RPM International Inc. recently reported financial results for its fiscal 2020 first quarter ended August 31, 2019. Net sales in the fiscal 2020 first quarter were a record $1.47 billion, compared to $1.46 billion reported a year ago.
“We continued to experience the benefits of the plant rationalization, manufacturing improvements and center-led procurement initiatives of our 2020 MAP to Growth operating improvement plan during the quarter,” said Frank C. Sullivan, chairman and CEO. “These actions resulted in adjusted EBIT and EPS performance that met our projections despite modest top-line sales growth. As we anticipated in July, sales growth was modest as a result of an extremely wet June that slowed painting and construction activity in North America and unfavorable foreign exchange. We were encouraged to see our restructuring program drive significant EBIT margin improvement across all of our segments. On a consolidated basis, our adjusted EBIT margin improved 260 basis points.
“As we communicated last quarter, we have realigned the business into four reportable segments from our previous three segments. The new segments are the Construction Products Group, Performance Coatings Group, Consumer Group and Specialty Products Group. The objectives of this realignment are to position the business for accelerated growth and to provide our investors with greater visibility into the business and better comparability among our peers. Starting with the current quarter of fiscal 2020, we are reporting our results under this four-segment structure and are providing comparable fiscal 2019 financials that have been recast to reflect the effect of this realignment.”
Net sales for the Construction Products Group increased 3.6% to $536.1 million during the fiscal 2020 first quarter, compared to $517.5 million in the prior year’s first fiscal quarter, reflecting organic growth of 0.7% and acquisitions contributing an additional 4.4%. Foreign currency translation reduced sales by 1.5%.
“The recent acquisitions of Nudura and Schul, as well as last year’s price increases, helped to drive sales growth in the Construction Products Group, despite unfavorable foreign exchange,” said Sullivan. “Impacting our North American businesses were labor shortages and June weather conditions that delayed construction activity. Also contributing to the top line was our basement waterproofing solutions business, as well as a recovery in our Brazilian operation, which generated significant sales growth. The $16.3 million improvement in the segment’s adjusted EBIT was substantially driven by savings from our restructuring program, including management delayering, plant rationalization and improved manufacturing disciplines.”
The Performance Coatings Group’s net sales were $297.2 million in the fiscal 2020 first quarter, compared to sales of $296.4 million in the 2019 quarter, reflecting organic growth of 0.4% and acquisitions contributing an additional 1.8%. Foreign currency translation reduced sales by 1.9%.
“Savings from our 2020 MAP to Growth plan provided significant earnings leverage in the Performance Coatings Group, driven by a reduction of our operational footprint and strategic decisions to exit low-margin businesses,” said Sullivan. “In addition, the segment has benefited from executing a reorganization and management delayering as it moves towards a global brand management structure.”
Consumer Group sales were $479.3 million in the 2020 first fiscal quarter, compared to sales of $477.4 million reported in the first quarter of fiscal 2019. Organic sales increased 0.1%, while acquisition growth contributed 1.3%. Foreign currency translation reduced sales by 1.0%.
“The Consumer Group’s improvement in EBIT was largely due to a favorable year-over-year comparison resulting from $10 million in costs associated with legal settlements during the first quarter of fiscal 2019,” said Sullivan. “Results in the first quarter were impacted by market share gains in the prior quarter, which led to higher costs from outsourcing production to service this increased demand. In light of market share gains and expectations for continuing growth, we are investing in new equipment, improving production methods and leveraging RPM’s internal manufacturing network to produce products more efficiently and create greater capacity.”
The Specialty Products Group reported sales of $160.1 million in the first quarter of fiscal 2020, compared to sales of $168.7 million in the fiscal 2019 first quarter. Organic sales decreased 4.3%, and foreign currency translation reduced sales by 0.8%.
“The Specialty Products Group experienced sluggish demand in the OEM, manufacturing and international markets it serves, which impacted the top line,” said Sullivan. “However, on the bottom line, adjusted EBIT margins improved by 230 basis points and adjusted EBIT increased by $2.2 million due to good cost discipline, manufacturing yield improvements and restructuring activities from our 2020 MAP to Growth program.”
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