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RPM Reports Record Sales for Q4, Year-End

Tuesday, July 23, 2019

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Parent company of coatings and sealants brands including Carboline and Tremco, RPM International Inc. (Medina, Ohio) reported a 2.8% increase in its fourth-quarter net sales, which ended May 31. The company also provided an update on the implementation of its 2020 MAP to Growth program.

The company reported record sales, increasing 3% in the fourth quarter and 5% for the fiscal year.

“We are very pleased with our significant earnings leverage for the quarter, which was bolstered by our 2020 MAP to Growth operating improvement plan, the benefits of which are beginning to be realized,” stated RPM chairman and CEO Frank C. Sullivan.

Fourth-Quarter and Year-End Results

RPM reported its fourth-quarter financials yesterday (July 22), indicating that net sales had increased to $1.60 billion from the same quarter’s $1.56 billion last year. Net income totaled $133.4 million, in comparison to last year’s $85.7 million.

RPM International Inc.

Parent company of coatings and sealants brands including Carboline and Tremco, RPM International Inc. (Medina, Ohio) reported a 2.8% increase in its fourth-quarter net sales, which ended May 31.

However, full-year net income reportedly decreased to $266.6 million from $337.8 million. The company reports that the decrease can be attributed to diluted earnings per share having been $2.01 compared to $2.50 in 2018.

Organic growth totaled 3.5% in the fourth quarter, with acquisition growth adding 1.9% and foreign currency translation accounting for a 2.6% reduction in sales numbers.

“Sales in North America, our largest market, were slowed by some of the wettest spring months on record, which caused delays in painting and construction projects,” stated Sullivan. “In addition, conditions in Europe, our second largest market, remained soft. Despite these challenges, our operating units were able to drive top-line growth and gain market share”

Over the year, consolidated full-year net sales increased 4.6% from $5.32 billion to $5.56 billion.

Industrial Segment

RPM’s industrial segment, including Carboline, Tremco and Stonhard, was reported to be relatively flat, decreasing slightly from $812.9 million to $809 million. Organic sales increased by 2.0% and acquisitions added 1%. Foreign currency translation resulted in a 3.5% reduction in sales.

Earnings before interest and taxes for the segment was $109.9 million, in comparison to last year’s EBIT of $99.3 million. If $5.9 million in restructuring-related charges are excluded, EBIT for the segment’s quarter was $115.7 million.

“Leading the industrial segment’s organic sales growth were our businesses providing corrosion control coatings, fiberglass reinforced grating, commercial sealants and concrete admixtures,” said Sullivan. “Top-line growth in the segment, which has our largest international exposure, was more than offset by the headwinds of translational foreign exchange.”

Specialty Segment

Sales for RPM’s specialty segment, which includes businesses like Day-Glo and Dryvit, increased 5.3% to $207.4 million. Organic sales were reported to be relatively flat while acquisitions contributed 6.7% to sales. Foreign currency translation negatively impacted sales by 1.2%. The specialty segment EBIT was $26.4 million. In exempting $5.9 million in restructuring-related charges, EBIT totaled at $32.3 million.

“Specialty segment sales were driven by the acquisition of insulated concrete forms manufacturer Nudura, as well as strong performances by our diesel additives and edible coatings businesses,” stated Sullivan.

“Specialty segment adjusted EBIT declined $1.4 million primarily due to an intangible write-off triggered by a change in international business regulations and additional start-up investments for our NewBrick exterior cladding product, which were partially offset by operating improvements and cost control measures."

Consumer Segment

Sales for RPM’s consumer segment saw a 6.7% increase to $585 million from last year’s fourth-quarter $548.4 million. Organic sales increased by 7%, while acquisitions added 1.5%. Foreign currency translations negatively impacted sales by 1.8%. Consumer segment EBIT totaled $99.4 million, but when $10.2 million of restructuring charges is excluded, segment EBIT was retotaled at $109.6 million, an increase of 50.6%.

Rust-Oleum

Sales for RPM’s consumer segment saw a 6.7% increase to $585.0 million from last year’s fourth-quarter $548.4 million.

Sullivan commented, “The initial focus of our 2020 MAP to Growth, which was initiated about a year ago, was directed toward our consumer segment and resulted in the elimination of 221 positions and closure of four manufacturing facilities to date. The consumer segment is now starting to experience the benefits of those difficult early actions taken under our operating improvement plan.

“Additionally, recent price increases have finally begun to ease the negative impact of significant raw material cost escalation over the last 24 months. These factors helped to drive an increase in consumer segment adjusted EBIT of $36.8 million.”

Steps for MAP to Growth Plan, Looking Forward

According to Sullivan, the MAP to Growth plan, which began about a year ago, has resulted in the closing of 12 manufacturing plants and more than 20 warehouses and other non-plant facilities, in addition to cutting over 500 positions.

“In addition, we are ahead of schedule with the goal we laid out in November to repurchase $1 billion of stock by May 31, 2021. As of today, with two years remaining to achieve that target, we are nearly halfway there via stock repurchases and the redemption of our convertible bond,” stated Sullivan.

The MAP to Growth objective is to return $1.5 billion in capital to stockholders by May 31, 2021.

Moving forward into fiscal year 2020, the company plans to report in four segments instead of its three previous segments. The new operating segments will include the Consumer Group, Specialty Products Group, Construction Products Group and Performance Coatings Group.

“We’re especially excited about the creation of the Construction Products Group, which was formed to create a cohesive portfolio of integrated construction systems that will deliver comprehensive building envelope solutions to our customers,” said Sullivan.

“Had these reportable segments been in place during fiscal 2019, their proforma sales would have been $1.9 billion in the Consumer Group, $0.7 billion in the Specialty Products Group, $1.9 billion in the Construction Products Group and $1.1 billion in the Performance Coatings Group.”

The company estimates that sales will continue to rise 1% to 2% in the first quarter of 2020.

   

Tagged categories: Asia Pacific; Business management; Business matters; Business operations; Carboline; Coating Business; Coating Materials; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Good Technical Practice; Latin America; North America; PaintSquare App - Commercial; RPM; Rust-Oleum Corp.; Tremco; Z-Continents

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