RPM International Inc. reported record financial results for its fiscal 2025 first quarter, which ended Aug. 31, 2024.

Frank C. Sullivan, RPM chairman and CEO, said, “By executing well on things within our control, our associates navigated a mixed economic backdrop to generate record adjusted EBIT for the 11th consecutive quarter. This included continued implementation of MAP 2025 operational improvement initiatives and leveraging our portfolio of products, services and entrepreneurial culture to capture growth opportunities where they existed. Our Construction Products and Performance Coatings groups both generated organic growth, and our Specialty Products and Consumer groups expanded adjusted EBIT margins despite continued weakness in end markets tied to housing. In addition to record profitability, MAP 2025 initiatives allowed us to continue making structural improvements to working capital that sustained our trend of strong cash flow generation.”

First-Quarter 2025 Consolidated Results

Consolidated

Volume growth at CPG and PCG and slightly positive overall pricing were more than offset by foreign currency translation headwinds and volume declines at the Consumer Group and SPG. Volume growth was strongest at businesses that were positioned to serve new high-performance building projects and renovations, while volumes were weaker at businesses with exposure to residential end markets.

Geographically, sales declined modestly in North America while European sales declined due to a soft economic environment, foreign currency translation headwinds and divestitures. Emerging markets faced foreign currency translation headwinds, particularly in Latin America, although Asia/Pacific and Africa/Middle East still grew sales, aided by spending on infrastructure and high-performance building projects.

Sales included a 0.9% organic decline, a 0.1% decline from divestitures net of acquisitions and a 1.1% decline from foreign currency translation.

Selling, general and administrative expenses decreased as MAP 2025-enabled actions to streamline expenses were partially offset by targeted investments in growth initiatives.

Fiscal 2025 first-quarter adjusted EBIT was a record, driven by MAP 2025, including the commodity cycle recovery, plant consolidations and SG&A streamlining; and improved fixed-cost leverage at businesses with volume growth. In Europe, a focused strategy to leverage MAP 2025 initiatives improved profitability in the region despite a sales decline.

Record first-quarter adjusted diluted EPS grew at a faster rate than adjusted EBIT and was driven by reduced interest expense from debt paydowns of $453.1 million over the last 12 months.

First-Quarter 2025 Segment Sales and Earnings

Construction Products Group

CPG achieved record first-quarter sales led by turnkey roofing systems and wall systems serving both new high-performance construction projects and renovations. This growth is in addition to strong results in the prior-year period, when sales increased 10.8%.

Sales included 2.2% organic growth, 0.4% growth from acquisitions and a 1.2% decline from foreign currency translation.

Record first-quarter adjusted EBIT was driven by improved fixed-cost leverage from volume growth, MAP 2025 benefits and a focus on selling higher-margin products and services.

Performance Coatings Group

PCG achieved positive first-quarter organic sales led by the flooring business, which benefited from its focus on maintenance and restoration, and specified solutions for high-performance new construction projects. Emerging markets also contributed to growth. Organic growth was more than offset by the prior divestiture of a non-core European service business and foreign currency translation.

Sales included 1.8% organic growth, a 2.0% decline from divestitures and a 1.6% decline from foreign currency translation.

Record first-quarter adjusted EBIT was driven by MAP 2025 benefits and improved fixed-cost leverage from higher volumes.

Specialty Products Group

SPG’s first-quarter sales decline was driven by soft specialty residential OEM end-market demand and a decline in the disaster restoration businesses, as high customer inventories muted the impact of storm activity during the quarter. Partially offsetting this decline, food coatings and additives generated growth from new business wins and a small acquisition made during the quarter.

Sales included a 4.8% organic decline and 1.3% growth from an acquisition.

First-quarter adjusted EBIT increased as a result of MAP 2025 benefits, partially offset by underabsorption from lower volumes.

Consumer Group

The Consumer Group’s first-quarter sales decline was driven by weaker DIY takeaway at retail stores, customer destocking and the rationalization of lower-margin products. This was partially offset by growth in international markets, which benefited from successful targeted marketing campaigns.

Sales included a 5.0% organic decline and a 1.1% decline from foreign currency translation.

Although first-quarter adjusted EBIT declined due to lower sales and unfavorable fixed-cost absorption from lower volumes, adjusted EBIT margin expanded, driven by MAP 2025 benefits and the rationalization of lower-margin products.

Cash Flow and Financial Position

During the first three months of fiscal 2025:

• Cash provided by operating activities was $248.1 million, driven by improved profitability and working capital efficiency, both of which were enabled by MAP 2025 initiatives. This compares to $359.2 million in the prior-year period when there was a large working capital release from internal destocking initiatives.
• Operating working capital as a percentage of sales improved by 250 basis points to 22.7% compared to 25.2% in the prior-year period, driven by MAP 2025 working capital efficiency initiatives.
• Capital expenditures were $50.7 million compared to $52.2 million during the prior-year period. This includes investments in a new production facility in Belgium that is expected to open in the second quarter of fiscal 2025. It will be managed by SPG, supply resins to all four segments and external customers, and serve to improve supply chain resiliency and lower costs.
• The company returned $76.4 million to stockholders through cash dividends and share repurchases.

As of Aug. 31, 2024:

• Total debt was $2.05 billion compared to $2.51 billion a year ago, with the $453.1 million reduction driven by improved cash flow being used to repay higher-cost debt.
• Total liquidity, including cash and committed revolving credit facilities, was $1.44 billion, compared to $1.23 billion a year ago.

Business Outlook

“The economic outlook for the second quarter remains mixed, with continued growth in high-performance building construction and renovation, and softness in residential end markets. While we are optimistic that lower interest rates will eventually lead to a rebound in residential markets, it is too early to say precisely when growth will return. As we have demonstrated, no matter the economic backdrop, we will focus on controlling what we can, including executing on MAP 2025 initiatives to leverage the power of RPM to capture growth opportunities, expand margins and structurally improve cash flow,” Sullivan concluded.

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

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

The company outlook for full-year fiscal 2025 remains unchanged with:

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