MEDINA, OH – RPM International Inc. recently reported financial results for its fiscal 2022 third quarter ended Feb. 28, 2022. The company reported fiscal 2022 third-quarter net sales of $1.43 billion, an increase of 13.0% over the $1.27 billion reported a year ago. Third-quarter net income was $33.0 million, a 13.7% decrease compared to $38.2 million reported in the year-ago period. RPM’s consolidated earnings before interest and taxes (EBIT) were a third-quarter record, up 2.3% to $66.9 million compared to $65.4 million reported in the fiscal 2021 third quarter.
“RPM’s associates persevered through unprecedented supply chain challenges, Omicron-related disruptions and inflation to generate record EBIT and record sales during the third quarter despite a difficult comparison to the prior year,” said Frank C. Sullivan, RPM Chairman and CEO. “Adjusted EBIT growth was driven by three of our four segments, which leveraged selling price adjustments and operational improvements to the bottom line.
“We have been fast to respond to supply chain challenges by quickly scaling up in-house resin production at the manufacturing plant we acquired in Texas last September. Additionally, as a result of our on-going investments in the fastest-growing areas of our business, our high-performance building construction and coatings systems have achieved accelerated growth. Construction and industrial maintenance activity was robust, energy markets began to rebound and consumer takeaway remained strong.”
The company’s Construction Products Group net sales increased 21.7% to a record $482.0 million during the fiscal 2022 third quarter, compared to fiscal 2021 third-quarter net sales of $396.0 million. Organic growth was 23.2% and acquisitions contributed 2.2% to sales. EBIT was $33.2 million, up 101.4% compared to EBIT of $16.5 million in the fiscal 2021 third quarter. Excluding certain items not indicative of ongoing operations, fiscal 2022 adjusted EBIT increased 89.7% to a record $35.1 million compared to adjusted EBIT of $18.5 million reported during the year-ago period. The group’s record revenue growth was largely due to the continued success in promoting its building envelope products and differentiated restoration solutions. Its fastest-growing businesses were those providing roofing systems, insulated concrete forms, commercial sealants, as well as admixtures and repair products for concrete.
Net sales for the Performance Coatings Group were a record $270.9 million during the fiscal 2022 third quarter, an increase of 19.6% from net sales of $226.5 million reported a year ago. Organic sales increased 17.8% and acquisitions contributed 3.4%, which were partially offset by a foreign currency translation headwind of 1.6%. EBIT was $24.8 million, an increase of 105.6% compared to EBIT of $12.1 million in the fiscal 2021 third quarter. Adjusted EBIT, which excludes charges not indicative of ongoing operations, increased 89.9% to a record $26.8 million during the third quarter of fiscal 2022 from adjusted EBIT of $14.1 million during the year-ago period. The group’s momentum accelerated in the third quarter, with all of its North American businesses generating double-digit organic sales growth. PCG’s businesses serving emerging markets experienced robust growth, and its European companies continued their steady rebound. Driving its strong top-line were increased industrial maintenance spending, recovery in energy markets and price increases. PCG’s best-performing businesses were those providing polymer flooring systems, corrosion control coatings and raised flooring systems.
The Specialty Products Group reported record net sales of $189.4 million during the third quarter of fiscal 2022, an increase of 11.9% compared to net sales of $169.2 million in the fiscal 2021 third quarter. Organic sales increased 11.9% and acquisitions added 0.8%, which were offset by unfavorable foreign currency translation of 0.8%. EBIT was $25.9 million, an increase of 5.2% compared to EBIT of $24.6 million in the fiscal 2021 third quarter. Adjusted EBIT, which excludes charges not indicative of ongoing operations, was a record $26.6 million in the fiscal 2022 third quarter, an increase of 5.4% compared to adjusted EBIT of $25.3 million in last year’s quarter. Record sales were a result of strong performance at nearly all of the group’s businesses, with the highest growth coming from those serving the OEM and food additives markets. In addition, sales of the disaster restoration equipment business rebounded after securing a supply of semiconductor chips and reconfiguring its products to accommodate them.
Consumer Group net sales were a record $491.6 million during the third quarter of fiscal 2022, an increase of 2.9% compared to net sales of $477.7 million reported in the third quarter of fiscal 2021. Organic sales increased 3.6%, which was partially offset by unfavorable foreign currency translation of 0.7%. Consumer Group IBT was $16.9 million compared with IBT of $42.8 million in the prior-year period. EBIT was $16.8 million, a decrease of 60.7% compared to EBIT of $42.8 million in the fiscal 2021 third quarter. Excluding charges not indicative of ongoing operations, fiscal 2022 third-quarter adjusted EBIT was $17.2 million, a decrease of 63.9% compared to adjusted EBIT of $47.8 million reported during the prior-year period.
As expected, the Consumer Group was able to grow revenue as the severe alkyd resin shortages it had experienced were partially offset due to supply provided by the Texas-based manufacturing facility that RPM acquired in September. The Consumer Group also faced a challenging comparison to the prior-year period when sales increased 19.8% and adjusted EBIT increased 48.6% due to elevated demand for its home improvement products during the pandemic’s first phase. The segment’s fiscal 2022 third-quarter sales were still 23.3% above pre-pandemic levels of the third quarter of fiscal 2020.
Due to the nature of its products and the markets it serves, inflation has had a greater impact on the Consumer Group than RPM’s other segments. In addition, fiscal 2022 third-quarter adjusted EBIT was challenged by unreliable shipping and supply resulting from labor shortages caused by the Omicron variant. Partially offsetting these factors were price increases and operational improvements. The Consumer Group continues to implement price increases to catch up with inflation, build resilience in its supply chain, and invest in capacity and process improvements to meet customer demand.
For the fiscal 2022 fourth quarter, RPM’s operations and those of its suppliers are expected to be impacted by ongoing supply chain challenges and raw material shortages, which will exert pressure on revenues and productivity. The strengthening U.S. dollar will also unfavorably impact the translation of RPM’s results in international markets. While RPM’s sales to Ukraine and Russia are immaterial, the Russian sanctions are exacerbating inflation of energy and transportation costs. They are also creating supply challenges for plant-based raw materials, as well as those that are derivatives of oil. Although it is too soon to discern, rising interest rates may slow business and consumer spending in the coming months.
In spite of these challenges, RPM expects to generate fiscal 2022 fourth-quarter consolidated sales growth in the low teens versus a difficult comparison to last year’s fourth-quarter sales, which grew 19.6%. The company also anticipates sales growth in the low teens in all four of its operating segments as a result of strategic investments it is making to capitalize on market opportunities and industry trends.
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