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IM Segment Helps Power RPM to Record

Monday, July 23, 2012

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Standout growth in industrial maintenance and protective coatings helped ring out a record fourth quarter and fiscal 2012 for Carboline parent RPM International, the Ohio holding company announced Monday (July 23).

“Nearly all of our industrial businesses delivered improved sales and earnings for the quarter,” said Frank C. Sullivan, chairman and CEO of the parent company of Tremco, Stonhard, AD Fire Protection and other well-known brands of coatings, sealants, and building materials.

 Sales of industrial maintenance and corrosion-control coatings grew by double-digit percentages for the fourth quarter and the fiscal year, RPM reported.

 RPM International Inc.

Sales of industrial maintenance and corrosion-control coatings grew by double-digit percentages for the fourth quarter and the fiscal year, RPM reported.

“Areas of particular strength included industrial maintenance coatings and corrosion control coatings, which have benefited from increasing demand in energy markets, as well as industrial capital spending and infrastructure investment.”

The “slowly recovering” North American commercial construction market also reaped sales growth in sealants, waterproofing, roofing materials, concrete admixtures and other construction chemical product lines, Sullivan said.

Fourth-Quarter Results

Net sales, net income and diluted earnings per share for the fourth quarter all notched double-digit gains over the same period in 2011, RPM reported

The company announced:

• Net sales grew 12.2% over the fourth quarter of fiscal year 2011, to a record $1.1 billion;

• Consolidated earnings before interest and taxes (EBIT) increased 16.5%, to $139.5 million;

• Net income soared by 17.7%, to $82.6 million; and

• Diluted earnings per share improved 16.7%, to $0.63.

“Our operating companies posted an excellent finish to the fiscal year,” said Sullivan. "This performance was driven by internal growth initiatives, market share gains and continued geographic expansion, despite ongoing raw material challenges and an uncertain global economy.”

Q4: Industrial Skyrockets

Industrial segment sales soared by 15.8%, to $724.8 million, in the fourth quarter of FY2012 from the comparable period of 2011, led by the bounce in industrial maintenance and corrosion control coatings, RPM reported.

Organic sales improved 10.2%, despite 3.3% in currency exchange-rate losses, which have afflicted every major coatings company. Fourth-quarter Industrial segment EBIT increased by 28.7%, to $90.4 million, over the year-ago period.

Fourth-quarter net sales for RPM's Consumer segment grew by 5.9%, to $377.0 million, from the same quarter of FY 2011. Acquisition growth accounted for 1.1%, while organic sales were up 4.8%, including 0.8% in currency-rate losses.

Consumer segment EBIT increased by 12.5%, to $60.3 million, from the same period of 2011.

Record-Setting 2012

RPM also reported double-digit increases—and several records—in its consolidated net sales, net income and earnings per share for the fiscal year ended May 31. Compared to FY 2011, the company posted for FY 2012:

• A net sales increase of 11.7%, to a record $3.8 billion;

• Consolidated EBIT growth of 14.9%, to $396.1 million;

• Net income improvement of 14.2%, to a record $215.9 million; and

• A 13.8% in diluted earnings per share, to a record $1.65.

FY 2012 Segment Results

Annual sales for RPM's industrial segment increased by 12.2%, to $2.5 billion, over FY 2011. Organic sales added 7.8%; acquisitions, 4.4 %. Foreign exchange rates had a neutral effect on the year's results. Industrial segment EBIT grew 19.8%, to $282.4 million in fiscal 2011.

Consumer segment sales for fiscal 2012 improved by 10.7%, to $1.24 billion, over fiscal 2011, boosted by new products in the Rust-Oleum Group. Organic sales contributed 10.2% of that increase, including net foreign exchange gains of 0.2%; acquisition growth added 0.5%. Consumer segment EBIT increased 9.7%, to $160.1 million.

Acquisitions Expand Reach

During the fourth quarter, RPM announced the acquisition of Australian protective coatings maker HiChem Paint Technologies Pty. Ltd., which has annual sales of about $23 million.

RPM expects the acquisition to expand its presence in that region and provide new local distribution channels and operating capabilities, Sullivan said.

In addition, since the fourth quarter, RPM's Building Solutions Group has acquired Viapol Ltda., a Brazilian producer of building materials and construction products with annual sales of about $85 million.

Slower Growth Ahead

Looking ahead, RPM forecast continued—but more moderate—improvement in fiscal year 2013.

The U.S. presidential election and continued shakiness in the European economies are likely to slow growth in the industrial markets, said Sullivan.

RPM is already seeing declines in sales and earnings in some European operations, “compounded by the continuing deterioration of the Euro versus the U.S. dollar,” said Sullivan.

Consumer coatings should benefit from the continued return to “more normal spending patterns for home maintenance, repair and redecorating,” in addition to "continuing modest momentum in residential and commercial construction spending,” Sullivan said.

Overall, he said, the company expects industrial segment growth of 6% to 10%, consumer segment growth of 5% to 10%, and consolidated sales and earnings growth of 5% to 10% for fiscal 2013.

One big plus, Sullivan added: Raw materials prices are finally stabilizing “for the first time in many years,” and RPM is “hopeful that we will be able to maintain or improve our gross margin profitability for the year.”


Tagged categories: Carboline; Earnings reports; Protective coatings; RPM; Sealers; Tremco

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