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RPM Reports Net Sales, Income Increase

Thursday, October 3, 2019

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RPM International Inc. (Medina, Ohio), a holding company that focuses on specialty coatings, sealants and building materials, achieved both a net sales increase and increase in net income in the first quarter of its 2020 fiscal year, as revealed in an earnings report issued yesterday (Oct. 2).

According to RPM, the firm’s Q1, which ended Aug. 31, saw a record $1.47 billion in sales, up from $1.46 billion in the same quarter last year. Net income was also up 52.2%, totaling $106.2 million in comparison to the $69.8 million reported a year ago.

“We continued to experience the benefits of the plant rationalization, manufacturing improvements and center-led procurement initiatives of our 2020 MAP to Growth operating improvement plan during the quarter,” stated RPM chairman and CEO Frank C. Sullivan.

In June, RPM announced that Michael H. Sullivan had joined the company as Vice President of Operations and Chief Restructuring Officer and would be overseeing the company’s 2020 MAP Growth operating improvement initiative.

Numbers by Group

Since last year’s first-quarter reports, RPM has realigned the business into four reportable segments from its previous three segments. The new segments are Construction Products Group, Performance Coatings Group, Consumer Group and Specialty Products Group.

RPM International Inc.

RPM International Inc. (Medina, Ohio), a holding company that focuses on specialty coatings, sealants and building materials , achieved both a net sales increase and increase in net income in the first quarter of its 2020 fiscal year, as revealed in an earnings report issued yesterday (Oct. 2).

“The objectives of this realignment are to position the business for accelerated growth and to provide our investors with greater visibility into the business and better comparability among our peers,” stated Sullivan. “Starting with the current quarter of fiscal 2020, we are reporting our results under this four-segment structure and are providing comparable fiscal 2019 financials that have been recast to reflect the effect of this realignment.”

RPM’s Construction Products Group saw a 3.6% increase in net sales in Q1 2020 compared to the recast first-quarter from 2019, including 0.7% organic growth and 4.4% growth attributed to acquisitions. Income before taxes for the segment was $82.7 million, up from $65 million the year before.

“The recent acquisitions of Nudura and Schul, as well as last year’s price increases, helped to drive sales growth in the Construction Products Group, despite unfavorable foreign exchange,” Sullivan said. “Impacting our North American businesses were labor shortages and June weather conditions that delayed construction activity. Also contributing to the top line was our basement waterproofing solutions business, as well as a recovery in our Brazilian operation, which generated significant sales growth RPM's Industrial segment accounts for more than half of its business.”

The Performance Coatings Group saw an increase in net sales to $297.2 million, from $296.4 million in the 2019 Q1 recast. RPM attributes a 0.4% increase in net sales for the group to organic growth, and 1.8% to acquisitions. IBT for the group was also up from the prior year, at $28.1 million in Q1 2020, in comparison with $8.3 million in Q1 2019.

“Savings from our 2020 MAP to Growth plan provided significant earnings leverage in the Performance Coatings Group, driven by a reduction of our operational footprint and strategic decisions to exit low margin businesses. In addition, the segment has benefited from executing a reorganization and management delayering as it moves towards a global brand management structure,” stated Sullivan.

Following suit, the Consumer Group also saw growth in net sales to $479.3 million, from $477.4 million in 2019’s first quarter. RPM attributes a 0.1% increase in net sales for the group to organic growth, and 1.3% to acquisitions. IBT for the group was $59.2 million, up from $51 million the prior year.

However, Specialty Products Group saw a decrease in net sales, reporting $160.1 million in Q1 2020 in comparison to 2019 Q1’s report of $168.7 million. RPM attributes a 4.3% decrease in net sales for the group to organic growth, while foreign currency translation also reduced sales by 0.8%. IBT for the group was slightly down from the prior year, at $23.3 million compared to $23.8 million in Q1 2019.

RPM attributed the decline in the group for Q1 2020 to sluggish demands in the OEM, as well as manufacturing and international markets it serves which ultimately impacted the top line. Although, Sullivan adds that the adjusted consolidated earnings before interest and taxes margins improved by 230 basis points and adjusted EBIT increased by $2.2 million due to good cost discipline, manufacturing yield improvements and restructuring activities from RPM’s 2020 MAP to Growth program.

Outlook: Price Increases, Restructuring Update

As reported in July, RPM plans to affirm the full-year fiscal 2020 guidance, using the MAP to Growth objective to return $1.5 billion in capital to stockholders by May 31, 2021.

“Despite the tightening of our revenue growth assumption, we expect to leverage the positive momentum of the 2020 MAP to Growth operating improvement plan to our bottom-line results," said Sullivan. "Therefore, we are maintaining our projected adjusted EBIT growth in the 20% to 24% range, as previously reported in July. We expect this to result in adjusted diluted EPS between $3.30 and $3.42 for fiscal 2020."

The company estimates that sales will continue to rise 2% to 3% in the second 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; Latin America; North America; Program/Project Management; RPM; Rust-Oleum Corp.; Tremco; Z-Continents

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