. Whether measured by financial performance, technical innovation, or market opportunity, the world’s leading coatings companies have demonstrated the ability to transform and adapt through myriad economic and business conditions. As demand for high-performing, cost-effective, and environmentally favorable coatings solutions has increased, the industry has transformed and increased both its relevance and value in the markets that it serves. Consider the record of the four leading coatings companies in the United States-PPG, Sherwin Williams, Valspar, and RPM. Over the past 10 years, these companies have cumulatively grown revenues from $13.6 billion to $28.5 billion, a roughly 7.5% combined annual growth rate.1 At the same time, EBIT2 margins also expanded 1% to 12.7%.

These companies were able to achieve these results amid one of the worst U.S. economic crises since the Great Depression and an uneven global environment that con­tinues today. Such strong growth reinforces why they have delivered a 315% return to their shareholders over the past 10 years, compared with 99% for the broader Standard and Poor’s 500.3 Analysis of the industry’s underlying practices provides insight into some key factors that have driven such strong performance, even in the face of economic headwinds. Attention to robust top-line growth; strong bottom-line and balance sheet management; and investment in technology, innovation, and brands underpin the performance of these four market-leading coatings companies. Understanding each of these performance levers in more depth provides a roadmap for future opportunities in the coatings industry.