John G. Morikis
Senior Vice President - Investor Relations & Corporate Communications at Sherwin-Williams
Thank you, Heidi, for that color on our fourth quarter segment results. I want to thank our teams for working hard to deliver a strong finish to the year. I'm particularly pleased with the significant adjusted profit margin improvement that all three segments delivered compared to the fourth quarter a year ago. Our fourth quarter completed a strong year for Sherwin-Williams, and I'd like to provide just a few high-level comments on our full-year performance.
On a consolidated basis, we delivered record sales, adjusted EBITDA, and adjusted diluted net income per share in 2022. We generated these results in a difficult operating environment, including relentless inflation, less-than-optimal raw material availability, a war in Europe, and COVID lockdowns in China. Our people refused to be deterred by these challenges and continue to do what they do best, serve our customers. Our success stems from executing on our strategy, which remains unchanged. We provide differentiated solutions that enable our customers to increase their productivity and their profitability. These solutions center on industry and application expertise, innovation, value-added services, and differentiated distribution. None of this happens without the determination and dedication of our greatest asset, the more than 61,000 employees of Sherwin-Williams. Together, this team grew full-year consolidated sales by 11.1% to a record $22.1 billion. It was the 12th consecutive year we have grown the business.
On a segment basis, the Americas Group delivered 12.9% sales growth and grew profit before tax $197.5 million. Our largest customer segment, residential repaint, grew by a double-digit percentage for the seventh year in a row. Sales in all other customer segments were also up by double-digits for the year. Consumer Brands sales were down 1.1% for the year. Sales were up mid-single- digits in North America, our largest region. This was more than offset by double-digit declines in Europe and China. Although the bottom line results weren't what we expected, 2022 was a transition year for Consumer Brands Group, as they completed a number of restructuring and simplification efforts to position the business for a long-term success and driving operating margins back to the high teens.
Performance Coatings sales were up 13.2% for the year against a 22% comparison. All divisions grew with the exception of industrial wood. It was down less than 1%. Adjusted segment margin expanded 250 basis points to 14.1% for the year, as we continued to recover from the highest cost inflation in the company and pursue our high-teens margin target for this segment.
Adjusted diluted net income per share increased 7.1% to a record $8.73 per share. Adjusted EBITDA for the year was $3.61 billion or 16.3% of sales. Net operating cash for the year was $1.9 billion or 8.7% of sales. We returned a total of $1.5 billion to our shareholders in the forms of dividends and share buybacks in 2022. We invested $883 million to purchase 3.35 million shares at an average price of $263.64. We distributed $618.5 million in dividends, an increase of 5.4%. We also invested $644.5 million in our business through capital expenditures, including approximately $188 million for our Building Our Future project. We ended the year with a net debt to adjusted EBITDA ratio of 2.9 times. Additionally, we invested $1 billion in acquisitions that accelerated our strategy.
I'd also like to mention our ESG efforts, where we continue to work toward meeting our longer-term targets. Newsweek, Forbes, and other third parties once again recognized various aspects of our program. Throughout the year, we continued to execute on continuous improvement initiatives and targeted investments to drive growth, competitiveness, efficiency, and profitability. We opened 72 new paint stores and hired 1,400 management trainees. We introduced multiple new products while reducing SKUs and formulations. We expanded production capacity and enhanced procurement and logistics processes. We also continued on our digital and sustainability journeys, and we executed on our acquisition strategy. I am confident we widened the gap between Sherwin-Williams and our competitors in 2022, and that's just what we intend to do again in 2023.
So turning to our outlook, we enter 2023 with confidence, energy, and a commitment to seize profitable growth opportunities wherever we find them. We have clarity and mission. We have the right strategy. We're focused on solutions for our customers. We're spending more time selling products and less time sourcing them, thanks to recovery in the supply chain. We're simplifying the business and we're executing on targeted restructuring actions. We've made the right growth investments and we'll continue to do so. We also have a portfolio that should be more resilient than in prior recessions. And above all, we've got the right people. We expect to outperform the market, just as we have in the past.
At the same time, we're not operating with our heads in the sand. We currently see a very challenging demand environment in 2023, and visibility beyond our first half is limited. The Fed has also been quite clear about its intention to slow down demand in its efforts to tame inflation. These factors have not changed from what we communicated on our third-quarter call, and our base case in 2023 remains to prepare for the worst. Based on current indicators, we believe this is the most realistic outlook at this time.
On the architectural side, it's no secret that US housing will be under significant pressure this year. Single-family permits have been down year-over-year for 10 consecutive months, and single-family starts have been down year-over-year for eight consecutive months. Mortgage rates also remain elevated. As a result, we believe our new residential volume could be down anywhere from 10% to 20% this year. We expect our other pro end markets to be more resilient than this, but there are headwinds in these areas too. For example, existing home sales, which drive a portion of our repaint business, have declined year-over-year for 16 straight months. Now, while we see a backlog of new commercial construction, the architectural billing index has contracted the last three months.
On the DIY side, we expect inflation to continue putting pressure on consumer behavior in the US and in Europe. On the industrial side, the PMI numbers for manufacturing in the US, Europe, China, and Brazil have been negative for multiple months. We have already seen an industrial slowdown in Europe and the same is beginning to appear in the US across several sectors. In China, COVID remains a wildcard, and the trajectory of economic recovery is difficult to map. The US housing slowdown will also impact some of our industrial businesses, namely industrial wood, where we have already seen pressure in coil to some extent. Our team fully understands the importance of winning new accounts, and growing share of wallet in this environment, and that is where we will be focused.
From a cadence standpoint, we expect year-over-year sales and earnings performance will be significantly better in the first half than in our second half, driven by several factors. Our total company comparison will be much more favorable in the first half of 2023, as we delivered a very strong second-half performance in 2022, where sales were up 13.8%, and adjusted earnings per share grew by over 37%. As we've often said, volume is the key driver for operating leverage in our model.
In the Americas Group, which is our largest and most profitable segment, our year-over-year volume comparisons are expected to be meaningfully better in the first half versus in the second half, based on the trends we are currently seeing. We also expect more carryover price in the first half of 2023, which will have the full benefit of our September 6, 2022, price increase in TAG, as well as prior price increases in the other two segments, all of which will annualize in the back half of this year. Additionally, we expect new residential sales will hold up better in our first half, before very meaningful deceleration of demand in the back half of the year. Acquisitions will also be a tailwind in our first half, as we expect incremental sales of approximately $140 million from transactions which closed after July 1 of last year. Given these factors and the softening demand environment, we believe our expectations for the back half of 2023 are tempered appropriately at this time.
As you would expect, we will gain more clarity as the year progresses, and we will provide a more finely-tuned view of our second half outlook during our second quarter conference call. As we said on our last call, we anticipated the demand environment will be challenging in 2023, leading us to get out ahead on cost management, with the targeted restructuring we began in the fourth quarter. We estimate the annual savings from this effort to be in the $50 million to $70 million range with about 75% realized by the end of 2023, and we are reaffirming those estimates today. Our outlook also assumes our raw material costs will be down by a low to mid-single-digit percentage in 2023 compared to 2022. We expect to see the largest benefit occurring in the second and third quarters. We expect to see decreases across many commodity categories, though, the range is likely will vary widely.
From an availability standpoint, certain alkyd resins remain a pain point impacting stains, aerosols, and some industrial products. We expect supply of these resins to continue improving through the first half of the year, in part due to ramping of our own internal production. We expect other costs including wages, energy, and transportation to be up in the mid to high-single-digit range. For the first quarter of 2023, we anticipate our consolidated net sales will be flat to up by a mid-single-digit percentage, compared to the first quarter of 2022, inclusive of a mid-single-digit price increase. Our sales expectations for the quarter by segment are included in our slide deck. For the full year 2023, we expect consolidated net sales to be flat to down mid-single digits, inclusive of a mid-single-digit price carryover from 2022. Our sales expectations for the year by segment are included in our slide deck.
We expect diluted net income per share for 2023 to be in the range of $6.79 to $7.59 per share. Full-year 2023 earnings per share guidance includes acquisition-related amortization expense of approximately $0.81 per share, and includes expense related to our previously announced targeted restructuring actions of approximately $0.25 to $0.35 per share. On an adjusted basis, we expect full-year 2023 earnings per share in the range of $7.95 to $8.65. We've provided a GAAP reconciliation in the Reg G table within our press release.
Let me close with some additional data points and an update on our capital allocation priorities. Given carryover pricing, raw material deflation, and our ongoing continuous improvement initiatives, we would expect full-year gross margin expansion. We expect SG&A as a percent of sales to increase in 2023. This is similar to the slowdown in 2008 and 2009 where we continued to invest in long-term solutions for our customers, that allowed us to grow at a multiple of the market when demand normalized. We'll also control costs tightly in non-customer facing functions, and execute on our restructuring initiatives. We have a variety of SG&A levers we can pull, depending on a material change to our outlook, up or down. We expect operating margin to modestly improve year-over-year, excluding restructuring and impairment costs, and acquisition-related amortization expense. While we don't typically provide this level of color, we believe it is helpful to do so this year, given the higher level of non-operating expenses impacting 2023.
We expect to open between 80 to 100 new stores in the US and Canada in 2023. We'll also be focused on sales reps, capacity, and productivity improvements, as well as systems and product innovation. We expect to complete the targeted restructuring actions we announced on our previous call, including the benefits and one-time costs we have outlined. We will continue to simplify and optimize the organization. The Latin American business of the Americas Group is now being managed and reported within the Consumer Brands Group. The change allows TAG leadership to focus more exclusively on its core US and Canada stores business, while the Latin America architectural demand and service model are trending to be more in line with CBG's strategy. This business had sales of approximately $700 million in 2022. The change will be marginally accretive to TAG, and marginally dilutive to CBG. You will see this change when we report first quarter results in April. Prior-year segment results will be restated at that time to reflect the change. The first quarter and full-year guidance for 2023 we've communicated today, does not reflect this change.
Next month, at our Board of Directors meeting, we will recommend an annual dividend increase of 0.8% to $2.42 per share, up from $2.40 last year. If approved, this will mark the 45th consecutive year we've increased our dividend. We expect to continue making opportunistic share repurchases. We do not have any long-term debt maturities due in 2023. However, we will reduce short-term debt to trend our adjusted EBITDA leverage ratio towards the high end of our long-term target of 2 times to 2.5 times. We will also continue to evaluate acquisitions that fit our strategy. In addition. I will refer you to the slide deck issued with our press release this morning, which provides guidance on our expectations for currency exchange, effective tax-rate, capex, depreciation, and amortization and interest expense. Given the many variables at play, limited visibility beyond the first half, and the high level of uncertainty in the global economy, we believe our outlook is a realistic one. Our slide deck further outlines the assumptions underlying our guidance, and is based on our current dialog with customers and suppliers, and our reading of numerous macro indicators.
As we get through our first half, and we see more information, those assumptions could change. If those assumptions change for the better, we would expect to do better than the guidance we are laying out today. While we can't defy gravity, we do expect to outperform the market and our competitors in 2023. I'm highly confident in our leadership team, which is deep and experienced and has been through many previous business cycles. We have transformed our business in many ways since the last significant downturn, and we are now a stronger and a more resilient company. We also know our guidance is clearly reflective of the market pressure we are experiencing. We anticipate that 2023 would be challenging. We've planned accordingly. We have and will continue taking appropriate actions. We expect strong momentum coming out of this period of uncertainty, similar to prior downturns. That momentum will stem from our strategy of providing innovative solutions, that help our customers to be more productive and more profitable. In challenging environments like the current one, we can be an even more valuable partner to our customer, while we're also earning new ones.
This concludes our prepared remarks. With that, we'd like to thank you for joining us this morning and we'll be happy to take your questions.
