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RPM Record: Rust-Oleum Never Sleeps

Monday, July 23, 2012

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Rebounding home renovations and new rollouts by Rust-Oleum helped paint quarterly and annual sales records for RPM International Inc. in fiscal 2012, the Ohio holding company announced Monday (July 23).

RPM International Inc.

RPM International’s consumer segment benefited from a mild winter, increased spending on home renovation, and some new products.

“Sales in the consumer segment, particularly at our Rust-Oleum subsidiary, benefited from successful new product introductions and continued strong take-away in small-project maintenance, repair and redecorating by consumers,” said Frank C. Sullivan, chairman and CEO of the parent company of DAP, Zinsser, Varathane and other well-known brands of coatings, sealants, and building materials.

“Sales in the mid-single-digit range for the fourth quarter were in line with our estimates, given the pull-forward of sales into our fiscal third quarter due to the extremely mild winter season in most of the U.S.”

Fourth-Quarter Results

Net sales, net income and diluted earnings per share for the fourth quarter all notched double-digit gains over the same period in 2011, RPM reported.

The company announced:

• Net sales grew 12.2% over the fourth quarter of fiscal year 2011, to a record $1.1 billion;

• Consolidated earnings before interest and taxes (EBIT) increased 16.5%, to $139.5 million;

• Net income soared by 17.7%, to $82.6 million; and

• Diluted earnings per share improved 16.7%, to $0.63.

“Our operating companies posted an excellent finish to the fiscal year,” said Sullivan. “This performance was driven by internal growth initiatives, market share gains and continued geographic expansion, despite ongoing raw material challenges and an uncertain global economy.”

Q4 Segment Results

Fourth-quarter net sales for RPM's Consumer segment grew by 5.9%, to $377.0 million, from the same quarter of FY 2011. Acquisition growth accounted for 1.1%, while organic sales were up 4.8%, including 0.8% in currency-rate losses, which have affected every major coatings company.

Consumer segment EBIT increased 12.5% to $60.3 million from the same period of 2011.

Industrial segment sales grew 15.8%, to $724.8 million in the fourth quarter of FY2012 from the comparable period of 2011, led by strong growth in industrial maintenance and corrosion control coatings.

Organic sales improved 10.2%, despite 3.3% in currency exchange losses, while acquisitions added 5.6%.

Record-Setting 2012

RPM also reported double-digit increases—and several records—in its consolidated net sales, net income and earnings per share for the fiscal year ended May 31. Compared to FY 2011, the company posted for FY 2012:

• A net sales increase of 11.7%, to a record $3.8 billion;

• Consolidated EBIT growth of 14.9%, to $396.1 million;

• Net income improvement of 14.2%, to a record $215.9 million; and

• A 13.8% in diluted earnings per share, to a record $1.65.

FY 2012 Segment Results

Consumer segment sales for fiscal 2012 improved by 10.7%, to $1.24 billion. over fiscal 2011. Organic sales contributed 10.2% of that increase, including net foreign exchange gains of 0.2%; acquisition growth added 0.5%. Consumer segment EBIT increased 9.7%, to $160.1 million.

Sales for RPM's industrial segment increased 12.2%, to $2.5 billion, over FY 2011. Organic sales added 7.8%; acquisitions, 4.4 %. Foreign exchange rates had a neutral effect on the year's results. Industrial segment EBIT grew 19.8%, to $282.4 million in fiscal 2011.

Acquisitions Expand Reach

During the fourth quarter, RPM announced the acquisition of Australian protective coatings maker HiChem Paint Technologies Pty. Ltd., which has annual sales of about $23 million.

In addition, since the fourth quarter, RPM's Building Solutions Group has acquired Viapol Ltda., a Brazilian producer of building materials and construction products with annual sales of about $85 million.

Mixed Forecast

Looking ahead, the company foresees continued—but more moderate—improvement in fiscal year 2013.

“In our core North American markets, we see consumers returning to more normal spending patterns for home maintenance, repair and redecorating,” said Sullivan. “We also expect continuing modest momentum in residential and commercial construction spending.”

Industrial markets are more uncertain, due to the upcoming U.S. presidential election and continued shakiness in European operations.

Nevertheless, RPM expects its consumer segment to grow by 5% to 7% and its industrial segment to grow by 6% to 10% in FY 2013, Sullivan said.

One big plus, Sullivan said raw materials prices are finally stabilizing “for the first time in many years,” and RPM is “hopeful that we will be able to maintain or improve our gross margin profitability for the year.”