Net Sales Increase 4.6% for RPM in Fiscal 2019
RPM’s fiscal 2019 consolidated full-year net sales increased 4.6% to $5.56 billion from $5.32 billion in fiscal 2018.
RPM International Inc. recently reported financial results for its fiscal 2019 fourth quarter and full year, ended May 31, 2019. Net sales for the fourth quarter increased 2.8% to $1.60 billion from $1.56 billion in the prior fiscal year. Net income in the 2019 quarter increased 55.7% to $133.4 million from $85.7 million reported in the fourth quarter of fiscal 2018.
“We are very pleased with our significant earnings leverage for the quarter, which was bolstered by our 2020 MAP to Growth operating improvement plan, the benefits of which are beginning to be realized,” said Frank C. Sullivan, chairman and CEO. “Also contributing to the bottom line were recently implemented price increases and stabilizing raw material cost inflation. These gains were partially offset by continuing increases in costs for distribution and labor.
“Sales grew organically by 3.5%, while acquisitions contributed 1.9%. This sales growth was offset by unfavorable foreign exchange of 2.6%. Sales in North America, our largest market, were slowed by some of the wettest spring months on record, which caused delays in painting and construction projects. In addition, conditions in Europe, our second largest market, remained soft. Despite these challenges, our operating units were able to drive top-line growth and gain market share.”
Sales for RPM’s Industrial segment for the fiscal 2019 fourth quarter were relatively flat at $809.0 million from $812.9 million a year ago. Organic sales improved 2%, while acquisition growth added 1%. Foreign currency translation reduced sales by 3.5%.
“Leading the industrial segment’s organic sales growth were our businesses providing corrosion control coatings, fiberglass reinforced grating, commercial sealants and concrete admixtures,” said Sullivan. “Top-line growth in the segment, which has our largest international exposure, was more than offset by the headwinds of translational foreign exchange. Sales were also impacted by extremely wet weather during the quarter that slowed construction projects and strategic decisions, made as part of 2020 MAP to Growth, to exit several product offerings with low margins and high working capital requirements. Also, as part of 2020 MAP to Growth, we closed a business in Saudi Arabia and exited several European locations. Despite flat sales, we were able to leverage our 2020 MAP to Growth savings to the bottom line, resulting in an increase in adjusted EBIT of $6.4 million.”
Fiscal 2019 fourth quarter net sales in the company’s Consumer segment increased 6.7% to $585 million from $548.4 million reported in the fiscal 2018 fourth quarter. Organic sales were up 7%, while acquisition growth added 1.5% and foreign exchange translation reduced sales by 1.8%.
“Both our Rust-Oleum and DAP businesses experienced strong sales growth in North America, despite the wet weather, as a result of market share gains and price increases, while sales in Europe were soft,” said Sullivan. “During the quarter, our Rust-Oleum business secured significant customer wins by regaining business in the home center channel and a major market share win within the hardware channel as part of a small project paint line review.
“The initial focus of our 2020 MAP to Growth, which was initiated about a year ago, was directed toward our consumer segment and resulted in the elimination of 221 positions and closure of four manufacturing facilities to date. The consumer segment is now starting to experience the benefits of those difficult early actions taken under our operating improvement plan. Additionally, recent price increases have finally begun to ease the negative impact of significant raw material cost escalation over the last 24 months. These factors helped to drive an increase in consumer segment adjusted EBIT of $36.8 million.”
RPM’s fiscal 2019 consolidated full-year net sales increased 4.6% to $5.56 billion from $5.32 billion in fiscal 2018. Net income was $266.6 million vs. $337.8 million reported in fiscal 2018.
For the year, the company’s Industrial segment improved 2.7% to $2.89 billion from $2.81 billion in fiscal 2018. Organic sales increased 4.1%, with acquisition growth contributing 1.4%. Foreign currency translation reduced sales by 2.8%.
Consumer segment sales for fiscal 2019 increased 7.6% to $1.89 billion from $1.75 billion in fiscal 2018. Organic sales growth was 7% and acquisitions contributed 2.1%. Foreign exchange decreased sales by 1.5%.
“As we move into fiscal 2020, we will begin reporting in four segments instead of our three previous segments,” said Sullivan. “Under this new structure, our business segments and their leadership will be better aligned to RPM’s overall strategy. This improved alignment is critical to our growth and success as it better positions our businesses to compete and win in the markets they serve. In addition, it provides our investors with greater visibility into the business and better comparability among our peers.
“The four operating segments are the Consumer Group, Specialty Products Group, Construction Products Group and Performance Coatings Group. The Consumer Group still houses our highly regarded Rust-Oleum and DAP businesses. The only minor change is that we have shifted our Kirker nail enamel business from the Consumer Group to our Specialty Products Group, which is a better fit for this niche business. The Specialty Products Group gains Kirker, but loses our exterior cladding business, Dryvit, and recently acquired insulated concrete forms manufacturer, Nudura, to the new Construction Products Group. The Construction Products Group is new and brings together our Tremco, tremco illbruck, Euclid Chemical, Viapol, Vandex and Flowcrete businesses, while also adding Dryvit and Nudura from Specialty Products. The Performance Coatings Group is unchanged with its core businesses including Stonhard, Carboline, USL, Fibergrate and others.
“We’re especially excited about the creation of the Construction Products Group, which was formed to create a cohesive portfolio of integrated construction systems that will deliver comprehensive building envelope solutions to our customers. We are also excited about changes at the Performance Coatings Group, which is being realigned from a more geographic matrix type of management into global brands with leadership teams that are responsible for [their sales throughout] the entire world. We expect that this realignment will result in improved market penetration and earnings leverage as we move forward.
“Had these reportable segments been in place during fiscal 2019, their proforma sales would have been $1.9 billion in the Consumer Group, $0.7 billion in the Specialty Products Group, $1.9 billion in the Construction Products Group and $1.1 billion in the Performance Coatings Group.”
For more information, visit www.rpminc.com.