John Morikis: Yes, it’s a good question. I think you should expect us, first I want to be very clear, not waiting for the market to lift all the boats. I mean we’re going to go really aggressively here, Ghansham, I would say that — let me be careful in the words that I choose, but I would say I wouldn’t want to compete with our team. These people are really well focused on the opportunities that we have. Yes, it will be impacted by housing starts, resale. We’ve got a terrific business in our property maintenance. We’ve always talked about kind of the table preparing from a strategic standpoint or which whatever way the table will tilt. And here in this environment, as the rates work their way through, if it’s in residential repaint, you’re going to see us outperform in residential repaint.
If it’s in property maintenance where people are going into multifamily homes as opposed to building homes, we’re the leader there. And the same point on property maintenance as new res. We’ve done exceptionally well on a national standpoint. We’re really cranking in after the regionals. This is the opportunity we have. We have competitors that are backing off because of some of the pressure in some of these segments. And we’re going to go — we’re going to be aggressive. I’ll just leave it there. We’re going to be very aggressive in the regional pieces as well.
Allen Mistysyn: Ghansham, this is Al Mistysyn. The only thing I would add to that, to your point, interest rates bounced around. And just like we talked about, as interest rates rose, it takes time to filter through the market and specifically into paint. So if you think about paint, we’re always at the end of the project. So even if starts flip today, you’re talking three to four months out, assuming no supply chain challenges before we get to our part of that project. And those are the things that we’ll keep monitoring and pushing on with our teams to make sure we’re gaining an outsized portion of the share as it returns.
John Morikis: One additional point, I’ll go back to Heidi’s comment about our over-indexing a bit in new residential. We’ve done very well here. And so as those points that Al just made as housing starts begin, while there will be a lag, we’ll see the benefit of that in a considerable way. And when it’s down, we’ll feel it perhaps a little bit more.
Ghansham Panjabi: Perfect. Thank you.
Operator: Your next question is coming from David Begleiter from Deutsche Bank. Your line is live.
David Begleiter: Good morning. John, in TAG, are you thinking about additional price increases this year?
John Morikis: Why don’t I start with that and Al, if I miss anything jump in here? I’d say that David, our view as it relates to pricing is always looking at total cost of the basket, not just raw materials, but everything from labor, transportation, containers, everything that goes into that. And right now, I would say, we’ve not announced any additional pricing. I think we’ve demonstrated the ability, desire and conviction to stay on top of that and the willingness to do that. So if, in fact, we find ourselves in that situation where we need additional pricing the first people that we’ll hear about it will be our customers, and then we’ll quickly advise the street of our actions.
Allen Mistysyn: Yes. David, the only thing I would add just to put some color around 2023 on pricing in general. We talked about on our third quarter call that we had no additional pricing, we’d expect a mid-single-digit impact on our full year ’23. Obviously, that would be a little bit higher in our first quarter. Our expectation is we’re going to maintain the majority of our price like we’ve seen in the past. We think we’ve gotten past the margin contraction portion of that cycle. We’re starting to see margin improvement sequentially and year-over-year, and we expect that to continue going into 2023.
David Begleiter: Very good. And Al, do you still expect production this year to be below volume sell-through? And so how much — what’s the dollar impact on earnings here?
Allen Mistysyn: Yes. I don’t know we’re going to quantify the dollar impact. But because we had to build so much inventory in 2022 to get back to more historic levels, and we are going to see a negative impact. And you could think about, and I talked about this, we’d expect a 5% to 7% decline in production gallons specifically on architectural. We are definitely expecting to see that. And that will have a drag when we look at Consumer Brands Group because that’s where our global supply chain is embedded. So you’re not going to see as much margin dollar improvement just for that very fact all else being equal.
David Begleiter: Thank you very much.
Operator: Your next question is coming from Adam Baumgarten from Zelman. Your line is live.
Adam Baumgarten : Thanks for taking my question. Just curious, you mentioned in the slides some inventory destocking in the North America retail channel it seems like. Are you seeing any destocking outside of that channel, perhaps maybe some of your OEM customers?
John Morikis: No. Most of our OEM customers operate on a very low min/max level. So they’re leaning on us to be responsive for them. So while some would have inventory, I’d say that they lean on us and we support that as a means of helping them to be successful.
Allen Mistysyn: Yes. And the only thing I would add to that, on the retail channel side, I think coming out of the third quarter, you heard some of our peers talk about destocking. We did not see that. So we were probably a quarter later anticipated some of that. And as a result, you saw consumer do a little bit better in the fourth quarter than we had planned.
Adam Baumgarten : Got it. That’s helpful. And then just in the past, you’ve touched on some pretty positive trends in the Pros Who paint business. Maybe an update there that also seen a slowdown as you move through the fourth quarter and into this year.
John Morikis: Well, it’s an important — very important initiative for us. That’s in our Consumer Brands Group. For those of you that may not be familiar with it. Todd Rea, our President there, is working closely with our teams to really capture a terrific opportunity. If you think about what we call the Pros Who Paints, it’s someone that might be involved in either house flipping or remodeling and while we’re very focused on the painting contractor through our store, there are customers who enjoy the wide breadth of assortment and availability of products that they get through a different format like a home center. We’re really excited about getting after this market because they prefer that type of a setting and we’ve got great relationships with customers that are interested in that.
So I would say that in Sherwin, we’re not a complacent company. There’s good momentum here. But along with our customers, we want to go faster. We think some in the market have been enjoying an unencumbered run at this business, and we enjoy disrupting that and helping our customers to be more successful and we’re intent on doing that. Good momentum, a lot of opportunity ahead.
Adam Baumgarten: Great. Thanks a lot. Good luck.
Operator: Your next question is coming from Kevin McCarthy from Vertical Research Partners. Your line is live.
Kevin McCarthy: Yes, good morning. As you move the Latin American business over to consumer, can you help us understand what the associated margin uplift might be to consumer from that repositioning?
Allen Mistysyn: Yes, Kevin, it’s really not a material change when you restate all of the factor — all the income statement, it might give it a little bit of a lift on the TAG side because, as you well know, Latin America has been dilutive of TAG. But on the consumer side, where we’re at today, versus where Latin America is. And I’ll give Latin America shout-out. They’ve done a lot of hard lifting and rightsizing their business and are now back to focusing on growth where before it was about cost management and that type of thing. So now that team is externally focused and really going after market share growth. So I don’t think you’re going to see a material change on either segment because of this. But I think from a strategic standpoint, a focus standpoint and where the market trends are, it’s the right decision at this time.
John Morikis: Yes. Kevin, I know you didn’t ask specifically about — I know you asked about the margin piece of it, but I do want to expand that to include it does have a positive impact on our TAG business. The focus on North America. We’ve got, as Al mentioned, a terrific leader, Alberto Benavidez down in Latin America that leads a wonderful team, and there’s a shift in what’s happening down there more towards what best aligns with our Consumer Brands Group. So it is a terrific opportunity from a best practice standpoint to align those two businesses. We think it’s going to help our TAG business focus, and we do think that it will allow our businesses to share information. We’ll take information out of Latin America that will bring up to North America and vice versa as well.
Kevin McCarthy: Okay. Thank you for that. And then secondly, I wanted to ask for your updated thoughts on Al kid resins. It sounded like that was a meaningful constraint in the fourth quarter. Is there a way to size that? And is the availability beginning to improve yet as we talk today in the first quarter?
Heidi Petz: Yes. Kevin, I would tell you that the availability, I’m not a surprise that alkyd resin does remain an industry-wide challenge. I give our technical teams and commercial teams a lot of credit for working through some very thoughtful and, in some cases, upgraded substitutions during this challenge. And we’ve really isolated this down a very few and are seeing sequential improvements already into our production. So I think you could expect over the next few quarters that we’re going to be in a much, much better position.
