RPM International Inc., a world leader in specialty coatings, sealants and building materials, reported record financial results for its fiscal 2024 fourth quarter and full year ended May 31, 2024.

“We achieved record adjusted EBIT for the 10^th consecutive quarter due to our strategic balance and our ability to leverage MAP 2025 operating improvement initiatives to increase profitability,” said Frank C. Sullivan, RPM Chairman and CEO. “Construction Products Group captured growth opportunities with its differentiated turnkey roofing offerings and wall systems, while Consumer generated record adjusted EBIT, despite continued DIY softness, due to its MAP 2025 initiatives and ability to win market share. Although Performance Coatings Group and Specialty Products Group faced headwinds, we still generated positive organic sales growth on a consolidated basis.”

Sullivan continued, “For the full fiscal year, we achieved record sales, profitability and operating cash flow as a result of good execution on factors we could control, including structural margin and working capital improvements. Our adjusted EBIT finished in the guidance range we provided 12 months ago as our teams nimbly captured growth opportunities in markets that were more challenging than expected and focused on initiatives that resulted in improved profitability.”

Fourth-Quarter 2024 Consolidated Results

Positive organic growth, including slightly positive pricing, was more than offset by foreign currency translation headwinds and divestitures, resulting in an overall sales decline. Volume growth was strongest in businesses that were positioned to serve high-performance new building projects and renovations. Market share gains also contributed to volumes. This was offset by weakness in the disaster restoration business, unfavorable timing of project completions, and lower DIY consumer takeaway at retail stores.

Geographically, sales increased slightly in North America, while emerging markets generally declined due to foreign currency translation headwinds and challenging comparisons. European sales also declined due to foreign currency translation headwinds, divestitures and initiatives to focus on higher-margin business.

Sales included a 0.4% organic increase, a 0.1% decline from divestitures net of acquisitions, and a 0.7% decline from foreign currency translation.

Selling, general and administrative expenses increased due to incentives to sell higher-margin products and services, investments to accelerate long-term growth, and inflation in compensation and benefits. Several MAP 2025-enabled initiatives to streamline the selling, general and administrative expense structure were implemented during the fourth quarter of fiscal 2024.

Fiscal 2024 fourth-quarter adjusted EBIT was a record, driven by MAP 2025 initiatives, including the commodity cycle recovery, positive mix from shifting toward higher margin products and services, and improved fixed-cost leverage at businesses with volume growth. In Europe, although sales declined, a focused strategy to leverage MAP 2025 initiatives improved profitability in the region.

Fourth-Quarter 2024 Segment Sales and Earnings

CPG fourth-quarter sales were a record with broad-based strength led by turnkey roofing systems, wall systems and products serving infrastructure-related projects, including those that lower the carbon footprint of projects. There was strength in both new construction projects and renovations.

Sales included 6.6% organic growth, 0.5% growth from acquisitions, and a 0.5% decline from foreign currency translation.

Record fourth-quarter adjusted EBIT was driven by improved fixed-cost leverage from volume growth, MAP 2025 benefits and favorable mix. Variable compensation increased as a result of improved financial performance.

PCG sales declined as a result of challenging comparisons in the prior-year period and the unfavorable timing of project completions, as well as pockets of weakness in Europe. Foreign currency translation and the prior divestiture of a non-core European service business also contributed to the sales decline. The flooring business generated positive growth in the U.S., despite a challenging comparison.

Sales included a 4.0% organic decline, a 1.3% decline from divestitures, and a 1.4% decline from foreign currency translation.

The fourth-quarter adjusted EBIT decline was driven by the lower sales and reduced fixed-cost leverage from lower volumes, partially offset by MAP 2025 benefits.

SPG’s fourth-quarter sales decline was driven by challenging comparisons in the prior-year period for the disaster restoration business. Additionally, specialty residential OEM end markets remained soft during the quarter.

Sales included an 8.1% organic decline and 0.1% growth from foreign currency translation.

Adjusted EBIT was negatively impacted by the sales decline and under absorption from lower volumes.

The Consumer Group’s fourth-quarter sales decline was driven by weaker DIY takeaway at retail stores and the rationalization of lower-margin products. Market share gains, aided by new products, and growth initiatives in international markets helped offset the overall sales decline.

Sales included a 1.2% organic decline and a 0.7% decline from foreign currency translation.

Record fourth-quarter adjusted EBIT was driven by MAP 2025 benefits and the rationalization of lower margin products, partially offset by unfavorable fixed-cost absorption from lower volumes, and compensation and benefits inflation.

Fiscal Year 2024 Consolidated Results

Fiscal year 2024 sales were a record, driven by strength in CPG and PCG, which have positioned themselves to provide engineered solutions for infrastructure and high-performance building projects, including reshoring projects. Partially offsetting this growth was the Consumer Group, which experienced soft DIY demand and SPG, which faced weak demand, particularly in disaster restoration and specialty residential OEM markets.

Record adjusted EBIT was driven by MAP 2025 benefits, including the commodity cycle, better mix and improved fixed-cost leverage at businesses that generated volume growth. The record adjusted EBIT was achieved despite an increase in selling, general and administrative expenses from incentives to sell higher-margin products and services; investments to accelerate long-term growth; and inflation in compensation and benefits.

Cash Flow and Financial Position

During fiscal 2024:

• Cash provided by operating activities was $1.12 billion compared to $577.1 million in the prior year, with the increase driven by improved profitability and working capital efficiency, both of which were enabled by MAP 2025 initiatives.
• Capital expenditures were $214.0 million compared to $254.4 million during the prior year.
• The company returned $286.9 million to stockholders through cash dividends and share repurchases.

As of May 31, 2024:

• Total debt was $2.13 billion compared to $2.68 billion a year ago, with the $556.7 million reduction driven by improved cash flow being used to repay higher-cost debt.
• Total liquidity, including cash and committed revolving credit facilities, was $1.36 billion, compared to $1.03 billion a year ago.

Business Outlook

“As we enter fiscal year 2025, we remain focused on things we can control in a mixed economic environment. These include outgrowing our markets, improving operating cash flow, and leveraging the power of RPM through MAP 2025 initiatives. The structural improvements we are making through MAP 2025 are helping us navigate the current economic landscape, and their impact will be even more evident when end markets improve.”

The company expects the following in the fiscal 2025 first quarter:

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

The company expects the following in the full-year fiscal 2025:

• Consolidated sales to increase in the low-single-digit percentage range compared to prior-year record results.
• Consolidated adjusted EBIT to increase in the mid-single to low-double-digit percentage range compared to prior-year record results.