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RPM Releases 2022 Q1 Earnings Report

Thursday, October 7, 2021

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RPM International Inc. (Medina, Ohio), parent company of specialty coatings and sealants brands including Carboline and Tremco, released its first-quarter financial report Wednesday (Oct. 6) reporting a record consolidated sales increase of $1.65 billion.

First-quarter net sales increased 2.7%; however, net income was $134.6 million, a decrease of 25.5% compared to the $180.6 million reported in the year-ago period.

“Our Construction Products Group, Performance Coatings Group and Specialty Products Group generated solid sales and adjusted EBIT growth for the fiscal 2022 first quarter. Their performance was particularly impressive given the raw material shortages, supply chain disruptions and inflation all of our segments have experienced and which have resulted in a negative impact on first-quarter sales of approximately $200 million,” said RPM Chairman and CEO Frank C. Sullivan.

“Sales and earnings for our Consumer Group decreased during the quarter as a result of these factors, as well as a difficult comparison to the prior-year period. All indicators suggest that the underlying demand for our consumer products is still strong and that the supply and material disruptions the segment is currently experiencing are temporary.”

By Segment

Construction Products Group net sales increased 17.7%, to a record of $644.4 million during the fiscal 2022 first quarter compared to fiscal 2021 first-quarter sales of $547.7 million. Sales grew organically by 15% and foreign currency translation added 2.2%. IBT was a record of $116.2 million, up 15.7% compared to EBIT of $100.5 million during the fiscal 2021 first quarter.

RPM Inc.

RPM International Inc. (Medina, Ohio), parent company of specialty coatings and sealants brands including Carboline and Tremco, released its first-quarter financial report Wednesday (Oct. 6) reporting a record consolidated sales increase of $1.65 billion.

“Organic growth of 15.0% in the Construction Products Group was particularly impressive given that a relevant market indicator for the segment, non-residential construction put in place, is down 11.6% this calendar year, according to the Portland Cement Association. Nearly all of the businesses in the segment experienced strong top-line performance, in part by focusing on growing markets such as technology and distribution,” said Sullivan.

“Those that performed particularly well were our businesses providing commercial roofing systems, concrete admixtures and repair products, and insulated concrete forms. The segment’s European operations generated double-digit top-line growth, due in part to an easier comparison to last year’s first quarter when shelter-in-place requirements were most severe,” stated Sullivan. “Segment earnings increased as a result of market share gains, operational improvements, cost controls and selling price increases, which offset production inefficiencies due to supply chain disruptions and material cost inflation.”

Performance Coatings Group net sales were $285.6 million during the first quarter, which was an increase of 9.9% compared to the $259.8 million reported a year ago. Organic sales increased 3.8%, while acquisitions contributed 3.7% and foreign currency translation increased sales by 2.4%.

Segment IBT was $35.1 million compared with IBT of $28.5 million reported a year ago.

“Performance Coatings Group results, with EBIT growth outpacing sales, were encouraging because it has been the segment most heavily impacted by the pandemic. Sales increased at nearly all of the Performance Coatings Group’s major business units, partially aided by comparisons to last year’s first quarter when pandemic restrictions did not allow outside contractors on worksites and poor energy market conditions led to deferrals in industrial maintenance spending. Sales were strong at our recently acquired Bison business, in emerging markets and in industrial maintenance outside of the energy sector,” stated Sullivan.

“Earnings were boosted by improved pricing, incremental savings from operating improvement initiatives and two recent acquisitions.”

The Specialty Products Group reported record sales of $182.1 million during the first quarter of fiscal 2022, an increase of 15.2% as compared to sales of $158.0 million in 2021. Organic sales increased 13.5%. Acquisitions added 0.3% and foreign currency translation increased sales by 1.4%.

“Generating strong top-line growth in the Specialty Products Group were businesses providing marine and powder coatings, wood stains and sealers, and disaster restoration equipment,” stated Sullivan. “Earnings increased due to higher sales volumes and incremental operating improvement program savings, which were partially offset by high raw material inflation, inefficiencies associated with supply chain disruption and investment in SG&A for future growth initiatives. In response, businesses in the segment are continuing to institute price increases.”

Finally, the Consumer Group sales were $538.4 million during the first quarter of fiscal 2022, a decrease of 16.0% compared to sales of $641.2 million reported in the first quarter of fiscal 2021. Organic sales also decreased by 20.1%, while acquisitions added contributed 3.3% to sales and foreign currency translation provided a 0.8% tailwind.

“Our Consumer Group faced a tough comparison to the prior year when sales increased 33.8% and adjusted EBIT was up 121.6% due to unprecedented demand for its home improvement products during the pandemic,” stated Sullivan. “The segment experienced a negative sales impact of approximately $100 million during the first quarter of fiscal 2022 from production outages due to raw material supply constraints. However, the segment’s fiscal 2022 first-quarter sales were 12.3% above pre-pandemic levels of the first quarter of fiscal 2020 in spite of the negative sales impact from shortages.

“There is pent-up demand for our products, and inventories in many of our channels are low. We expect to recover the lost sales when conditions normalize. Earnings declined during the first quarter of fiscal 2022, as compared to the prior year, as a result of inflation in materials, freight and labor, as well as the unfavorable impact of supply shortages on productivity. These factors were partially offset by price increases and savings from our operating improvement program. We are proactively building resiliency in our supply chain to secure the raw materials we require today and in the future.”

Conclusions

Looking ahead, RPM expects raw material, freight and wage inflation to persist, in addition to the ongoing raw material shortages and supply chain issues. However, the company also expects that these challenges will be offset by price increases, operational improvements and additional manufacturing capacity.

“Accordingly, we expect that the second-quarter results will be directionally similar to the first quarter, with significant year-over-year declines again in our Consumer Group, which is still lapping tough comparisons, and double-digit sales and earnings increases for our other three segments in aggregate. This will result, on a consolidated basis, in a decline of adjusted EBIT of 15% to 25% versus the second quarter of fiscal 2021,” said Sullivan.

“Moving forward, we will maintain the positive momentum created by our operating improvement program as we complete its remaining projects, leverage resources across RPM to manage supply chain issues and meet customer demand, identify new opportunities for efficiencies through our continuous improvement culture, and make investments in growth opportunities, including capacity expansions.”

   

Tagged categories: Asia Pacific; Business management; Business matters; Business operations; Carboline; Coating Business; Coating Materials; Coatings; Consumer Reports; Earnings reports; EMEA (Europe, Middle East and Africa); Finance; Latin America; North America; Program/Project Management; RPM; Tremco; Z-Continents

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