RPM Reports Net Sales Increase for 2022 Q2

THURSDAY, JANUARY 6, 2022


RPM International Inc. (Medina, Ohio), parent company of specialty coatings and sealants brands including Carboline and Tremco, released its second-quarter earnings report for 2022 on Wednesday (Jan. 5).

The company announced that, for Q2, net sales came in at a record $1.64 billion, up 10.3% over this period last year, which reported $1.49 billion. Net income was reported at $124.9 million, down 2.2% over last year, which came in at $127.7 million.

Other numbers include: Diluted earnings per share were $0.96, a decrease of 2.0% over the $0.98 reported in the year-ago quarter; income before income taxes was $163.2 million, a decrease compared to $167 million reported in the prior year’s second quarter; and consolidated earnings before interest and taxes were up 4.6% to $187 million compared to $178.7 million reported in the year-ago period.

The company credits its MAP to Growth program and price increases to offset the supply chain disruptions for the increases.

“Robust demand for our paints, coatings, sealants and other building materials led to strong double-digit sales growth at three of our four operating segments and drove consolidated top-line performance that was ahead of our projections. In fact, top-line growth could have been even better if not for supply chain challenges that limited access to certain raw materials and cost us roughly $200 million in sales during the quarter,” said Frank C. Sullivan, RPM chairman and CEO.

“The decline in adjusted EBIT was in line with our outlook and was a result of continued material, wage and freight inflation, as well as supply chain disruptions that were exacerbated by Hurricane Ida and increased our conversion costs. These challenges were partially offset by price increases and operational improvements from our MAP to Growth program that led to $19 million of incremental year-over-year savings. It’s also worth noting that we faced a difficult comparison to the prior year when consolidated adjusted EBIT increased 29.7%.

“We remain focused on long-term growth and continue to invest in initiatives that will drive the business forward, including operational improvements, the development of innovative new products, acquisitions and manufacturing capacity expansions, as demonstrated by the 178,000-square-foot chemical manufacturing facility we purchased in September.

“I would like to commend our associates around the world for their extraordinary efforts to meet our customers’ needs and collaborate with our suppliers as we continue to execute and invest in strategies that will drive RPM’s long-term growth and success,” Sullivan concluded.

Numbers by Segment

Net sales in the Construction Products Group increased 22% to a record of $614.2 million, up from $503.5 million last year. The company stated that the increase was a result of innovation in its high-performance building solutions, market share gains and strong demand in North America for its construction and maintenance products.

The highest growth businesses included insulated concrete forms, roofing systems, concrete admixtures and repair products, and commercial sealants. However, performance in international markets was mixed, with Europe fairly flat, while emerging markets showed signs of recovery. 

The Performance Coatings Group also showed an increase, up 16.9% from $258.8 million to $302.5 million, which RPM attributes to catch-up of maintenance by industrial customers, as COVID-19 restrictions relaxed and contractor access to construction sites improved. Sales growth was reportedly also facilitated by price increases and improved product mix, driven by new decision support tools that helped improve salesforce efficiencies and product mix. 

The largest businesses in this segment were the polymer flooring systems and corrosion control coatings. Its recently acquired Bison raised flooring systems and emerging market sales also reportedly remained strong.

The Specialty Products Group reported sales of $193.6 million, an increase of 10% over the $176.1 million last year. Recent management changes were credited for continued sales in this segment, with businesses that serve the outdoor recreation, furniture and OEM markets performing well.

Higher expenses were experienced in this group stemming from SPG’s investments in future growth initiatives and higher legal expenses, which were partially offset by operational improvements.

While the other segments saw increases in sales, the Consumer Group decreased 3.3% from the $547.5 million reported last year. The Consumer Group generated $529.2 million in net sales, noting that severe raw material shortages seen in the 2022 first quarter persisted this quarter. According to the company, the resulting production outages adversely impacted segment sales by approximately $100 million.

The demand for products remains high, while inventories are low, with RPM expecting lost sales to be recovered when these conditions normalize. Capacity is continued to be added to meet demand and build resiliency in its supply chain to secure required raw materials.

Look Ahead

According to the report, the company expects demand for its paints, coatings, sealants and other building materials in the fiscal 2022 third quarter. However, it also expects pressure on revenues and productivity due to supply chain challenges, raw material shortages and disruptions for the COVID-19 Omicron variant.

RPM predicts to generate double-digit consolidated sales growth in the fiscal 2022 third quarter versus last year’s third quarter sales, which grew 8.1%, with high double-digit sales growth in its CPG and PCG segments. SPG sales are anticipated to be up in low-double digits compared to last year, with the Consumer Group anticipated to increase by low-single digits.

For Q3, the company expects for the consolidated adjusted EBIT to decrease 5% to 15% compared to last year, when adjusted EBIT was up 29.7%. Earnings will likely be impacted by ongoing raw material, freight and wage inflation, as well as sales volume disruptions caused by shortages and COVID-19, namely in the Consumer Group.

“RPM continues to work to offset these challenges by implementing price increases, improving operational efficiencies and bringing on additional manufacturing capacity. The company remains focused on managing through the challenges stemming from the pandemic, while optimally positioning the business to deliver long-term growth and increased value for its stakeholders,” stated the report.

   

Tagged categories: Asia Pacific; Business management; Business matters; Business operations; Carboline; Coating Business; 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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