RPM - Earnings call transcript Q2 2020

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Operator

Good morning, and welcome to RPM International's conference call for the fiscal 2020 Second Quarter. Today's call is being recorded. This call is also being webcast and can be accessed live or replayed on the RPM website at www.rpminc.com.

Comments made on this call may include forward-looking statements based on current expectations that involve risks and uncertainties which could cause actual results to be materially different.

For more information on these risks and uncertainties, please review RPM's reports filed with the SEC.

references made call, measures. non-GAAP conference this may to be financial During measures website. assist non-GAAP most to financial these in directly the RPM GAAP To understanding reconciliations terms, you has posted comparable on RPM the [Operator Instructions].

this to Chairman opening over remarks. At the Sullivan, Mr. RPM's I to and would turn time, call Frank CEO, for like

You sir. may begin,

Frank Sullivan

XXXX. with you, Happy Treasury, of our New charge second RPM today call investor Inc. fiscal Gordon, Brandon. President Year, XXXX the Relations. RPM's call Ratajczak, Global in Thank Investor and Officer; for ended Vice quarter On are Rusty XX, Chief Tax, November International of also President me and and welcome today's our our Vice and to Matt Financial

on update improvement second and formal our second remainder and off then our Rusty kick review we'll Matt more I'll quarter fiscal detail. outlook on XXXX, for Growth conclude operating XXXX will your comments an MAP plan. to questions. Then numbers in take the will our the call quarter some of with our results comments the with

earnings For up third our year were of quarter, consecutive prior significantly over and ahead the the expectations.

up Revenue price pricing increases were coupled to bottom gains up line by XXXX due is X.X% was also results. the year, Last the to with quarter inflation growth was our a which during grow primarily Organic activity. impacted material enabling than Growth and driven moderating program, earnings to growth peers. our X.X% in MAP us at strong raw rate market Our positively faster quarter. sales selling has some share

with we operating. taking line the given environment in growth place which organic product are this with macro pleased at along RPM current are rationalization the We aggressive

delayer our to operating more have low-margin at value-added volume. the lines to shedding product EBIT-accretive management MAP actions to different free quarter the improvement regard for up we plan, included consolidating groups, and Growth continuing XXXX manufacturing In taken during specific to resources

product to approximately lines have MAP to with Growth on an program, million XXXX basis discontinued revenues of we annualized $XX through far So million. $XX

the X so X the of Growth XX early to We also brings with part in plant the a plant MAP closure completed plants of This quarter. to out planned quarter total second program along our third announced XX far consolidations. in of the more

On MAP in a million realized consolidated second we million which $XX million Growth came totaling XXXX from savings million, basis, about from the $XX to G&A. procurement, of $XX from manufacturing, and quarter $X

$XX and we total realized quarter plan respectively. this I first As million, quarterly the savings Growth is to million and improvement increases XXXX these fiscal the because quarter that of recall, earnings you XXXX point out fiscal the strong improvement may the program momentum of XXXX fourth operating $XX of generating. during demonstrate of MAP in savings successive

to procurement our consolidation spending of make continue plan, of as spending better terms our leverage we function material in across companies. improvement central-led our operating we In progress through a operating

business approach. finding suppliers strategic Our in as their this are on change so recent they RPM grow with by can our well capitalizing opportunities

advantages base that and RPM procurement negotiate added significant the suppliers. terms programs have to financing on we the supplier Also payment for side, our some improved provide continue supplier with and both

us closing In the customers. continue our while costs are in plants plants to productivity to manufacturing, service that operate, efficiency underutilized improve increasing improving to we we and allowing by reduce

our and training in our invest we progress seeing to through continue focused improvement and disciplines, our plants workforce team in We good continuous efforts. are improvement

it the program. savings ERP the consolidation of well are MAP early consolidations savings in to expect from as Growth our that as accounting generates XXXX Wave X additional innings and We in our of see to

results Matt to the Ratajczak turn for to quarter. our now review the I'll over call

Matthew Ratajczak

as-adjusted second quarter basis. and will of We about for to on an XXXX. be good comments our X.X% $X.XX of up consolidated second this will fiscal everyone. financial during compared billion my results reported record that $X.X the Frank, the morning, achieved quarter net year's sales Thanks, be note billion, Please and

As or $X.X continued or a sales while Frank be exchange million. to million. stated, organic $XX.X million, sales sales reduced X.X% Acquisitions to X.X% headwind that foreign or growth by was $XX.X X.X% contributed

As Frank significant year's from improvement moderating leverage bottom also year's last was accretion prior Growth resulted diluted earnings from the increased million to $X.XX increased EPS Also versus to an XX% repurchases quarter. retirement the to Diluted of in XXXX raw for mentioned, in $XXX.X and our ago. XX% to X.X%. the $X.XX EBIT per Share the XX% program share $X.XX of MAP some costs. a convertible margin diluted line. line year EBIT to for bond material contributing EBIT resulting per generated share bottom margin per the margin share diluted pricing

aided that at quarter to was Sales or our million. exceptionally looking performance rainy construction a segment strong Group increased our X.X% weather $XXX.X slowed Now in by from was backlog Products a resulted million, and that on basis. very had last largely organic X.X% Construction $XX.X from at activity. Growth

North offerings In recent market. somewhat in by from product capital rationalization, share or American are more our and foreign Schul was Nudura we currency addition, transactions. offset lukewarm million, did reduced X.X% sales discontinuing picked working meet Acquisitions or also million, through translation, which up by contributed the that $X.X construction we primarily X.X% by not commercial a margin product Organic market standards. growth or $X.X stringent and which

overhead proactively improve remained perspective, this by and We're a and From simultaneously to mix earnings margins. markets European our combating soft. product managing geographic reducing

Performance modest Growth This to or Our our growth, businesses and Latin increased or Group control our X.X% constant and currencies. XXXX $XXX.X $XX.X up MAP businesses fireproofing $XX.X from growth year. by were the contribution generated corrosion American was savings, to in in a coatings. Sales last million Organic largely acquisitions. providing $X.X growth to Coatings pricing, good million, volume XX.X% attributed from million. improvement driven million million, $X.X was EBIT Segment

our bear us to share particularly was quarter, in a market Carboline structure, is up segment last in the fruit. noted beginning management enabling reorganized product brand in experienced Europe global As line. growth continued It's under North pick and we we to America, which

MAP were the strategic actions to Impacting sales, million to Growth pricing despite million. initiatives contributing segment margin-dilutive improvement earnings XX.X% international $X.X strong the added was soft and X.X% XXXX product reductions X low-margin and exit markets and or from exchange Segment lines. Acquisitions with X.X% leverage a improved line while EBIT like last organic essentially exit savings product increased provided sales foreign Also was Much this Operating to to bottom businesses. growth. mix. included $XX flat sales headwind. workforce to quarter,

increasing This was early to $XXX.X conditions were sales wet Organic spring million X%. X.X% the strong, and also new Sales American a products percentage currency In driven million. and the sealant foreign by Europe in pent-up exceptionally new benefited uncertainty during Europe, the sales translation soft weather by large that and due or adhesive $XX.X increased while generated X.X% also surrounding market are from caused the sales weak U.K., which X% to segment summer. by gains. to $X.X or reduced of Brexit. North in that demand contributed and sales, macroeconomic Consumer share the were in Acquisitions coatings exterior, accounts million, for small-project Group, and paints

the improvement due last Consumer Growth wildfires as our was year. in actions disciplines demand price million, line result XX.X% fluorescent top Group Products taken, closures, included recover restoration was in by rampant and trend higher These programs such which year Specialty are natural equipment boosted and retardant towards including to MAP prior plant EBIT for and helping drove Group hurricane enhanced initiatives, the to The that pigments, of XXXX are was increases levels. elevated difficult $XX.X for was demand activity an more of a impacted increase X plus demand historical over These the from to tracer This the comparison manufacturing the dies. that margins prior used fire disasters. a our when year.

There lower accelerate EBIT impact order decreased recent In EBIT the no and the changes. the to million top were $XX.X year. acquisitions. line, million of was than sales quarter, the $XXX.X by X.X%. Segment management translation sales was segment's Organic in in currency million. have $XX.X from we foreign during which sales reduced XX.X%, prior growth was made

operational to consolidation reduce and in of costs XXXX. to initiatives selective ERP growth in platform, this fiscal to to to including the segment, system improvements revive implement into X the continue going we invest We also continue

expect We that see actions benefits of these the the segment quarters. in will coming the

comment on a flow. Lastly, cash

to million improve was first operations by margins. $XXX.X due million of capital increase XXXX, cash of reduce working grew ago. $XXX.X to a $XXX.X XXX.X% This initiatives compared to year to million and the For half fiscal from

for now fiscal for I'll details Rusty XXXX. the on the outlook turn of over call our remainder to

Russell Gordon

Matt. Thanks,

the of construction months cold to XX% February, generate is modest EBIT high to to We third December to weather. painting expect through for low third because the winter our leveraging each to range. Looking bottom the anticipate forward growth activity due sales EPS teens this we most adjusted resulting our our to results quarter of generates diluted XXXX sales estimated an growth X.X% falls Historically, it XX% adjusted $X.XX in to X%. and during in quarter, when and year line slow snowy growth, consolidated

will year's a point should this of result the during to roughly to proportionate during the period based sales well. expect annual Growth we on that be generated MAP out XXXX of I savings and Additionally, quarter, our fiscal consolidated history, XX% as third amount

quarter on results construction begins fourth weather accelerate the improves projects. as and are painting Our work and to typically strongest

fiscal XXXX for on last guidance Based expectations first XXXX, and remainder our the XX, year October. are of in we we on release full our our results in the maintained for reaffirming half provided fiscal earnings and the July the year,

our Our is the X%. end disclosed to full low of of be on to sales X.X% anticipated range year growth previously

disclosed, MAP bottom XX% and operating EBIT our are of to adjusted expect the growth the leverage our in line the XX% we range. previously to improvement XXXX positive to projected to momentum plan maintaining As Growth

adjusted We EPS expect diluted will in result between our full $X.XX $X.XX for fiscal year. this XXXX and

will formal your our and questions. concludes we pleased now to be take This comments,

Operator

we And Capital Instructions]. from BMO [Operator Markets, John have McNulty.

John McNulty

fourth has there the guess, I projects, we levels the through wet they guess that through demand much to how about you construction itself the regard volumes, the you quarter the year? when kind and that -- saw at backlog as how already With strong of Congratulations. for roll the of I look of think remain the especially, rest the guess, I may business worked should and pent-up the still from pickup and weather how of much

Frank Sullivan

our some In mostly the have pretty we and slowing, remains seen businesses, our business, Sure. around roofing construction sealant backlog waterproofing robust. projects. major In

the think And or admixtures taking roofing pretty it's that is strength or experiencing distribution continues America the market somewhat real delivering. whether we share than because last some in comment I to is what good there. be larger that so is waterproofing, Our the growth be broad to I'll make seem we're North in is market

John McNulty

to to some then And be weather-related the normal that, the of much how and demand there was it that doing tough business, pent-up one the you of and a it. where some channel demand? just Or in way filling figure to figure may Ace Lowe's Consumer Got that is out? at growth out is again, tied is of it

Frank Sullivan

others. and really No. performance, growth. us Clearly, start were solid a the bad John, not flip beneficiary of, it's what the this we impacted quarter. in first channel hurt the impacted quarter was latter. to has summer, only and the of It side but which in No filling weather the kind was and good, really rainy of good

So which some our into part was of from first of and of the impacted in the strength second of our summer the projects or second quarter. early back because think, fall, Consumer, in were summer weather the that the end positively delayed into the the quarter the -- I

John McNulty

Got it. one And then last question. maybe just

on wondering regard how cash to that pretty back given level should back as of looks work we cash I think toward took million working be like some year note. the running guess, the the about Just at done guess, that? capital of uses you're front. half the we the high with year this and about for half. the a It much flow, thinking toward you looking may going down forward, you've the go how guess, as you're I'm buybacks I I that $XXX

Frank Sullivan

Sure.

deliberately As out. the slowly little couple in quarters, last got expected we a and to start we our share program of we the repurchase more communicated than fast execute

our on we completed of commitment, recall, billion X inside you'll repurchase that of As months. half $X

balance the out years. the think of over so, couple And will play of I it next

You should see repurchases a cash between and expect of to free repayment. debt share flow balance

Operator

From we G. Morbelli. Rosemarie Research, have

Rosemarie Morbelli

terms of of the MAP found has you joined expectation focus the Matt -- savings? firm early the Sullivan expectation Could and opportunities in you -- any new could $XXX million about Frank, change since what and talk of from in he potentially

Frank Sullivan

Sure.

of instrumental in to Steve time and to Sullivan think part with MAP the Mike Hyde, of and to a run both Growth the manufacturing that in really program the has take long Tim over I Kinser partnership been who helping and are side Growth with our for part of architected really Gordy team procurement MAP and RPM program Knoop.

have utilizing some annualized and We entirely our the early spend regional to are such relationship the program. in MAP AlixPartners of exited the Growth consultants parts did

million and the in or range, now $X We’re $X million $XX in range. million we're the

it's our learnings to that people real So, sense some mentioned Growth. of as that are really a them. out work well, the some you is and have of of The on I to we by internalizing factory MAP the gives how going floor tribute that come

think I we MAP that Growth face figuring that is operate. flag MAP next the months improvement the operating we permanent of when we elements, and in wave and of to challenge even, parts such Growth the are plant then out that become elements at how consolidation elements initiative our other XX of the victory level And what completed Board to on

Rosemarie Morbelli

And period? in over the no of the million $XXX worth change savings

Frank Sullivan

No.

bit I there savings think that that a in upfront were assumed are as assumptions X incorrect. X equally waves. made little I've the commented across SG&A hindsight before, We we

second quarter, that that of biggest In SG&A will as the has be be we're And we into working those. Wave for part savings implementations accounting part or the and X, consolidation third then the fact, annualizing point the complete all deferred purposes, SG&A fourth our savings, some practical get and in of were the to been of ERP we'll we on. and

to the benefit. more plant Again, we really The piece such it that other come consolidation elements to incorrect our we there. original and needed of continuous the working necessity, some capital. proved completed will because, assumptions initiated and that get of get by be is to we the would improvement There's early that start to

see, I in and which to about. you'll capital fiscal beyond cash, conversion of more we're So terms working in think, year excited the next

it of relates million in I to of these ultimately $XXX from date years. on think new the million, will And target. XXXX, some are than XX, as as $XXX see more initiatives subsequent we post benefit December And we original we

Rosemarie Morbelli

little acquisitions -- doing may were about And Could you ask Nudura, details if on question I one than more more and doing well. you else mentioned Schul, us give expected? that whoever is better maybe

Frank Sullivan

specifics, good were resources marketing Sure. the bear into Nudura those of of getting case, acquisitions, particularly Products lines, into Products each Without too and Schul Construction Group integrate in distribution bring we to and Construction could these our on product way and the that much businesses. Group the in our and sales

that And at mid- RPM Construction industrial in I into segment the and margin and rates pretty teens, so about separated terms very teens, revenue exceptional we've Group, was X are the was Products growth the our those going exciting. continue. XX% and Having our of results, businesses and it's seeing affected, organic strategic performance Coatings we've They're improvement. in in will Group are you, leadership historically, it to that tell Performance that of we got that's teams. high reorganization the the laggard to and that

Operator

Steve America, Bank Byrne. have From of we

Steve Byrne

still some XXX higher target. cost $XXX also upside Growth something that where When point do increases potential or have an to year-over-year end this than see million likely you based like that quarters, to had And sounds you? these out of -- that to is had XX% you of program, EBIT quarter. MAP cost you basis couple last Is target you you basis underway? -- the of savings It points margin to realistic rolled were around XXX you've seem see continue on that targeted that this at you projects

Frank Sullivan

Sure.

on communication of we organic X.X% absolute the historic compounded of achievement And and growth As last had we combination couple based further investor to X period. than you'll goals as about XX over that X-year the growth, that, our over rates the XX there originally the growth we've reason out our of and prior growth is probably principal years, quarters, in November principally to the assume are XX and recall, our planned. related XXXX communicated months acquisition of

The first half of this year are X.X%. consolidated up results

And I so goals terms absolute it's to our that in us to still that working continue to of think year quarters achievement what our is of the of billion couple making at in both that are are progress, you we be the track. $X to results great many of our we and growth margin element on us that's pushed to last But not has out when to versus will Growth and outperformance and of prior goals a and going bit. unique well hope program peers. MAP little look the caused EBIT The communicate be

Steve Byrne

And the Has Frank, this there's revisited to indicated scope other whether levers program. program have this pull to you you're restructuring resources the run hadn't internally developed? in -- previously lot any this a to of you pulling you determine that of

Frank Sullivan

comfortable and that to originally improvement that to expect add, that in why would opportunities don't process. elements pipeline. the to Obviously, an to We that to we million in the in we're much but add look years areas total. be I opportunities the there would date XX, end $XXX continue continuing to our December get savings to we are bigger very more first. MAP And exceed done the ongoing following add see I plant that, it's we it's to continue know But XXXX, communicated, Growth

Steve Byrne

any your your And the one could you retardant get so, then fire fluorinated just if see where coatings dies into tracer human are exposure PFAS issues? sucked ask compounds. and/or quick do to pathways you And potential one. whether fireproof Wanted

Frank Sullivan

that's a would many No, company we answer been exposure no. subsequently of of competitor. great was that is did did acquire a was and good the for acquired We a the part that private pursue RPM, question, have they some Yes. acquisition It that that had there, by and that reason but to years principal an a not business.

experience, our sensitive might issues. to given as we're toward you so those past And imagine, highly

Operator

From have Frank Fermium Mitsch. we Research,

Frank Mitsch

in versus bps Looking the XXXX. what that half of most you improvement, XXX back MAP And is in are materials raw at interplay I expectations Growth, to pricing margin your but expand of of the the improvement? of can your imagine upon margin terms fiscal

Frank Sullivan

Sure. Of that basis, that consolidated the about an segments I a growth, and it is organic split between to volume on our differently varies think, way and price. even units. think our business unit between Obviously,

greater have of segment We other metal relative a our their materials, challenges raw in items. packaging, some Consumer few and unique seedlac, to cans

there's the And our challenges And there so than the more some price effect there businesses, annualize instance. end of the into largest of begin have been the been we in quarter. to quarter fourth third increases at our for industrial and

And and activity price we as can savings of pure see annualize line hit the that Growth so MAP we what in benefits bottom to generate the our you'll volume spring.

Frank Mitsch

All right.

about So gains half talked admixtures, the start cetera. et fourth of little do the think market and of that year 'XX? And How in share you bit in about will in the back a the moderate into fiscal to we that quarter. some

Frank Sullivan

-- and Europe, been continues. I couple has activity years the to economic of a hard is for that It's weak in -- say.

going the be the good be North regardless appears I revisited the think decision news is passed, impact will if And NAFTA seems like Brexit. U.K., uncertainty get of eliminating our The it in helpful. is America. in near-term USMCA a slowing will almost areas to helpful. there in that there's opinion, on that as certain on is It been some

we've And general. terms growth our good I got Products really and Group Construction of market think momentum in so that share gains in in

businesses. Carboline have our Proofing to and some corrosion our fire continue Performance our in strong performance We real coatings Stonhard Group, Coatings specifically and flooring control

these where hard the we overcome be we're manufacturing that we will challenge tackling the, Specialty summer. have our is in then Group Products biggest fourth in and into And Consumer in leadership I return think, had we initiatives. challenges the new pretty a Matt believe in quarter that or investing alluded by underinvestment And We have the the some would selectively businesses earnings to of expect and higher-margin see as some We've problem. to them has the and new growth positive been some changes, sales fiscal in to, year. are

Frank Mitsch

just Can manufacturing the very expand Consumer? challenges you That's upon in helpful.

Frank Sullivan

and gains of that bunch couple home of center Sure. share one manufacturing We that our all up areas, and up plant as of I major our finishes. We some environmental equipment in had stains know our folks down issues in market primary regained a of was picked picked making. share, share small-project lost certain think, a We back. X were And had interior at some had area. paint problem. customers, that in we've for We wood that we own us weeks, some a shut some

investing plant. are disruption We major aerosol in another capacity, the installation a in significant some caused which of new

addressing, efficiencies And we issues light we wouldn't that bottom we're that's we that that us. those for disruptions I And in worked to to need so items, know, now of will but make it's some including than make get customers line. to more our And that sure probably information of working -- of our you a caused could cacophony hit we're types those now issues. hard those service sure hard capacity that

Operator

From Baird, Panjabi. have we Ghansham

Ghansham Panjabi

in December the through the did of actually what play don't you going sense, X.X% how You quarter? you well, Frank, a basis? course out on growth just the as I you us demand, as an if mind? a Can monthly out played read the us et just for of And sales then quarter. guess, pent-up some How to cetera. core it give on give just back second saw the to early touched on that

Frank Sullivan

they're Consumer a tell to relationship outsized Group, we a weather that, the in the and in first I was And to both impact big in had was some that and our get September, wanting quarter. not that of you was that didn't have into great details leverage a which little the would for particularly month-by-month while quarter and Sure. with future, And we quarter, our bottom feel to and really I third the forecast Construction look bit we're things, We -- Group November. to going Products a good. a in December strong strong is think track we line. for you be had which at the October, when on choppy. another looks the great

As that, it's looking window in Cleveland, out I say I'm and my snowing Ohio.

our weather is so And and other items impacts quarter subject its always given to third relatively low seasonality.

Ghansham Panjabi

Okay. Matt That's that? do made American market. comment on, commercial construction North calendar year commercial you helpful. expand a then American Can this construction? on a And you just into specific Lukewarm basis What to going I North think, year on a see

Frank Sullivan

Sure.

cannabis in I in very lot New a think uncertainty a success the of Canada construction on industrial of which rapid in specification around think cannabis things the revive Airport, big markets. of of more production. the had warehousing the industry are will in that same, had The we're Mexico biggest and trade We City hopeful We the projects, in I significant the some that Mexico, area in build-out maybe activity headquarters. like terms Apple -- we production around we of see was canceled. and see softness

that -- or there's if weakness, any so And in area. the it's disappointment

and maintenance kind pretty serves really repair commercial solid. to continues low which the of and/or construction, distribution, broad be Our

Ghansham Panjabi

Okay.

million; XQ. those for $XX think to MAP one. we for element same was XQ, think, final XQ, the cadence Growth. year mean a the that one -- How should $XX million; million that the $XX us half about Just of some I same I and gave -- of on back basis? you quarterly of

Frank Sullivan

for one, are savings, there. Wave our annualized of Number savings there the earlier. SG&A I come yes, in will that next and X. commented bank elements two on Well, most Sure. we've SG&A

the with our And so manufacturing flow P&L plant sales. improvements, those consolidation, the through

so have because sales. the leverage the sales you'll in quarter. the pick fourth be done see the up the because sales same typically we've see you'll That's in QX that flip than EBIT the in in more or in side back volume lower it have to quarter. past, will higher then a we to -- is our we you'll impact but in again line And And lower relationship QX see a

And couple momentum, certainly the talk in it of still and follow next that. about be is on 'XX quarters add And a look to more in we good we'll position will MAP to for fiscal we're and to margin, July. solid we see Growth so But and have items pretty continuing on to in program And what the it. track. April the

Operator

RBC. From

have Viswanathan. We Arun

Arun Viswanathan

maybe in coming results you the top Congratulations question quarters? about Would that of I Consumer first and size you on back guess, coming line. just progress be on And the continued to MAP. on you the is the the issues. you think When of the the manufacturing to what some able costs business, you? kind mentioned if see that

Frank Sullivan

expect into on our was with there, provided capacity would -- the beyond begin get process, to see efforts don't to issues that. the around an and earlier on we know we challenges the number detail detail I manufacturing a in would hiccups to of it that the that and I It Yes. few was a address question.

You'll QX, QX as again, that the next the impact given in nature there. then and better see of fiscal well going into of year, seasonal up the to very it, show low isn't

Arun Viswanathan

if continued now? some play continuing? that that building category. to seeing you Consumer I in from And would you've unemployment we business, you And and I little a that in the low to, expect of how the the Is see do small improvement some headwind the we're right that products there's on project think dig know out mentioned just and been that weakness about deeper, guess, numbers homebuilding past, when

Frank Sullivan

four kind that weakness there. have weakness last of we The we is stains the the back picked up home that summer. in any category been we for quarter, the instance, expectations last takeaway the last in project had our Sure. exceeded consumer or performance months lot major see would A early this don't parts we of guess, spring of that our And of the pretty of to -- wood XX August us, and particular and weather and customers for over related, terms solid I a what work. center in And at do. met going months, terms through believe, finishes

So self-inflicted, were performance you had that about The addressed we've is issues those. manufacturing the and there asked part solid. very

Arun Viswanathan

on Performance was Europe. that quarter, Coatings, Construction you think definitely Last some Products had in and I weakness was there then called out. mentioned that And --

you're I second well. quarter? to guess, in that you I easier that. comp deteriorated the to as maybe and I incrementally wanted guess, year. Is just the next just thoughts, And months? to your continuing an Brexit of think see part fiscal it that would of I'm mentioned Europe, sense through this at I expect just get curious, given continue couple your you

Frank Sullivan

Sure.

think relates results product to that as we a and, to lower-margin particular, lines. have And instances, perspective been cases, we've looking exit taken it market few to in primary in serve in we X the weak in lower-margin from the MAP no-margin or, Growth, to Europe very seeing a I discontinue a deliberate markets approach in have business been some there for years.

of and a And but higher-margin I'd Coatings for the And we decision here some sit so it's to we like we've see our had improving, think business that as activity with Europe a on that see European don't engineering Brexit Performance Europe very better today. the had process and strategically profile. in we'll earnings focus performance a than we've Construction deliberate sales business performance. market Products in

Arun Viswanathan

lastly, to have And Looks like while. cost. price then price in little I been your the XXX kind on just for XXX gains a of basis range point may, if

way a rise we potentially expect raw of guess, given kind over materials is that right a thinking lower over couple that to deflation? the period the to Assuming you continue raw maybe of entering but still hold that I next of quarters next on price? X about quarters, or continues that to Is quarters. for fair continue, of you material next material raw Are do the that just trend characterization? Or should couple the

Frank Sullivan

business depending unit and through spring. our increases fair that's I of or last segment, the lot deflation the We a February and in price the XX think that's a the characterization. in ending. months starting the XX happened categories, annualize is In on

have work years ago, a In number QX, won't we've our where no X businesses, will margins year-over-year or QX. got to in X still our are impact do. we not in of as and they we much or so were have little So price a

Operator

we Vertical Kevin From have McCarthy. Research,

Kevin McCarthy

sort you you're but spoke gaining you at share sustainable ask gains in that's you market could to to might think, over Do will to above some to we at share, length, where market the longer? or you What framework be. Frank, of next perhaps terms for dynamic? I that to elaborate and wanted how you happening year, example, that of think apply there why X% grow X%

Frank Sullivan

the way Particularly think Construction about sustainable. think to our think of I in that that's is Products right and Sure. Group, it, I

pursue restoration roof leader been and material resin We have bio-based the more products. continue from both friendly coatings a raw in to and, better-performing environmentally perspective,

I our a product think that's share DAP going market had Carboline about happened. We've lines. once so other our we they've segment in couple spring, this talk product that in And lines, really see well. And market gains can moves of Consumer significant our we'll some share

think through a ability on change I significant RPM, marketing to -- our the the of again, on same is the a focused across the That and and time, goal. sales there's keep was customers. that going to credit thing we're the their and our floor it's factory we're businesses with, associates organizations. and So At pleased most great

knock it. far, excited And wood, working, and so about we're that's

of Products the Construction think us. and and competitors in that's I for very who on also growth, helped major focused we've been reorganizing, sale, beneficiary been the some we've have been Group

Kevin McCarthy

to in the weeks. maybe your talk you In your bit Okay. mentioned uncertain you about complex and you're a your procurement little -- could become recent a And regard improved folks how raw remarks, has doing But energy volatile with see I basis? on basket negotiating more prepared also obviously, think the company-specific you terms. And materials, some then trending? are what

level market of in beyond raw you is terms at So benefit costs? expect material to would what the transpiring

Frank Sullivan

improvement Yes. demonstrated I And that. our think margin gross have

categories help, with way been suppliers not of still the or is annual well-organized some to benefits our through involved, we're we X had procurement of consulting consolidation. some very categories come of combination spend we've mix $X.X we've peers. significant where have centralizing had of a $XX million raw or number down it activities. in which a costs, And XX. outside price in has the and but portion to have And of gross X from many of our We margin excess X and all that taken expansion that of And are spend, annual gone material million to impact a starting between we've cost/price see

centralizing prime consolidation a level, and from were improvement. a rough is cost/price to think I the if and floor plant I prime improvement, we think our benefits XX% half it gross way disclose margin prime of whole on At benefit of margin our is our margin supplier the is about of continuous the and our consolidating -- say I procurement base. in mix XX% that activity think the experiencing from of chunk and margin, is improvement big about margin gross is factory a would the terms industry to

Operator

From we UBS, Josh have Spector.

Joshua Spector

seems low mid-single year-over-year? that the bottom digits, help little than on would $XX factors mean, bit leverage year-over-year, Can basis. MAP growth savings to highlighted Specialty drive mean if that maybe a maybe of bridge look to you the the line in was some EBIT I on less it the and at the there in you to what expected organic exclude cost I from like earlier be plan. Just the million Growth then I bridge

Frank Sullivan

not leverage you the I'm think to higher you understand we I if then consolidated I the that -- conclusion of results, sure mean the have come exclude not would Specialty I to maybe other that? repeat in could question. businesses. I'm you relative But some our

Joshua Spector

Sure.

EBIT $XXX what at million. ago. guess savings was looking the I your quarter So is year $XX $XXX was I'm for adjusted a million million. The cost was It

bridges to that $XXX million. around So

You've lost Specialty. million $X in

as some being plus. issues, manufacturing And at of looking despite understand flat bridge might X.X% organic I'm the kind of being which growth So roughly I that have been factor. a

there's things led that? that a other Just any result like year-over-year wondering lower might would call of that as you have growth a out if to

Russell Gordon

Rusty Sure. here. Josh, it's

$XX savings. year-over-year disclosed really terms In incremental savings. savings total an That that's we is of million, the of MAP not

the sales the of and to about part maybe on were And when that, down confusion. I look just million. that's down EBIT I a $XX focus was $X at million, So Specialty little in see the Specialty, more than

loss. drop think from revenue that's down we'd normal I see the So a

So help? did answer I Or that some... can

Joshua Spector

cumulative that just was No, realized what helps. it the was Yes. quarter. didn't realize in I Yes, versus

helpful. that's So

Russell Gordon

Wave half the would deferred small savings, be release. discussed, earnings to of talked we fiscal this much X the year. back we of That X Wave in about and X as the of portion summer which Yes. our year-end last And is Wave

Frank Sullivan

last MAP $XX And time you that the disclosed quarter. savings against net this have in million would to the year

Russell Gordon

Yes. year with And that in last we disclosed what year-end.

million First savings. X quarters, we disclosed $XX

Joshua Spector

Okay. parts that's Great. give business, business. And just secondly, was within then I on if the helpful. wondering you of the perhaps No, backlog on can some color Coatings the Performance that different

then lower as next And So maybe you you're that Curious some noted with on of year. potential in well? kind how for flooring seeing side out the CapEx energy. strength pan

Frank Sullivan

of of the oil when that Sure. and -- of market cutting plunged, those. in capital be of to any the kind a level. the outlook markets The energy budgets We or those to ago couple spend prices years deferment of normal for either in stabilized, spending seems back have don't see change a

windmill broad different everything from is to pretty to Our as It's blades refineries. transmission activity to well. energy pipelines

the some parts real have marketplace, share year-over-year quite be not other of us. been where through product the of to some growth the it's shown a overcome product we've for in seen activity lot a gains, offshore used growth strong of been both areas lines, there. growth solid oil, or that was business in the been solid But it's European of that exception only it's and by us candidly, Europe. And actually about one for area in One strong the the European the those market and unit marketplace market normal lines spends like

Operator

From Morgan Andrews. Stanley, Vincent we have

Steven Haynes

actually guess, Steve is quick on ones. This two Vincent. just kind for of I

maybe On expectations. quarter the EBIT it than a third bit growth, lower was

to that like you is guys, it that notable could a for smaller bridging maybe considering that is is gap? there So out quarter there in call anything be but that

Russell Gordon

Yes.

think confusion, right? quarter Steve, third I terms the In you're the talking, not of second some quarter, about and

Steven Haynes

Correct. Yes, XQ guidance. the

Russell Gordon

Yes.

low As our a we through it's convey outlook, quarter. tried to seasonally

down MAP So we savings, year. I'll savings, would third quarter. MAP of year, the And savings of is XX% we would XX% you're this our up, the say, of not $XXX throughout because cost in quarter as in and roughly typically of down, let's is total the a evenly expect percent sales make sales there's third sales if do our looking the those volume at get you of million

confusion terms might outlook. that some the quarter be third of So the in of

Frank Sullivan

Yes.

SG&A. have plant be I improvement so and been As SG&A has my is procurement mentioned in The there's year-over-year activity the grow Wave us and no next the activity. consolidation prepared continuing continuous remarks, What to for been will the savings MAP wave in annualized, savings X.

sell we a All realized going products. gets gets inventory, and on capitalized month, lower to lower have impact. as it and of that income you're then into And lower-revenue a

XX% growth over is that, improvement XQ. XX% growth actually the we EBIT to EBIT just said year-over-year a Having that an in experienced

we're forecast internal on what sales EBIT where track our be growth well X% in appears we terms the so track to continues third in it And in expect quarter. somewhere And on are. solid terms on we're continuing range. modest the to And of growth we what to of to relative in relative X% be

Steven Haynes

helpful. a follow-up That's And on Okay. then just Specialty.

fourth and kind think mentioned of of work the way last maybe I are that pushed things time initiatives that underway of some we by expect the kind to still starting Is in the its you Or the see line? kind out? should quarter maybe beginning of bit long quarter, to through of kind you'd of starting fiscal Like last? how a XXXX. weakness

Frank Sullivan

the No. That's time line.

see. we I think correct, what that's that's and

being them growth sales to year and this fiscal 'XX. half fiscal and towards contributor You'll of a earnings see positive back into the

think that's line we So that exactly I the time see.

Operator

we Seaport Mike Harrison. have Research, From

Michael Harrison

quick a one Specialty segment. on I the also had

expected? You slightly, this had XX.X% sales down now sales was full that 'XX should fiscal be in that better using worse year be and you year the than number whether organically. guided Can still down see or -- last to assumption? quarter quarter coming up is would you the slightly down flat we frame us to help for just flat And had full

Frank Sullivan

Yes.

slightly on Legend seasons, quarter used events a business them very a major Los I was Angeles. past the some commented expectations business, very of categories. major category think then and that weather-related fire has fire the I was the had around fires modest. And this, Day-Glo brands of principally for segment, the our in in it to with pigments and for past compared Specialty The product the below publicity in the and second impact and our business -- the it's that performance dyes spotting notwithstanding season moderate Rusty product the been retardants, was think in around chemicals,

impacted And of was revenues, segment. are so high-margin negatively businesses that slower Both that those a the and area. lower-than-expected that had

QX. For the the back I year, somewhat of sales think be they'll not balance recover on will in results the but track, they lower-than-expected

Michael Harrison

right Australia not for now? that are used retardants, you fire market those is dies tracer fluorescent The a that being into? Or in sell

Frank Sullivan

to I you question. actually Yes. get offline. We I can to and out know certainly find don't so, don't answer that the believe but back

Michael Harrison

stand on is Okay. seeing consumer Can the terms question what and point sales you're normal customers start customers? those the levels side business. to Is move you talk last sell-through are a of they box in And inventory big at slower of on period? high? where then data this about Or more of into little your that we sense running levels? bit retail seasonal Any inventory as relatively

Frank Sullivan

No.

summer been last inventory customers We were adjustments fall. of I commented slow or some as our and major year. the was earlier, some has in takeaway It solid think we by consumer pretty in relative the negatively impacted significant choppy, slower-than-expected by pretty to solid.

customers. expect box I had we the don't by last think and year that significant inventory lower, we same this impact our inventory big levels some from are year adjustments

be positive. a So think, will year-over-year that, I

Operator

Jeff have we Zekauskas. JPMorgan, From

Jeffrey Zekauskas

progress materials $XX $X the were your I X%, At know, characterized a the program. I be puzzled that or your results bit million call, of raw was lot million. that $X you from operating the X.X%, profit beginning about if to Growth coming little of the Frank, But don't down if another is up, because MAP by prices the would million. be a were And would

the of so raw increases operating for of materials would the And profit growth. and all combination account price

is given Growth So other considerations? what's really program wrong how with to MAP things those that the influencing analysis? words, In two

Frank Sullivan

of A of of meaningful one, better at our versus Yes. would quarters, number peers. some our expansion our look the have Number last for had I a we points expansion couple couple things, Jeff. margin than And margin peers. of

touch X be that point because cost/price So should all we're benefiting from mix.

your on is Secondly, across RPM, assumption mixed. savings material raw

true Group FIFO we're fact the true categories our Industrial of on because in been and So in Products and the Construction our that packaging, segment. segment Performance yet It that not has Group, our been that's in Coatings the accounting. some I about, of Consumer old talked principally

some the of see, finally benefits some that you So breaks.

results in some in Some that other the packaging this are, hit increases suffering And items. our show in up and everybody, labor costs will fall we meaningful like breaks coming in quarters. final

to And so think compare to than benefits you're your the put would than, to our whether simplest versus MAP way margin margin Growth our look results our working our are that equal to comments or correct. here. we the I gross expansion it's if continue is is if EBIT and and pretty suggest I to And to peers. seeing less that some numbers, at good But up continue

is I can tell thing The we're last closing plants. you

in And hitting instituting disciplines before, didn't Our it our XXX headcount where by exist is people. lean XXX successfully line. manufacturing bottom we plants and or are down it's

Jeffrey Zekauskas

for Rusty. goods quarter? of What's quick cost the final sold in a the adjusted question Maybe Okay.

Russell Gordon

don't We disclose Yes. that.

see our If do reconciliation website, we you slides have some to that you... that go you'll give

Jeffrey Zekauskas

Right. because items reconcile and out goods But to number don't sold cost the break of you doesn't the how... that individual

Frank Sullivan

goods or competitive sold. any out I of number for And think we cost Correct. specifics don't competitors any reasons their that of of break our of

Operator

we From have Michael Fargo, Wells Sison.

Unidentified Analyst

on is Mike. Richard This for

you look? segments pipeline question have think seen growth quick X% does now? to you have opportunities? X.X% the on a environment assuming How any revenue you you'll change are do right to How for And the much your range? M&A. Just And which

Frank Sullivan

in way a Profile announce of the So from business. think see I QX is did Specialty we much Products which in relatively impact M&A. small Group, Foods, And part you'll our don't of

think good And us. our manufacturing there's skinny focus as I for pipeline been see some the that businesses -- we're with the and commented you on results. earlier, their do can a marketplace, little pleased has I the customers of on think think But and synergies really in there. I I M&A our

things. it's better revenue to that's there's that are deals been on MAP that it's better combination, price area put I Number And we a such with through can acquisitions. to acquisition If disappointing, one sizable MAP the one, of X bit a think, expectations Growth capital little use other And change from returns a that. think on Growth repurchases has that focus on that negatively separately, do to a investments. been in way to has activity, certain organization I and focused extent impacted and we're share on our executing the working to

Unidentified Analyst

in I Great. know the far And Looks the Do step you'd Or... last in of so just you on little first year. the half? $XXX a million second to quarter, up half. expect guided Capex. light that

Frank Sullivan

Yes.

could that's but I that short fall still have things target planned, ability think target. the we of of just We execute that the current to on because for year. the our the that's

Operator

And Perrella. Bloomberg, from we have Christopher

Christopher Perrella

that into up earlier forward backlog continue or of expect from with the at touching and first on Or quarter your second point Do third guess, backlog. quarter? I this the discussed any backlogs question, into pull you to you're customers? the the the caught A quarter on the

Frank Sullivan

I our bump, Products. waterproofing between flooring in in I pretty to second very say, second whipsawed rates. normal some the a long for be roofing solid. of experiencing beginning good. another, don't as in revenue our or I growth the But coatings industrial pretty one Consumer get quarter we expectations our think corrosion we're kind quarter let's by from for see solid got weather the And seem and first control as half the segment. of growth we've our And year mentioned we're Construction think as the quarter in and at earlier, did We that of is and and businesses backlog, Consumer

Christopher Perrella

right. follow-up. All a And

compared capital you fourth the larger seasonally should last to So strong release quarter a with year? working see

Frank Sullivan

No.

you'll fact, opposite. little bit see of In a the

I think that, about the million working of capital think the on improvement 'XX. of flow the cash see I to biggest of fiscal in improvement working impact capital Of $XXX to start year-over-year in you'll $XX businesses year-over-year million end. cash and and, we million at payment day that to cash candidly, timing new on $XX quite terms as suppliers difference flow flow a is opposed major every quarter with as negotiated focused have

And in differences, so we did have some timing particularly Consumer.

$XX so from really earnings it about capital of balance And more to was flow of higher timing, solid number. million $XXX of performance our that better cash that's million million was the permanent. improvement operations, and working $XX year-over-year

of So into fourth 'XX, cash generation. much strength timing to because quarter your continued -- if see But quarter last not the any, will fourth the then show question, we triggered our back year. I flow flow think you'll improvement, that fiscal difference in cash get as

Operator

comments. closing for Sullivan Frank to back it turn now We'll

Frank Sullivan

come. worldwide XXXX associates and tremendous plan. our work dedication operating years for Growth to will and improvement RPM in for employees that we excellence in to are growth-oriented the hard quarters I'd our resulting execute the culture continued improvement programs, improvement operational they from growth to their our commend simultaneously focus and our positioning shareholders entrepreneurial their is for on coming business like and continuous combining sustained coming MAP operating our on the as provide with that By customers, growing value

XXXX look Year. you us today's on results to for very joining on much We in New you call. Thank third forward fiscal quarter updating our April. Happy

Operator

and Ladies today's Thank concludes you gentlemen, conference. joining. Thank you. this for

now You disconnect. may

RPM International (RPM) 8 Jan 202020 Q2 Earnings call transcript