RPM International Inc. reported record financial results for its fiscal 2024 second quarter ended November 30, 2023.

“For eight consecutive quarters, we have generated record sales and adjusted EBIT, and we are making good progress toward achieving our MAP 2025 profitability goals by becoming a more efficient and collaborative organization. At our investor day last year, we discussed two other key components of MAP 2025 – improving cash flow conversion and investing to accelerate organic growth. We have made great progress with cash flow, as our $767.8 million cash from operating activities through the first six months of fiscal 2024 has already exceeded our previous 12-month fiscal year record. Our organic growth investments are yielding successes, particularly in high-performance buildings and turnkey flooring systems, where we are gaining share,” said Frank C. Sullivan, RPM Chairman and CEO.

“Our Construction Products Group and Performance Coatings Group, the segments focused on coatings and high-performance buildings, led growth in the second quarter. They benefited from their focus on maintenance and repair, as well as their positioning to sell highly engineered solutions into growing end markets. Demand in DIY and specialty OEM markets remained weak; however, we overcame these challenges by successfully executing MAP 2025 initiatives to expand gross margins by 320 basis points and generate double-digit adjusted EBIT growth.”  

Second-Quarter 2024 Consolidated Results

Consolidated

Fiscal 2024 sales were a second-quarter record and were in addition to strong growth in the prior-year period when sales increased 9.3%. Pricing was positive in all segments as they catch up with cost inflation. Volume growth was strongest in businesses that were positioned to serve solid demand for infrastructure, reshoring and high-performance building projects with engineered solutions, which was more than offset by lower DIY consumer takeaway at retail stores and weak demand from specialty OEM end markets.

Geographically, sales growth was strongest in markets outside the U.S. A new management team and focused sales strategy in Europe contributed to 8.9% growth, and Africa/Middle East and Asia/Pacific benefited from improved coordination under PCG management that resulted in 13.0% and 6.4% sales growth, respectively. 

Sales included a 0.3% organic decline, a 0.2% decline from divestitures net of acquisitions, and 0.5% growth from foreign currency translation.

Selling, general, and administrative expenses increased due to incentives to sell higher-margin products and services; investments to generate long-term growth; and inflation in compensation, benefits and healthcare expenses. These increases were partially offset by expense reduction actions taken in the fourth quarter of fiscal 2023.

Fiscal 2024 second-quarter adjusted EBIT was a record and in addition to strong growth in the prior-year period when adjusted EBIT increased 36.4%. This growth was driven by gross margin expansion of 320 basis points, aided by MAP 2025 initiatives, including the commodity cycle, a positive mix from shifting toward higher margin products and services, and improved fixed-cost leverage at businesses with volume growth.

Performance Coatings Group

PCG generated record second-quarter sales, which were in addition to strong results in the prior-year period, driven by growth in engineered turnkey flooring systems serving reshoring capital projects and market share gains. Strong growth in Asia/Pacific and Africa/Middle East, which were all recently aligned under PCG, also contributed to the record sales.  

Sales included 5.6% organic growth, a 0.5% decline from divestitures net of acquisitions, and no impact from foreign currency translation.

All-time record adjusted EBIT was driven by sales growth, favorable mix and improved fixed-cost leverage that was enhanced by MAP 2025 initiatives. The adjusted EBIT growth was achieved in addition to strong results in the prior-year period.

Business Outlook

“We expect business conditions in the third quarter to generally be similar to the second quarter, with strength in our CPG and PCG segments, international markets, and market share gains offsetting continued weakness in DIY and specialty OEM demand. Adjusted EBIT growth is expected to accelerate, driven by less challenging prior-year comparisons and MAP 2025 benefits, which should more than offset lower volumes in certain businesses and investments we are making to accelerate future growth and efficiencies,” Sullivan added. “For the remainder of the year, we are leveraging our focus on repair and maintenance; our strong position serving demand for infrastructure, high performance buildings and reshoring projects; and MAP 2025 to deliver another year of record sales and adjusted EBIT.”

The company expects the following in the fiscal 2024 third quarter:

  • Consolidated sales to be flat compared to prior-year record results. 
  • CPG sales to increase in the mid-single-digit percentage range compared to prior-year record results.
  • PCG sales to increase in the mid-single-digit percentage range compared to prior-year record results.
  • SPG sales to decrease in the mid-teen percentage range compared to prior-year record results.
  • Consumer Group sales to decrease in the low-single-digit percentage range compared to prior-year record results.
  • Consolidated adjusted EBIT to increase 25% to 35% compared to prior-year record results.

The company expects the following in the full-year fiscal 2024:

  • Consolidated sales to increase in the low-single-digit percentage range compared to prior-year record results. The previous outlook was for mid-single-digit percentage growth.
  • Consolidated adjusted EBIT to increase in the low-double-digit to mid-teen percentage range compared to prior-year record results. This outlook is unchanged from the prior outlook.

More information can be found at www.RPMinc.com.