Financial News

RPM reports Q4 and year-end results for fiscal 2012; reports sharp gain in sales and income

August 15, 2012

RPM International Inc. reported sharp gains in net sales, net income and diluted earnings per share for its fiscal 2012 fourth quarter and year ended May 31, 2012.

Net sales and net income were up significantly over prior-year results. Net sales grew 12.2 percent to a record $1.1 billion from $981.8 million in fiscal 2011. Consolidated earnings before interest and taxes (EBIT) increased 16.5 percent to $139.5 million from $119.8 million a year ago. Net income was up 17.7 percent to $82.6 million from $70.2 million a year ago.

“Our operating companies posted an excellent finish to the fiscal year by delivering double-digit increases in sales and net income over last year’s strong fourth quarter,” said Frank Sullivan, chairman and CEO. “This performance was driven by internal growth initiatives, market share gains and continued geographic expansion, despite ongoing raw material challenges and an uncertain global economy.”

Industrial segment sales grew 15.8 percent to $724.8 million in the fiscal 2012 fourth quarter from $625.9 million a year ago. Organic sales improved 10.2 percent, despite 3.3 percent in foreign exchange translation losses, while acquisition growth added 5.6 percent. Industrial segment EBIT increased 28.7 percent to $90.4 million from $70.3 million in the fiscal 2011 fourth quarter.

“Nearly all of our industrial businesses delivered improved sales and earnings for the quarter. Areas of particular strength included industrial maintenance coatings and corrosion control coatings, which have benefited from increasing demand in energy markets, as well as industrial capital spending and infrastructure investment,” said Sullivan. “The slowly recovering commercial construction markets in North America also led to increased sales in sealants, waterproofing, roofing materials, concrete admixtures and other construction chemical product lines.”

Net sales for RPM’s consumer segment grew 5.9 percent to $377 million from $355.9 million in the fiscal 2011 fourth quarter. Organic sales were up 4.8 percent, including foreign exchange translation losses of 0.8 percent, while acquisition growth added 1.1 percent. Consumer segment EBIT increased 12.5 percent to $60.3 million from $53.6 million a year ago.

“Sales in the consumer segment, particularly at our Rust-Oleum subsidiary, benefitted from successful new product introductions and continued strong take-away in small-project maintenance, repair and redecorating by consumers,” said Sullivan. “Sales in the mid-single-digit range for the fourth quarter were in line with our estimates, given the pull-forward of sales into our fiscal third quarter due to the extremely mild winter season in most of the U.S.”

Fiscal 2012 consolidated net sales, net income and earnings per share saw double-digit increases. Net sales were up 11.7 percent to a record $3.8 billion from $3.4 billion in fiscal 2011. Consolidated EBIT increased 14.9 percent to $396.1 million from $344.8 million in fiscal 2011. Net income improved 14.2 percent to a record $215.9 million from $189.1 million in fiscal 2011. Diluted earnings per share grew 13.8 percent to a record $1.65 from $1.45 a year ago.

Sales for RPM’s industrial segment increased 12.2 percent to $2.5 billion from $2.3 billion in fiscal 2011. The organic sales increase was 7.8 percent, with acquisition growth contributing 4.4 percent, while foreign exchange had a neutral effect on the year’s results. Industrial segment EBIT grew 19.8 percent to $282.4 million from $235.8 million in fiscal 2011.

Consumer segment sales for fiscal 2012 improved 10.7 percent to $1.24 billion from $1.12 billion reported last year. Organic sales increased by 10.2 percent, including net foreign exchange gains of 0.2 percent, with acquisition growth adding 0.5 percent. Consumer segment EBIT increased 9.7 percent, to $160.1 million from $146.0 million a year ago.

During the fourth quarter, RPM announced the acquisition of HiChem Paint Technologies Pty. Ltd., a producer of protective coatings for automotive, home and industrial markets, based in Hallam, Australia. Acquired by RPM’s Rust-Oleum Group on March 30, 2012, HiChem has annual sales of approximately $23 million.

On June 19, 2012, subsequent to year-end, RPM’s Building Solutions Group acquired Viapol Ltda., a producer of building materials and construction products based in Cacapava, Brazil, near Sao Paulo. Viapol’s annual sales are approximately $85 million.

“While we are planning for another year of continued improvement in sales and earnings, we anticipate growth will be at a more moderate pace in our 2013 fiscal year,” said Sullivan. “In our core North American markets, we see consumers returning to more normal spending patterns for home maintenance, repair and redecorating. We also expect continuing modest momentum in residential and commercial construction spending.

“We are experiencing some slowdown in the pace of growth and investment for the industrial markets we serve, due in part to the uncertainty that exists around the November U.S. Presidential election,” said Sullivan. “We are beginning to see declines in sales and earnings across some of our European operations. This is compounded by the continuing deterioration of the Euro versus the U.S. dollar. On the plus side, we are seeing stabilization in raw material costs for the first time in many years and are hopeful that we will be able to maintain or improve our gross margin profitability for the year.

“Based on these factors, we expect consumer segment growth to be in the range of five to seven percent and that our industrial segment will grow six to ten percent, driving RPM consolidated sales and earnings up year over year in a range of five percent to ten percent for our fiscal year ending May 31, 2013.”

From an acquisition perspective, Viapol will add about $85 million of sales for the full year.

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