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RPM to Report Results for Fiscal 2021 Fourth Quarter and Full Year

  • Successfully completed MAP to Growth operating improvement program with annualized savings exceeding target by $30 million
  • Fourth-quarter net sales increased 19.6% to $1.74 billion
  • Fourth-quarter diluted EPS increased 42.9% to $1.20 and adjusted diluted EPS increased 13.3% to $1.28
  • Fiscal 2021 full-year sales increased 10.9% to $6.11 billion
  • Fiscal 2021 full-year diluted EPS increased 65.4% to $3.87 and adjusted diluted EPS increased 35.5% to $4.16
  • Record cash from operations of $766.2 million for the full year driven by margin improvements and good working capital management
  • Supply chain challenges and margin pressure expected to persist during the fiscal 2022 first-half

RPM International Inc. (NYSE: RPM), a world leader in specialty coatings, sealants and building materials, today 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,” stated RPM chairman and CEO Frank C. Sullivan.

“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,” stated Sullivan. “The operational disciplines we developed will continue to generate improvements in our profitability, cash flow and return on investment metrics. Perhaps more significantly, we maintained our entrepreneurial, growth-focused culture as evidenced by the fact that our revenues grew at or above our industry averages throughout the MAP to Growth program. Our ability to achieve these accomplishments during the disruptions caused by the global pandemic and unprecedented supply chain challenges is a testament to the dedication and resilience of the RPM associates worldwide.”

“While we have officially concluded our 2020 MAP to Growth operating improvement plan and achieved our primary objectives, we still expect to generate more than $50 million in incremental MAP to Growth savings in fiscal 2022. RPM has always been exceptional at growing the top line. Now, thanks to MAP to Growth, we are a much more efficient business as well,” stated Sullivan. “Our next step is to leverage the lessons learned from MAP to Growth to chart a course for 2025. Over the next six to 12 months, we will be working on a ‘MAP 2.0’ program in conjunction with our operating leaders. We remain committed to achieving our long-term goal of a 16% EBIT (earnings before interest and taxes) margin. We will share more information about this program over the coming quarters.”

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. Diluted earnings per share (EPS) were $1.20, an increase of 42.9% compared to diluted EPS of $0.84 in the year-ago quarter. Income before income taxes (IBT) was $204.3 million compared to $146.9 million reported in the same period last fiscal year. RPM’s consolidated EBIT increased 26.6% to $215.0 million compared to $169.8 million reported in the fiscal 2020 fourth quarter.

The fourth quarter included restructuring and other items that are not indicative of ongoing operations of $21.2 million during fiscal 2021 and $43.8 million in fiscal 2020. Excluding these items, RPM’s adjusted EBIT was $236.2 million compared to $213.6 million during the year-ago period, which was an increase of 10.6%. The company has excluded the impact of gains and losses from marketable securities from adjusted EPS, as their inherent volatility is outside of management’s control and cannot be predicted with any level of certainty. These investments resulted in a net after-tax gain of $11.8 million for the fourth quarter of fiscal 2021 and a net after-tax loss of $1.9 million during the same quarter last year. Excluding the restructuring and other adjustments, as well as investment gains and losses, fiscal 2021 fourth-quarter adjusted diluted EPS increased 13.3% to $1.28 compared to $1.13 in the fiscal 2020 fourth quarter.

“Because of an unusual comparison in our non-operating segment, our fourth-quarter operating performance was actually better than indicated by our consolidated adjusted EBIT growth of 10.6%. It’s important to note that last year’s fourth quarter was impacted by the pandemic’s onset, which created the extraordinary situation where our non-operating segment reported a profit due to lower medical expenses, incentive reversals and other factors. On the other hand, during this year’s fourth quarter, we experienced higher insurance costs due to property claims and business interruptions created by hurricanes and winter storm Uri, as well as higher incentives tied to improved performance,” stated Sullivan. “Excluding the impact of our non-operating segment from both years, our four operating segments generated impressive sales growth of 19.6% and adjusted EBIT growth of 27.5% as they overcame margin pressures and supply availability challenges.”

Fourth-Quarter Segment Sales and Earnings

Construction Products Group net sales were a record $629.4 million during the fiscal 2021 fourth quarter, which was an increase of 33.2% compared to fiscal 2020 fourth-quarter net sales of $472.4 million. The sales increase was driven by organic growth of 28.4% and foreign currency translation tailwinds of 4.8%. Segment IBT was $107.2 million compared to $70.3 million a year ago. EBIT was $108.9 million, an increase of 50.4% versus EBIT of $72.4 million in the fiscal 2020 fourth quarter. The segment incurred $1.5 million in restructuring expenses during the fourth quarter of fiscal 2021 and $5.0 million in restructuring and other items not indicative of ongoing operations during the same period of fiscal 2020. Excluding these charges, fiscal 2021 fourth-quarter adjusted EBIT was a record $110.4 million compared to adjusted EBIT of $77.3 million reported during the year-ago period, representing an increase of 42.7%.

“Construction, maintenance and repair activity accelerated during the quarter in the U.S. and even more so in international markets, which had been more heavily constrained, as the impact of the pandemic eased. Our Construction Products Group capitalized on this trend and generated record results,” stated Sullivan. “Leading the way in North America were our businesses that provide commercial roofing materials and concrete admixtures and repair products, as well as our European businesses, all of which generated record sales. Demand for our Nudura insulated concrete forms remained at elevated levels as a result of their relatively low installed cost, in addition to their environmental and structural benefits as compared to traditional building methods. The bottom line was boosted by volume leveraging, savings from our MAP to Growth program and higher selling prices.”

Performance Coatings Group net sales were $283.3 million during the fiscal 2021 fourth quarter, which was an increase of 20.5% compared to the $235.1 million reported a year ago. Organic sales increased 12.9% and acquisitions contributed 2.9%. Foreign currency translation increased sales by 4.7%. Segment IBT was $26.0 million compared to $18.7 million reported a year ago. EBIT was $25.9 million, an increase of 38.2% compared to $18.7 million in the fiscal 2020 fourth quarter. The segment reported fourth-quarter restructuring expenses and acquisition-related costs of $5.1 million in fiscal 2021 as compared to $4.9 million in fiscal 2020. Adjusted EBIT, which excludes these charges, was $31.0 million during the fourth quarter of fiscal 2021 compared to adjusted EBIT of $23.7 million during the year-ago period, representing an increase of 31.2%.

“Our Performance Coatings Group also benefited from the release of pent-up demand for the construction, maintenance and repair of structures in the U.S. and abroad, which it leveraged into strong year-over-year growth,” stated Sullivan. “This segment had been particularly challenged through the pandemic because of its greater exposure to international markets and the oil and gas industry, as well as a greater reliance on facility access to apply its products. Points of strength in the segment were its businesses providing commercial flooring systems and North American bridge and highway products, as well as a recovery in its international businesses. Segment earnings increased due to higher sales volumes, the MAP to Growth program and pricing, which helped to offset raw material inflation.”

Consumer Group reported record net sales of $628.9 million during the fourth quarter of fiscal 2021, an increase of 2.0% compared to net sales of $616.2 million reported in the fourth quarter of fiscal 2020. Organic sales decreased 3.8%, while acquisitions contributed 3.8% to sales. Foreign currency translation increased sales by 2.0%. Consumer Group IBT was $91.0 million compared to $74.6 million in the prior-year period. EBIT was $91.0 million, an increase of 21.9% compared to $74.7 million in the fiscal 2020 fourth quarter. The segment incurred restructuring-related expenses of $2.6 million during the fiscal 2021 fourth quarter and $29.8 million during the year-ago period. Excluding these charges, fiscal 2021 fourth-quarter adjusted EBIT was $93.6 million, a decrease of 10.4% compared to adjusted EBIT of $104.5 million reported during the prior-year period.

“During the first three quarters of this fiscal year, our Consumer Group’s sales and earnings have grown rapidly as it served the extraordinary demand for DIY home improvement products by consumers who were homebound during the pandemic. As more Americans became vaccinated and were no longer confined to their homes, DIY home improvement activity began to slow towards the end of the fourth quarter from its torrid pace since spring of 2020, though the pace of sales remained higher than pre-pandemic levels. In international markets, many of which still have stay-at-home orders in place, sales growth remained quite strong,” stated Sullivan. “Helping to partially offset the cost pressures were selling price increases and savings from our MAP to Growth program, some of which were invested in advertising programs to promote new products.”

The Specialty Products Group reported record net sales of $202.8 million during the fourth quarter of fiscal 2021, which increased 49.9% compared to net sales of $135.2 million in the fiscal 2020 fourth quarter. Organic sales increased 46.2%, while acquisitions contributed 0.7% to sales. Foreign currency translation increased sales by 3.0%. Segment IBT was $34.8 million compared with $2.9 million in the prior-year period. EBIT was $34.9 million, an increase of 1,079.6% compared to $3.0 million in the fiscal 2020 fourth quarter. The segment reported $1.4 million of restructuring and other items that are not indicative of ongoing operations in the fourth quarter of fiscal 2021 and $4.4 million in the comparable prior-year period. Adjusted EBIT, which excludes these items, was a record $36.3 million in the fiscal 2021 fourth quarter, an increase of 395.0% compared to adjusted EBIT of $7.3 million in the fiscal 2020 fourth quarter.

“For the second quarter in a row, our Specialty Products Group generated the highest organic growth among our four operating segments. Its results have improved sequentially over the past three quarters with excellent top- and bottom-line results by nearly all of its businesses, including cleaning chemicals and restoration equipment as well as coatings for recreational watercraft, food, pharmaceuticals, wood and other OEM applications,” Sullivan stated. “Its record results were driven by recent management changes, increased business development initiatives and improving market conditions.”

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%. Foreign currency translation increased sales by 1.0%. Net income was $502.6 million, an increase of 65.1% compared to $304.4 million in fiscal 2020. Diluted EPS increased 65.4% to $3.87 versus $2.34 a year ago. IBT was $668.4 million compared to $407.8 million reported 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. Sales grew organically by 9.5% and foreign currency translation added 0.9%. IBT was $291.8 million versus year-ago IBT of $209.7 million. Segment EBIT was $299.8 million, an increase of 37.6% over EBIT of $217.9 million in fiscal 2020. The segment incurred restructuring and other items not indicative of ongoing operations of $9.9 million during fiscal 2021 and $14.2 million during fiscal 2020. Excluding these items, fiscal 2021 adjusted EBIT increased 33.4% to $309.7 million from $232.1 million reported for 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%. IBT was $90.7 million versus year-ago IBT of $102.3 million. Segment EBIT was $90.6 million, a decrease of 11.5% from EBIT of $102.3 million during fiscal 2020. The segment reported restructuring expense and acquisition-related costs of $13.5 million in fiscal 2021 and $19.4 million in fiscal 2020. Adjusted EBIT, which excludes these charges, decreased 14.5% to $104.1 million during fiscal 2021 from adjusted EBIT of $121.8 million during the prior year.

In the Consumer Group, fiscal 2021 sales were up 18.0% 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%. IBT was $354.8 million compared to year-ago IBT of $198.0 million. Consumer Group fiscal 2021 EBIT was $355.0 million, an increase of 79.0% compared to $198.3 million reported a year ago. The segment incurred restructuring expenses and acquisition-related costs of $13.7 million during fiscal 2021 and $54.7 million during fiscal 2020. Excluding these charges, fiscal 2021 adjusted EBIT was $368.7 million, an increase of 45.8% over adjusted EBIT of $253.0 million reported during the prior period.

Specialty Products Group fiscal 2021 sales were $706.0 million compared to $601.0 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%. IBT was $108.2 million versus year-ago IBT of $57.9 million. Fiscal 2021 EBIT in the segment was $108.5 million, an increase of 87.1% versus $58.0 million a year ago. The segment reported restructuring expense and other items that are not indicative of ongoing operations of $6.7 million in fiscal 2021 and $18.7 million in fiscal 2020. Adjusted EBIT, which excludes these items, was $115.2 million in fiscal 2021, an increase of 50.3% versus $76.7 million in fiscal 2020.

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. Capital expenditures during fiscal 2021 of $157.2 million compare to $147.8 million in 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.

“Moving to the second quarter of fiscal 2022, we expect good performance again, with the exception of the Consumer Group, where we anticipate similar challenges as discussed earlier to result in a significant decline in adjusted EBIT against difficult prior-year comparisons when sales were up 21% and adjusted EBIT was up 66%,” stated Sullivan. “We anticipate that the second-quarter decline in Consumer will be mostly offset by the combined EBIT growth in our three other segments, leading to consolidated adjusted EBIT being roughly flat versus another difficult prior-year comparison, when consolidated adjusted EBIT was up nearly 30%.”

“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.”

Source: RPM

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