07.26.21
RPM International Inc. reported financial results for its fiscal 2021 fourth quarter and year ended May 31, 2021.
“As we conclude a fiscal year unlike any other, I am extremely grateful for the perseverance of our associates around the world. Through their efforts, we were able to generate very strong fourth-quarter and full-year financial results. For the full fiscal year, consolidated sales increased nearly 11% to $6.1 billion, net income increased 65% to $502.6 million, and cash flow climbed nearly 40% to a record $766.2 million,” said Frank C. Sullivan, RPM chairman and CEO.
“Also, at year end, we brought our MAP to Growth operating improvement program to a successful conclusion. Over the course of the three-year initiative, we reduced our global manufacturing footprint by 28 facilities, created a lasting culture of manufacturing excellence and continuous improvement, consolidated material spending across our operating companies, negotiated improved payment terms that helped us to reduce working capital, consolidated 46 accounting locations, migrated 75% of our organization to one of four group-level ERP platforms and returned $1.1 billion of capital to shareholders,” Sullivan continued.
“These actions generated $320 million in annualized cost savings, which exceeded our original target by $30 million. We also significantly improved our profit margin profile and cash generation, as reflected in the cumulative total return generated by RPM that has exceeded our peer group average over the last three years,” added Sullivan.
Fourth-Quarter Consolidated Results
Fiscal 2021 fourth-quarter net sales were $1.74 billion, an increase of 19.6% compared to the $1.46 billion reported in the year-ago period. Fourth-quarter net income increased 42.8% to $156.1 million compared to net income of $109.3 million in the prior-year period. RPM’s consolidated EBIT increased 26.6% to $215 million compared to $169.8 million reported in the fiscal 2020 fourth quarter.
Full-Year Consolidated Results
Fiscal 2021 full-year net sales were $6.11 billion, an increase of 10.9% compared to $5.51 billion during fiscal 2020. Organic sales increased 8.1%, while acquisitions added 1.8%. Net income was $502.6 million, an increase of 65.1% compared to $304.4 million in fiscal 2020. EBIT was $709.4 million, an increase of 42.2% versus the $499.0 million reported last year.
Fiscal 2021 and 2020 included restructuring and other items that are not indicative of ongoing operations of $75.2 million and $121.3 million, respectively. Excluding those items in both years, RPM’s adjusted EBIT was up 26.5% to $784.6 million compared to adjusted EBIT of $620.3 million last year. Investments resulted in a net after-tax gain of $31.2 million during fiscal 2021 and a net after-tax gain of $1.1 million last year. Excluding the restructuring and other items, as well as investment gains, adjusted diluted EPS for fiscal 2021 increased 35.5% to $4.16 compared to $3.07 in fiscal 2020.
Full-Year Segment Sales and Earnings
Construction Products Group fiscal 2021 full-year sales were $2.08 billion, an increase of 10.4% compared to $1.88 billion during fiscal 2020. Segment EBIT was $299.8 million, an increase of 37.6% over EBIT of $217.9 million in fiscal 2020.
Performance Coatings Group fiscal 2021 full-year sales declined by 4.8% to $1.03 billion from $1.08 billion during fiscal 2020. Organic sales decreased 6.8%, while acquisitions added 0.7%. Foreign currency translation increased sales by 1.3%.
In the Consumer Group, fiscal 2021 sales were up 18% to $2.30 billion from $1.95 billion during fiscal 2020. Organic sales increased 13.3%, while acquisitions added 3.8%. Foreign currency increased sales by 0.9%. Consumer Group fiscal 2021 EBIT was $355.0 million, an increase of 79% compared to $198.3 million reported a year ago.
Specialty Products Group fiscal 2021 sales were $706 million compared to $601 million a year ago, representing an increase of 17.5%. Organic sales increased 13.9%. Acquisitions added 2.3% and foreign currency translation increased sales by 1.3%. Fiscal 2021 EBIT in the segment was $108.5 million, an increase of 87.1% versus $58.0 million a year ago.
Cash Flow and Financial Position
For fiscal 2021, cash from operations was a record $766.2 million compared to $549.9 million during fiscal 2020. Total debt at the end of fiscal 2021 was $2.38 billion compared to $2.54 billion a year ago. Per the terms of RPM’s bank agreements, the company’s calculated net leverage ratio was 2.17 on May 31, 2021, which was an improvement as compared to 2.89 a year ago. RPM’s total liquidity at May 31, 2021 was $1.46 billion, and included $246.7 million of cash and $1.21 billion in committed available credit.
“Our cash flow was excellent and reached a record, increasing nearly 40% over last year’s record cash flow, primarily due to good working capital management and margin improvement initiatives. All working capital metrics improved during the year. As a result of our strong cash flow, we reinstituted our stock buyback program, completed multiple acquisitions and are investing more aggressively to support the growth of our businesses,” stated Sullivan.
Business Outlook
“As mentioned last quarter, a number of macroeconomic factors are creating inflationary and supply pressures on some of our product categories. Due to the lag impact resulting from our FIFO accounting methodology, we expect that our fiscal 2022 first-half performance will be significantly impacted by inflation throughout our P&L, which is currently averaging in the upper-teens. We continue to work to offset these increased costs with incremental MAP to Growth savings and commensurate selling price increases, which we will continue to implement as necessary. More importantly, the limited availability of certain key raw material components is negatively impacting our ability to meet demand. Our largest such challenge for the first half of fiscal 2022 will be in our Consumer Group,” stated Sullivan.
“Several factors are compressing margins in the segment. First, selling price negotiations took place last spring and material costs have rapidly escalated further since then. Second, insufficient supply of raw materials, several of which are severely constrained due to trucking shortages or force majeure being declared by suppliers, has led to intermittent plant shutdowns and low productivity. Lastly, the Consumer Group has outsourced production in several cases to improve service levels at the expense of margins. In response to these first-half margin challenges, the Consumer Group is cutting costs and working with customers to secure additional price increases. We expect that our other three segments will successfully manage supply challenges to continue their robust top- and bottom-line momentum from the latest quarter into the first half of fiscal 2022.”
“Turning now to our first-quarter guidance, we expect consolidated sales to increase in the low- to mid-single digits compared to the fiscal 2021 first quarter, when sales grew 9% creating a difficult year-over-year comparison. Additionally, supply constraints have slowed production in some product categories. In spite of these factors, our revenue growth is expected to continue in three of our four segments,” stated Sullivan. “We anticipate our Construction Products Group and Performance Coatings Group to experience sales increases in the high-single or low-double digits. The Specialty Products Group is expected to generate double-digit sales increases. These sales projections are based on the assumption that global economies continue to improve. Sales in our Consumer Group are expected to decline double digits as it continues to face difficult comparisons to the prior year when organic growth was up 34%. However, the Consumer Group’s fiscal 2022 first-quarter sales are expected to be above the pre-pandemic record, indicating that we have expanded the user base for our products since then.”
“We expect our first-quarter adjusted EBIT to grow in three of our four segments, with the exception again being our Consumer Group. Based on the anticipated decline in this one segment, our first-quarter consolidated adjusted EBIT is expected to decrease 25% to 30% versus a difficult prior-year comparison, when adjusted EBIT in last year’s first quarter was up nearly 40%,” stated Sullivan.
“After we work through the temporary supply chain challenges, we expect to emerge with a Consumer Group that has broader distribution and a larger user base than it had before the pandemic,” stated Sullivan. “For our other three segments, good results are expected to continue due to recent strategic changes in our Specialty Products Group continuing to bear fruit and the catch up of deferred maintenance driving additional business at our Construction Products Group and Performance Coatings Group.”
“As we conclude a fiscal year unlike any other, I am extremely grateful for the perseverance of our associates around the world. Through their efforts, we were able to generate very strong fourth-quarter and full-year financial results. For the full fiscal year, consolidated sales increased nearly 11% to $6.1 billion, net income increased 65% to $502.6 million, and cash flow climbed nearly 40% to a record $766.2 million,” said Frank C. Sullivan, RPM chairman and CEO.
“Also, at year end, we brought our MAP to Growth operating improvement program to a successful conclusion. Over the course of the three-year initiative, we reduced our global manufacturing footprint by 28 facilities, created a lasting culture of manufacturing excellence and continuous improvement, consolidated material spending across our operating companies, negotiated improved payment terms that helped us to reduce working capital, consolidated 46 accounting locations, migrated 75% of our organization to one of four group-level ERP platforms and returned $1.1 billion of capital to shareholders,” Sullivan continued.
“These actions generated $320 million in annualized cost savings, which exceeded our original target by $30 million. We also significantly improved our profit margin profile and cash generation, as reflected in the cumulative total return generated by RPM that has exceeded our peer group average over the last three years,” added Sullivan.
Fourth-Quarter Consolidated Results
Fiscal 2021 fourth-quarter net sales were $1.74 billion, an increase of 19.6% compared to the $1.46 billion reported in the year-ago period. Fourth-quarter net income increased 42.8% to $156.1 million compared to net income of $109.3 million in the prior-year period. RPM’s consolidated EBIT increased 26.6% to $215 million compared to $169.8 million reported in the fiscal 2020 fourth quarter.
Full-Year Consolidated Results
Fiscal 2021 full-year net sales were $6.11 billion, an increase of 10.9% compared to $5.51 billion during fiscal 2020. Organic sales increased 8.1%, while acquisitions added 1.8%. Net income was $502.6 million, an increase of 65.1% compared to $304.4 million in fiscal 2020. EBIT was $709.4 million, an increase of 42.2% versus the $499.0 million reported last year.
Fiscal 2021 and 2020 included restructuring and other items that are not indicative of ongoing operations of $75.2 million and $121.3 million, respectively. Excluding those items in both years, RPM’s adjusted EBIT was up 26.5% to $784.6 million compared to adjusted EBIT of $620.3 million last year. Investments resulted in a net after-tax gain of $31.2 million during fiscal 2021 and a net after-tax gain of $1.1 million last year. Excluding the restructuring and other items, as well as investment gains, adjusted diluted EPS for fiscal 2021 increased 35.5% to $4.16 compared to $3.07 in fiscal 2020.
Full-Year Segment Sales and Earnings
Construction Products Group fiscal 2021 full-year sales were $2.08 billion, an increase of 10.4% compared to $1.88 billion during fiscal 2020. Segment EBIT was $299.8 million, an increase of 37.6% over EBIT of $217.9 million in fiscal 2020.
Performance Coatings Group fiscal 2021 full-year sales declined by 4.8% to $1.03 billion from $1.08 billion during fiscal 2020. Organic sales decreased 6.8%, while acquisitions added 0.7%. Foreign currency translation increased sales by 1.3%.
In the Consumer Group, fiscal 2021 sales were up 18% to $2.30 billion from $1.95 billion during fiscal 2020. Organic sales increased 13.3%, while acquisitions added 3.8%. Foreign currency increased sales by 0.9%. Consumer Group fiscal 2021 EBIT was $355.0 million, an increase of 79% compared to $198.3 million reported a year ago.
Specialty Products Group fiscal 2021 sales were $706 million compared to $601 million a year ago, representing an increase of 17.5%. Organic sales increased 13.9%. Acquisitions added 2.3% and foreign currency translation increased sales by 1.3%. Fiscal 2021 EBIT in the segment was $108.5 million, an increase of 87.1% versus $58.0 million a year ago.
Cash Flow and Financial Position
For fiscal 2021, cash from operations was a record $766.2 million compared to $549.9 million during fiscal 2020. Total debt at the end of fiscal 2021 was $2.38 billion compared to $2.54 billion a year ago. Per the terms of RPM’s bank agreements, the company’s calculated net leverage ratio was 2.17 on May 31, 2021, which was an improvement as compared to 2.89 a year ago. RPM’s total liquidity at May 31, 2021 was $1.46 billion, and included $246.7 million of cash and $1.21 billion in committed available credit.
“Our cash flow was excellent and reached a record, increasing nearly 40% over last year’s record cash flow, primarily due to good working capital management and margin improvement initiatives. All working capital metrics improved during the year. As a result of our strong cash flow, we reinstituted our stock buyback program, completed multiple acquisitions and are investing more aggressively to support the growth of our businesses,” stated Sullivan.
Business Outlook
“As mentioned last quarter, a number of macroeconomic factors are creating inflationary and supply pressures on some of our product categories. Due to the lag impact resulting from our FIFO accounting methodology, we expect that our fiscal 2022 first-half performance will be significantly impacted by inflation throughout our P&L, which is currently averaging in the upper-teens. We continue to work to offset these increased costs with incremental MAP to Growth savings and commensurate selling price increases, which we will continue to implement as necessary. More importantly, the limited availability of certain key raw material components is negatively impacting our ability to meet demand. Our largest such challenge for the first half of fiscal 2022 will be in our Consumer Group,” stated Sullivan.
“Several factors are compressing margins in the segment. First, selling price negotiations took place last spring and material costs have rapidly escalated further since then. Second, insufficient supply of raw materials, several of which are severely constrained due to trucking shortages or force majeure being declared by suppliers, has led to intermittent plant shutdowns and low productivity. Lastly, the Consumer Group has outsourced production in several cases to improve service levels at the expense of margins. In response to these first-half margin challenges, the Consumer Group is cutting costs and working with customers to secure additional price increases. We expect that our other three segments will successfully manage supply challenges to continue their robust top- and bottom-line momentum from the latest quarter into the first half of fiscal 2022.”
“Turning now to our first-quarter guidance, we expect consolidated sales to increase in the low- to mid-single digits compared to the fiscal 2021 first quarter, when sales grew 9% creating a difficult year-over-year comparison. Additionally, supply constraints have slowed production in some product categories. In spite of these factors, our revenue growth is expected to continue in three of our four segments,” stated Sullivan. “We anticipate our Construction Products Group and Performance Coatings Group to experience sales increases in the high-single or low-double digits. The Specialty Products Group is expected to generate double-digit sales increases. These sales projections are based on the assumption that global economies continue to improve. Sales in our Consumer Group are expected to decline double digits as it continues to face difficult comparisons to the prior year when organic growth was up 34%. However, the Consumer Group’s fiscal 2022 first-quarter sales are expected to be above the pre-pandemic record, indicating that we have expanded the user base for our products since then.”
“We expect our first-quarter adjusted EBIT to grow in three of our four segments, with the exception again being our Consumer Group. Based on the anticipated decline in this one segment, our first-quarter consolidated adjusted EBIT is expected to decrease 25% to 30% versus a difficult prior-year comparison, when adjusted EBIT in last year’s first quarter was up nearly 40%,” stated Sullivan.
“After we work through the temporary supply chain challenges, we expect to emerge with a Consumer Group that has broader distribution and a larger user base than it had before the pandemic,” stated Sullivan. “For our other three segments, good results are expected to continue due to recent strategic changes in our Specialty Products Group continuing to bear fruit and the catch up of deferred maintenance driving additional business at our Construction Products Group and Performance Coatings Group.”
