RPM International Inc. recently reported financial results for its fiscal 2022 first quarter ended August 31, 2021. Net sales in the fiscal 2022 first quarter increased 2.7% to a record $1.65 billion, compared to the $1.61 billion reported a year ago.
“Our Construction Products Group, Performance Coatings Group and Specialty Products Group generated solid sales and adjusted EBIT growth for the fiscal 2022 first quarter,” said Frank C. Sullivan, chairman and CEO. “Their performance was particularly impressive given the raw material shortages, supply chain disruptions and inflation all of our segments have experienced and which have resulted in a negative impact on first-quarter sales of approximately $200 million. Sales and earnings for our Consumer Group decreased during the quarter as a result of these factors, as well as a difficult comparison to the prior-year period. All indicators suggest that the underlying demand for our consumer products is still strong and that the supply and material disruptions the segment is currently experiencing are temporary.
“Across the company, we are continuing to implement price increases, where appropriate, in order to protect our margins. We also continue to benefit from incremental cost savings resulting from our recently concluded MAP to Growth operating improvement program. Additionally, we are making strategic investments for growth, as evidenced by the two acquisitions we recently completed and the manufacturing facility we purchased. The 178,000-square-foot plant located on 120 acres in Texas will serve as a manufacturing center of excellence for all four of our operating segments. It is fully operational and has an experienced operating team that will enable us to add long-term resilience in our supply chain, improve fill rates and more easily expand production of a number of our high-growth product lines in the coming quarters.”
Net sales for the Construction Products Group increased 17.7% to a record $644.4 million during the fiscal 2022 first quarter, compared to $547.7 million in the same period the prior year. This reflects organic growth of 15%, foreign currency translation tailwinds of 2.2%, and acquisition growth of 0.5%.
“Organic growth of 15.0% in the Construction Products Group was particularly impressive given that a relevant market indicator for the segment, non-residential construction put in place, is down 11.6% this calendar year, according to the Portland Cement Association,” Sullivan said. “Nearly all of the businesses in the segment experienced strong top-line performance, in part by focusing on growing markets such as technology and distribution. Those that performed particularly well were our businesses providing commercial roofing systems, concrete admixtures and repair products, and insulated concrete forms. The segment’s European operations generated double-digit top-line growth, due in part to an easier comparison to last year’s first quarter when shelter-in-place requirements were most severe.”
The Performance Coatings Group’s net sales were $285.6 million during the fiscal 2022 first quarter, a 9.9% increase compared to sales of $259.8 million reported a year ago. Organic sales increased 3.8%, while acquisitions contributed 3.7% and foreign currency translation increased sales by 2.4%.
“Performance Coatings Group results, with EBIT growth outpacing sales, were encouraging because it has been the segment most heavily impacted by the pandemic,” said Sullivan. “Sales increased at nearly all of the Performance Coatings Group’s major business units, partially aided by comparisons to last year’s first quarter when pandemic restrictions did not allow outside contractors on worksites and poor energy market conditions led to deferrals in industrial maintenance spending. Sales were strong at our recently acquired Bison business, in emerging markets and in industrial maintenance outside of the energy sector.”
The Specialty Products Group reported record sales of $182.1 million during the first quarter of fiscal 2022, an increase of 15.2% compared to sales of $158 million in the fiscal 2021 first quarter. Organic sales increased 13.5%, foreign currency translation provided a 1.4% tailwind, and acquisitions contributed 0.3%.
“Generating strong top-line growth in the Specialty Products Group were businesses providing marine and powder coatings, wood stains and sealers, and disaster restoration equipment,” Sullivan said.
Consumer Group sales were $538.4 million during the first quarter of fiscal 2022, a decrease of 16% compared to sales of $641.2 million reported in the first quarter of fiscal 2021. Organic sales decreased 20.1%, while acquisitions contributed 3.3% to sales, and foreign currency translation provided a 0.8% tailwind.
“Our Consumer Group faced a tough comparison to the prior year when sales increased 33.8% and adjusted EBIT was up 121.6% due to unprecedented demand for its home improvement products during the pandemic,” said Sullivan. “The segment experienced a negative sales impact of approximately $100 million during the first quarter of fiscal 2022 from production outages due to raw material supply constraints. However, the segment’s fiscal 2022 first-quarter sales were 12.3% above pre-pandemic levels of the first quarter of fiscal 2020 in spite of the negative sales impact from shortages. There is pent-up demand for our products, and inventories in many of our channels are low. We expect to recover the lost sales when conditions normalize.
“Looking ahead to our fiscal 2022 second quarter, we expect raw material, freight and wage inflation to persist, as will the raw material shortages and supply chain challenges we have been experiencing. In addition, we face another difficult comparison to the prior year when consolidated adjusted EBIT increased 29.7%. We anticipate these factors to be partially offset by price increases, operational improvements and additional manufacturing capacity.
“Based on these factors, we expect our fiscal 2022 second-quarter consolidated sales to increase in the mid-single digits. Our Construction Products Group, Performance Coatings Group and Specialty Products Group are anticipating double-digit sales growth. Our Consumer Group is anticipating another double-digit decrease in sales due to continued raw material shortages and a difficult comparison to the prior-year period when pandemic-fueled demand rapidly drove organic growth up 15%. However, we do expect the segment’s sales to be above its pre-pandemic level, which is a fairer comparison. While underlying demand for our products and services is strong, significant material shortages and inflationary pressures remain. Accordingly, we expect that the second-quarter results will be directionally similar to the first quarter, with significant year-over-year declines again in our Consumer Group, which is still lapping tough comparisons, and double-digit sales and earnings increases for our other three segments in aggregate.
“Moving forward, we will maintain the positive momentum created by our operating improvement program as we complete its remaining projects, leverage resources across RPM to manage supply chain issues and meet customer demand, identify new opportunities for efficiencies through our continuous improvement culture, and make investments in growth opportunities, including capacity expansions.”
Additional details are available at www.rpminc.com.