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RPM Releases Q1 Numbers

Thursday, October 5, 2017

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RPM International Inc. (Medina, Ohio), parent company of coatings companies such as Rust-Oleum and RPM Wood Finishes, as well as the Euclid Group, released its first quarter fiscal numbers for 2018 on Wednesday (Oct. 4), reporting record sales and net income.

In its quarterly results, the company reported net sales of $1.35 billion in Q1, which comprised the three months ending on Aug. 31. Those sales numbers were up 7.5 percent over the company’s first-quarter sales in 2017. Net income was up 3.2 percent from the prior year, at $116.4 million.

Pipeline coating

RPM Inc.'s Industrial segment, which includes Carboline, saw growth in both organic sales and acquisitions in the first quarter of 2018.

The company’s earnings before interest and tax (EBIT) also increased significantly, up 6.1 percent over 2017’s Q1, to $177.6 million.

RPM reports that the effects of foreign currency translation were “essentially neutral” in the first quarter.

Consumer Segment

Consumer businesses for RPM—including Rust-Oleum, DAP and Zinsser—saw an increase in sales, driven by acquisitions in the segment, and a bump in EBIT as well in Q1.

Sales in the Consumer segment, at $427.1 million, were up 6.8 percent in the first quarter compared with prior-year numbers. Acquisition growth gave the segment an 8.1 percent boost, while organic sales were down 1.2 percent from 2017’s Q1. EBIT for the consumer segment was up 3.5 percent, to $72.6 million.

"Our growth in consumer is being driven by Touch n' Foam and SPS, both of which were acquired in the third quarter of fiscal 2017. Even though the residential housing market remains solid, overall organic growth in the U.S. paint category, across the industry, has been softer over the last couple of quarters," Sullivan said.

Industrial Segment

RPM’s Industrial segment, which includes Carboline, Stonhard, Tremco and Illbruck, among other companies, reported strong net sales, up 8 percent over prior-year numbers at $729.8 million. Organic sales grew 3.2 percent, while acquisitions bumped sales numbers up by 4.3 percent.

EBIT for the segment, though, increased only marginally, up 0.4 percent to $91.5 million. RPM chairman and CEO Frank C. Sullivan attributed the discrepancy to raw material costs, among other factors.

"Our industrial segment results reflect a combination of higher raw material costs, unfavorable product mix, higher distribution expense and disappointing results from a struggling Latin America,” Sullivan said. “Our European and Canadian businesses performed very well in the quarter.”

Rust-Oleum roofing

The Consumer segment, including Rust-Oleum, reported growth in sales, driven by acquisition growth.

Sales in the oil and gas industry were down, but a yearslong negative trend in that area slowed, and Sullivan said he expects sales growth in businesses serving that market in the coming quarter.

In July, RPM announced the acquisition of Key Resin, a polymer flooring and coating systems firm based in Batavia, Ohio, which became part of the company’s Euclid Group. Key Resin brings annual sales of about $25 million, according to RPM.

Specialty Segment

RPM’s Specialty segment, including brands like Day-Glo, Dryvit and RPM Wood Finishes, reported growth in net sales—both organic and acquisitions-based—and EBIT in the first quarter.

Sales in Specialty were up 6.9 percent, at $188.5 billion, with organic growth of 3 percent and acquisition growth totaling 4.1 percent. EBIT for the segment was up 8.9 percent, to $33 million, in Q1 2018.

"Many of our specialty business units had solid performance in the quarter, led by a surge at our restoration equipment unit, which was partially due to immediate response efforts to Hurricane Harvey,” Sullivan noted. “Our powder coatings, wood finishes and wood preservatives businesses also performed well in the quarter.”

Future Outlook

Sullivan said the company expects to see mid-single-digit sales growth in the Industrial and Consumer segments over the course of 2018, and low- to mid-single-digit growth in the Specialty segment.

The company is continuing to incur costs related to integrating Flowcrete and Euclid into the company’s new Euclid Group, Sullivan noted, and the firm expects more re-alignments in the Industrial segment in the future in order to increase efficiency.


Tagged categories: Carboline; Earnings reports; Finance; RPM; Rust-Oleum Corp.

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