RPM Reports Fiscal 2022 First-Quarter Results
October 6, 2021
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the lost sales when conditions normalize. Earnings declined during the first quarter of fiscal 2022, as compared to the prior year, as a result of inflation in materials, freight and labor, as well as the unfavorable impact of supply shortages on productivity. These factors were partially offset by price increases and savings from our operating improvement program. We are proactively building resiliency in our supply chain to secure the raw materials we require today and in the future,” stated Sullivan.
Cash Flow and Financial Position
During the fiscal 2022 first quarter, cash generated from operations was $76.1 million compared to $318.1 million a year ago. Capital expenditures were $51.9 million in the quarter, compared to $41.5 million in the year-ago period. Total debt at August 31, 2021 of $2.43 billion compares to $2.38 billion at May 31, 2021. Per the terms of RPM’s bank agreements, the company’s calculated net leverage ratio was 2.42 on August 31, 2021 as compared to 2.39 a year ago. Total liquidity, including cash and committed revolving credit facilities, was $1.38 billion at August 31, 2021, compared to $1.46 billion at May 31, 2021.
“Cash flow decreased due to the unfavorable supply environment’s impact on working capital metrics and margins. We have been building safety stocks, where possible, to mitigate the impact of severe raw material shortages. Liquidity remains high, enabling us to manage through the current supply chain challenges and continue making investments in operational improvements, acquisitions and manufacturing capacity expansions,” stated Sullivan.
Business Outlook
“Looking ahead to our fiscal 2022 second quarter, we expect raw material, freight and wage inflation to persist, as will the raw material shortages and supply chain challenges we have been experiencing. In addition, we face another difficult comparison to the prior year when consolidated adjusted EBIT increased 29.7%,” stated Sullivan. “We anticipate these factors to be partially offset by price increases, operational improvements and additional manufacturing capacity.”
“Based on these factors, we expect our fiscal 2022 second-quarter consolidated sales to increase in the mid-single digits,” stated Sullivan. “Our Construction Products Group, Performance Coatings Group and Specialty Products Group are anticipating double-digit sales growth. Our Consumer Group is anticipating another double-digit decrease in sales due to continued raw material shortages and a difficult comparison to the prior-year period when pandemic-fueled demand rapidly drove organic growth up 15%. However, we do expect the segment’s sales to be above its pre-pandemic level, which is a fairer comparison. While underlying demand for our products and services is strong, significant material shortages and inflationary pressures remain. Accordingly, we expect that the second-quarter results will be directionally similar to the first quarter, with significant year-over-year declines again in our Consumer Group, which is still lapping tough comparisons, and double-digit sales and earnings increases for our other three segments in aggregate. This will result, on a consolidated basis, in a decline of adjusted EBIT of 15% to 25% versus the second quarter of fiscal 2021.”
“Moving forward, we will maintain the positive momentum created by our operating improvement program as we complete its remaining projects, leverage resources across RPM to manage supply chain issues and meet customer demand, identify new opportunities for efficiencies through our continuous improvement culture, and make investments in growth opportunities, including capacity expansions,” Sullivan concluded.
