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RPM Boasts Record Highs in Q2 Sales, Income

Friday, January 5, 2018

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RPM International Inc. (Medina, Ohio), parent company of consumer paints and specialty coatings companies including Rust-Oleum and RPM Wood Finishes, announced record sales and net income in the second quarter of its 2018 fiscal year in a quarterly earnings report released Thursday (Jan. 4).

RPM reported sales of $1.32 billion in Q2, which ended Nov. 30; that’s up 10.5 percent from the $1.19 billion in sales the company achieved in the second quarter of 2017. The increase came as a result of both organic sales—up 4.2 percent—and acquisitions, which increased sales by 4.7 percent; foreign currency translation also worked in the company’s favor, adding 1.6 percent to sales figures.

Frank C. Sullivan
RPM International

“Sales growth was strong across all three of our business segments, with a balance of organic and acquisition growth,” said Frank C. Sullivan, RPM chairman and chief executive officer. 

The company’s net income for the quarter was $95.5 million, up from an adjusted net income of $70.5 million in RPM’s prior-year quarter—and up considerably compared with the net loss of $70.9 million that the company actually posted in 2017 Q2 due to two major one-time charges.

Record Numbers

Those sales and net income numbers, along with earnings per diluted share of $0.70, represent records for the company, RPM says.

“Sales growth was strong across all three of our business segments, with a balance of organic and acquisition growth,” said Frank C. Sullivan, RPM chairman and chief executive officer. “We are also seeing the benefits of last year’s product line acquisitions and cost reduction efforts on improved leverage, which more than offset higher raw material costs that have negatively impacted gross profit margins.”

During fiscal year 2017, RPM acquired firms including U.K.-based Adhere Industrial Tapes, Ohio-based Key Resin Company, Dutch specialty chemicals company SPS Group and polyurethane foam brand Touch N' Foam, among a handful of other additions to its portfolio.

Sales were strong across all three of RPM’s segments in Q2, with growth of about 11 percent in both the Industrial and Consumer segments, and 7.4 percent growth in Specialty.

Numbers by Segment

RPM’s Industrial segment, which includes Carboline, Stonhard, Tremco and Illbruck, posted sales of $702.9 million in Q2 2018, up from $633.4 million in the same quarter the prior year. RPM reports adjusted earnings before interest and tax (EBIT) of $70.2 million for the quarter, up from $64.4 million in Q2 2017.

Sullivan attributed strong sales to growth in the roofing and commercial and industrial polymer flooring industries, and a “slight rebound” in the oil and gas market.

Carboline intumescent coating
Carboline Company

The Industrial segment, which includes Carboline, reported sales numbers up about 11 percent compared with the prior year.

The Consumer segment, including Rust-Oleum, DAP and Zinsser, reported sales of $415.4 million in Q2 this year, up from $373.7 million in the same quarter last year. The segment posted an adjusted EBIT of $45.2 million, down slightly from the adjusted number of $47.7 million in Q2 2017. EBIT before adjustment in last year’s second quarter, though, was actually a $140.5 million loss, owing to a $188 million impairment charge related to RPM’s Kirker nail enamels business.

“During the quarter, we saw a sharp uptick in business from caulks and sealants products, as well as some international markets,” Sullivan said. “The segment also benefited from last year’s acquisitions of Touch ‘N Foam in the U.S. and SPS in Europe. The decline in EBIT resulted from higher raw material costs and unfavorable manufacturing absorption and product mix.”

Rust-Oleum 10X Advanced
Rust-Oleum

The Consumer segment, including Rust-Oleum, reported growth in net sales despite a slightl dip in adjusted EBIT.

The Specialty segment, with brands including Day-Glo, Dryvit and RPM Wood Finishes, reported net sales of $197 million, up from $183.6 million in Q2 of 2017. The segment saw EBIT of $34.3 million in the second quarter this year, up from $31 million in the same quarter last year.

The company also reported expenses in the “Corporate/Other” category, accounting for a $17.9 million in costs subtracted from the firm’s EBIT this quarter.

Looking Ahead

In the second half of the fiscal year, RPM expects continued growth in oil and gas, and steady earnings in construction in the U.S., bolstered by construction needed in regions affected by last year’s hurricanes.

In the Consumer segment, Sullivan said he expects “low-to-mid-single-digit” sales growth, largely organic in nature. “We plan to invest in our great brands by stepping up advertising and promotional activity in the spring sell-in season and, therefore, expect back-half earnings results to be fairly flat to last year in this segment,” he said.

Sullivan also expects earnings per share to be bolstered by the lower corporate tax rate in the U.S., effective immediately in the new year.

   

Tagged categories: Business matters; Carboline; Coatings manufacturers; Earnings reports; Industrial coatings; RPM; Rust-Oleum Corp.; Stonhard; Tremco; Zinsser

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