RPM Sets Sales Record in Q3, Names New VP
Holding company RPM Inc. (Medina, Ohio), parent company of coatings firms including Carboline, Stonhard and Tremco, as well as consumer paints companies like Rust-Oleum, saw record sales and record net income in the third quarter of its fiscal year 2018, according to a quarterly report issued Thursday (April 5).
RPM reported sales of $1.1 billion for the quarter (which ended Feb. 28), representing a third-quarter record for the company. Sales were up 7.8 percent compared with the third quarter of 2017.
Net income was up dramatically for the company year over year, at $40.2 million in Q3 2018, compared with $11.9 million during the same period last year. During the third quarter of 2017, net income had been detrimentally affected by pre-tax charges for an intangible impairment on its Rust-Oleum Restore product line, and by the closing of a manufacturing facility in Europe.
Consolidated earnings before interest and taxes (EBIT) were reported at $56.7 million for Q3, up more than 50 percent compared with prior-year numbers.
“RPM’s operating performance for the third quarter was outstanding, despite severe, continued industry-wide headwinds from higher raw material costs,” said chairman and CEO Frank C. Sullivan.
RPM’s Industrial segment, which includes Carboline, Stonahrd, Tremco and illbruck, saw increased sales on the quarter, owing both to organic sales (up 2.2 percent) and acquisitions (up 2.8 percent). Sales in the segment totaled $569.2 million in Q3, up 9.2 percent compared with the previous year.
RPM's Industrial segment, which includes a number of protective and marine coatings firms, saw increased organic and acquisitions-based sales.
“Our industrial segment, representing over 50 percent of consolidated sales, increased EBIT by nearly 40 percent through greater SG&A [Selling, General and Administrative Expenses] cost leverage, despite higher raw materials costs,” Sullivan said. “Our Tremco Roofing and international polymer flooring businesses did extremely well, partially offset by continued weakness in Brazil and mixed results in Europe.”
The Consumer segment also saw growth in sales, spurred more by acquisitions (up 4.2 percent) than by organic sales growth (up just 0.7 percent). Consumer sales got a slight boost courtesy of foreign currency translation, which had a positive effect of 1.5 percent.
“In our consumer segment, prior-year acquisitions continue to drive incremental sales and our organic growth has outperformed that of our peers in the consumer space,” Sullivan said. “However, the overall sluggishness in consumer point-of-sale takeaway over the last several quarters continued. We expect a robust advertising schedule in the fourth quarter to position the consumer segment for accelerated growth in fiscal 2019.”
Recent RPM acquisitions in the Consumer segment include California-based Miracle Sealants.
In both Consumer and Industrial, acquisition-related growth was largely a result of a series of buys the firm made in fiscal year 2017, including Georgia-based infrastructure chemicals company Prime Resins; raw-materials manufacturer Arnette Polymers; industrial tape maker Adhere Industrial Tapes; and Specialty Polymer Coatings Inc.
More recently, RPM has boosted its Consumer side with the acquisitions of Dutch decorative and specialty coatings company SPS and Iowa-based stain-remover firm Whink Products (both in December) and California-based Miracle Sealants Company (in March), all joining the Rust-Oleum brand.
In the Specialty segment, sales were up as well, up 6.5 percent over prior-year numbers, to $170.1 million.
“Sales were brisk in our restoration, OEM and pleasure marine coatings businesses, which were partially offset by expected declines in our edible coatings business as a result of a patent expiration,” Sullivan explained.
Outlook, New VP
The company anticipates “mid- to upper-single-digit sales growth” in the fourth quarter, according to Sullivan, led by the Industrial segment, where the firm anticipates mid- to upper-single digit growth. RPM expects mid-single-digit growth in Consumer and marginal growth in the Specialty segment.
Timothy R. Kinser, formerly executive vice president of DAP Products, will become vice president of operations for RPM in June.
The company also announced Thursday that Timothy R. Kinser has been appointed vice president of operations for the company, a position he will take effective June 1. Kinser previously served as executive vice president of RPM’s DAP Products Inc. subsidiary, a maker of caulks, sealants and adhesives.
"Throughout his career, Tim has proven himself as an outstanding operational leader," Sullivan said. "His commitment to RPM and his experience at DAP have aptly prepared him to produce continuous, sustainable improvements for all of our business segments."