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RPM Posts Profit in Q2

Thursday, January 7, 2016

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Rust-Oleum’s parent company RPM International Inc. posted double-digit gains for its fiscal 2016 second quarter, fueled by the strengthening commercial construction sector and despite currency fluctuations, the company reported Wednesday (Jan. 6).

The Medina, OH-based coatings company reported a 20 percent increase in net income and a 19 percent increase in earnings per diluted share on an 8 percent sales increase for its second quarter, ended Nov. 30, 2015. 

Frank C. Sullivan
Photos: RPM International Inc.

Frank C. Sullivan serves as chairman and CEO of RPM International Inc. RPM employs approximately 13,000 people and operates 116 manufacturing facilities in 26 countries.

“During the second quarter, most of our international businesses posted solid sales gains in local currencies, which were reduced by foreign currency translation that lowered reported sales by 6.3 percent company-wide,” stated Frank C. Sullivan, RPM chairman and CEO.

“In total, foreign currency, including both translational and transactional, reduced EPS by $0.06 per share. Sales and earnings benefited from the reconsolidation of our Specialty Products Holding Company (SPHC) subsidiary’s businesses, which continued to perform in line with our expectations.”

Q2, First Half Results

Net sales of $1.16 billion were up 7.9 percent over the same period a year ago. Consolidated EBIT (earnings before interest and taxes) increased 17.9 percent, to $141.6 million the fiscal 2015 second quarter.

FY 2016 second-quarter net income was up 19.6 percent, to $83.4 million from last year’s second quarter. Earnings per diluted share increased to $0.62 from $0.52 a year ago.


RPM's industrial segment is its largest, accounting for 53 percent of its business.

The first and second quarters produced a record six months for RPM. In the first half of fiscal 2016:

  • Net sales improved 5.4 percent, to $2.40 billion;
  • Consolidated EBIT increased 6.5 percent, to $302.2 million;
  • Net income was up 8.5 percent, to $183.2 million; and
  • Diluted earnings per share increased to $1.36, up 9.7 percent from a year ago. 

Segments: Consumer Growth

RPM’s fiscal 2016 second-quarter consumer segment sales increased 1.8 percent to reach $359.1 million.

Organic sales increased 3.6 percent, while acquisition growth added 0.7 percent. Foreign currency translation reduced sales by 2.5 percent. Consumer segment EBIT improved 6.2 percent, to $65.4 million from $61.6 million a year ago.

“During the quarter, our largest U.S. consumer businesses performed solidly and in line with expectations, while our nail enamel and Canadian businesses continued to struggle with sales declines,” said Sullivan. “We expect to benefit from several product roll-outs with various customers in the third and fourth quarters of fiscal 2016.”

For the first half of FY 2016, consumer segment sales dipped 3.6 percent, to $754.6 million, from the previous year’s results. Consumer segment EBIT also declined 4.9 percent, to $131.5 million, from a year ago.

Segments: Industrial Declines

RPM reported that its second quarter industrial segment sales declined 5.8 percent from the previous year, to $610.2 million.

“We continued to see solid performance by our businesses serving the U.S. commercial construction market,” said Sullivan.

“However, the impact is masked by the strong dollar, because a significant portion of the industrial segment’s revenue is outside U.S. markets,” he said, noting that the businesses are generating growth in local currencies but are seeing those positive results erased by foreign currency translation.


RPM reports sales growth by region in this chart. Additional information is available in the company's slide presentation available here.

Sullivan pointed to Europe as an example. In Europe, RPM’s second largest market, a 2.2 percent increase in sales in constant dollars was converted through currency exchange to a 9.6 percent decline.

Additionally, Sullivan noted that the company’s industrial businesses serving the energy industry have been impacted by the global slowdown in oil and gas drilling, resulting in a decline in sales to that sector of nearly 10 percent.

Organic sales for the industrial segment improved 1.9 percent, while acquisition growth added 0.7 percent. Foreign currency translation reduced sales by 8.4 percent. Industrial segment EBIT declined 0.4 percent, to $64.5 million from the same period a year ago.

For the first half of 2016, sales declined 5.1 percent, to $1.27 billion, from the fiscal 2015 first half. Segment EBIT decreased 2.7 percent in the first half over the prior year.

Segments: Specialty Heats Up

Second-quarter sales for the specialty segment increased 164.8 percent, to $186.7 million from $70.5 million in the fiscal 2015 second period.

Organic growth was 3.8 percent, while acquisitions, principally the reconsolidated SPHC subsidiaries, added 167.1 percent. Foreign currency translation reduced sales by 6.1 percent. Specialty segment EBIT improved 104.8 percent, to $29.1 million.

“Most of our core specialty businesses, including food coatings, wood protection products, pleasure marine and other high performance coatings, performed well in the quarter, excluding the negative impact from foreign currency,” Sullivan stated.

For the first half of 2016, specialty segment sales grew a whopping 146.7 percent, to $370.4 million. Segment EBIT increased 83.0 percent, to $57.1 million from $31.2 million.


“Over the last several months, the U.S. dollar has continued to strengthen against most of the major currencies around the world and we expect the negative impact in the back half of fiscal 2016 to be approximately $0.05 per share worse than we originally estimated,” according to Sullivan.


Consumer brands included in RPM's portfolio of coatings and sealants are Rust-Oleum, DAP, and Zinsser.

In addition, during last year's third quarter, the company recognized a $0.10 per share tax benefit that will not repeat this fiscal year.

“For the full year, however, we are reaffirming our guidance for earnings per diluted share of $2.50," stated Sullivan.

In commenting on the outlook for its industrial segment, the company expects sales to be flat to up slightly for the balance of this fiscal year, due to the strength of our businesses serving the U.S. commercial construction markets.

“In the specialty segment, the second half of fiscal 2016 will have a one-month benefit year over year from the reconsolidation of SPHC. For the remaining months of this fiscal year, we expect sales growth in the specialty segment to be in the mid-to-upper-single-digit range,” Sullivan said.

Consumer segment growth is expected to be in the mid-single digits, Sullivan noted.


Tagged categories: Asia Pacific; Business matters; Carboline; Commercial Construction; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Good Technical Practice; Latin America; North America; RPM; Rust-Oleum Corp.; Zinsser

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