RPM - Earnings call transcript Q2 2021

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Operator

Welcome to RPM International’s Conference Call for the Fiscal 2021 Second Quarter Today’s call is being is 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.

During this conference call, all references may be made to non-GAAP financial measures. understanding most terms, measures directly RPM in reconciliations has on you website. the to comparable assist these RPM non-GAAP posted the To GAAP financial over like At turn time, Instructions] Chairman I'd [Operator the CEO, this call to Mr. RPM’s and to opening for remarks. Sullivan Frank sir. go ahead, Please

Frank Sullivan

Happy and Thank investor the Inc. welcome RPM you, Liz. for quarter. our to International call fiscal New Year XXXX second

of Tax review Financial we'll generated Vice are and excellent Joining to achieved Gordon, RPM's questions. second in fiscal which Global Chief today’s President with then quarter. and results our Ratajczak, for call an in products, Relation up Rusty Treasury, also The range due economic was wrap categories, I'm our Growth bottom our sales growth the to challenging X%. performance Officer; on edition line broad is our areas. then Ali the Matt me President will our brand and paints, initiative Investor After who supporting project the and earnings formal coupled three third worldwide your and and of for strong of by financial Vice an take of earnings financial for coatings grew both sales achieved detail, once disinfecting quarter, remarks of our air which I'll renewed a leverage positively cleaning, second we've our and growth of products. quarter on activities. operational to is out few focus the operating to moments with which XXXX sales since to the Ali moderate while and pleased outlook Organic for factors flow strong including also to to purification to The sales, small generated efforts provide in improvement equipment, including four efficiency quarter and cash to its again Industries, program. our Matt a line, the MAP record MAP associates despite conditions is fiscal largely the an of top demonstrating very update Gator our improvement made overview driving sales with our segments, XXXX share quarter, second the abrasive grow performance our activities. Growth known Acquisitions also of take our best invest in impacted of Rusty largest quarter acquisition year. we other was that also initiatives. contributed report OEM and will

margin On international Europe also particularly translation to as to the basis our points during a of increased last XXX driven in by currency added EBIT showed those registering and basis, markets, comparison consolidated sales even margin XX.X% high XX%. Foreign improvement. an more EBIT was tough substantial improvements This our adjusted EBIT growth. quarter, impressive four segments adjusted given when year increased three EBIT

way Our by project sealants, consumer small lead its cleaners. consumer for demand continues and stains to business caulk, unprecedented the paints, driven

win compete segments they the markets finding other our While serve. to and are ways in

to XXX continuing was drywall and application and free market for fire in fix a quickly durability to new mess passive for very -- cementitious protection. Pyrocrete is focused next fire Repair developed mess excellent XXX, fire positions protection. develop is coating customers. Eclipse businesses properties repair. generation remained as common example which and Carboline other DAP’s with Carboline’s solutions enhanced and Wall Pyrocrete introduced, are And One Our a Patch on damage passive just most growth simple our is With innovative Rapid leader

focus roofs us which temperatures Group Including products working degrees as and Products Construction renovation challenging cost and one coatings, AlphaGuard its continues construction was to $XX recent EWS Simple in recommending Construction won restoration. that the Spectrum Spectrum this winter concrete. million. will In our by cost recently to in Group And Fahrenheit. Tremco a residential at used for to Vulkem a PUMA protect minus $X On Simple tower replacement introduced market, waterproofing FACADE the of job addition, our million. low seal is complete Products exemplified as a keep window by estimated FACADE a on solution suite was are of XX used its only to in which restore Minnesota,

of restoration more product this significantly sales. expect project We

tremendous momentum. Our MAP Growth program continues to have to

example start meetings the we We're in as improvement in to recently continue examples the across During result which this in is our training program. process focused the trained out which in closure continuous announced plants, like cost Sigma much team of for Growth manufacturing to operations our our brings identified the improvement savings. throughout our closure utilizing who originally scrap the in savings of targeted opportunities. a RPM, Six $XXX,XXX and Dryvit have principles, engineer One XX reduce to of hundreds two to There becoming XX associates program. are also deliver that improvements were literally second quarter, other increase yields, total invested efficient assets of the at manufacturing MAP we annual plants more as

of plan, the In administrative to continuing in are our procurement implemented. ERP be from addition, are our benefits and center targeted consolidations initiatives lead improvements ahead

is Growth I'd will from Growth ultimately continuous end, Based We've inclusion predecessor and better down million we this exceeding that pay to our Tom had died it improved and final $XXX total culture our He the passed our he share balance quarter, margins debt, $XXX add tremendous were today. our over stood like operations units to making At generated of of improvement, and MAP long in initiatives record the sales been because flow comment an MAP on we continue November business expectations. stronger also sheet liquidity a operational on in in our unexpectedly. working Sullivan, on RPM fiscal away relates savings savings make billion, a to to of managing who improvements the father been at $X.X to business my capital quarter management, using acquisitions after run that father my that beyond, our cash make took XX% annualized reserve. shaping this reach in to said this increase into mentor pipeline of That of to increased to 'XX and influence than time. robust will XX. it's in to our $XX million. original cost in plan At and record year. rate by strategic expect RPM last result who we carry cash time, programs his which and XXXX mentioned million. One will As fiscal I cash the

his with the to retired sales our XXXX from career XX-year practices organization had Following financial perpetuate review and $X over detail. billion. RPM. nearly great Tom our our growth in I'll second in results a to fiscal the when continued and turn Board reached 'XX and success continues call Ratajczak, who quarter within His now spirit drive more RPM, annual will leadership to Matt

Matt Ratajczak

my morning, adjusted will on note Thanks, an basis. that Please be everyone. Frank, as and good comments

of record million. Acquisitions contributed consolidated X% $XX.X an fiscal the Organic of net or increased sales to $XX.X the billion, sales XXXX. second generated of X.X% sales same during quarter, During million. increase reported $X.X compared quarter billion X.X% we to the $X.XX or

or million. $X.X, a diluted to share per by was an tailwind XX.X% sales Exchange the that compared $X.XX increase Foreign $X.X Adjusted earnings in X.X% quarter. ago increased of were year

in million $XXX.X Our reported compared XX.X% increased consolidated the fiscal interest quarter. to and before to million adjusted earnings $XXX.X taxes, XXXX second EBIT,

X.X% increased acquisitions. no year now $X.X results. Products from $XXX.X to ago. Turning compared million Sales There was increased our to our Group $XXX.X segment sales X.X% to or Construction million Organic impact in a million.

million. by maintain construction its and envelope million leading its systems Performance $XXX.X concrete in single including ago our from with growth $XXX.X by $X.X Products Sales sales projects, improve translation markets the EBIT Group line EBIT million its and to $XX.X ago. on soft million. Growth $X.X was restoration sales. in proactive expanding leverage building achieved or to XX.X% reported of or market contributed Organic to aggressive $XX.X technologies, in to continuing its insulated cost industry million outstanding X.X% able Europe. provider reduced cuts increased $XX.X to largely Construction sales commercial million to period. mix. The Adjusted the year on of Acquisitions and North This into XX.X% Nudura and decreased and a source was top to to from able modest currency management product forms despite or segment Coatings XX.X% to Foreign The a to year adjusted discretionary its construction bottom institutional sales renovation initiatives, declined in X.X% segment MAP America as due share line, results the was million position its focusing Group take

has The hurricanes its and especially particularly down EBIT million or to which that the coatings our Foreign sales and industrial by all control been to Coatings most limited increased exchange segment's was segment industrial deferral energy is markets, segments, also to was Group year reductions. corrosion partially quarter, disrupted million of Performance $XX emerging were and earnings by XX.X% region capital the largest in to construction Carboline by resulted adjusted unfavorably $X.X COVID-XX to the access fireproofing The Out restricted, X.X% U.S. sales $XX Growth in the sector, pandemic. the MAP impacted Similar Coatings compared was discretionary continue be savings of of our sales, cost Gulf the by energy million. restrictions weak period. and for temporarily prior has declining market sites, affected that in have in impacted business offset of last by Performance to Industrial markets the The spending maintenance the the Group's businesses. a by in segment's spending. been challenged

second demand benefit the on our increase maintenance its However, increased it contributed XX.X% projects. $XX.X construction million. for customers catch this quarter, fiscal as XX.X% million significantly to in significant in to stands continued Acquisitions from $XXX.X or deferred unprecedented $XXX.X Organic sales pandemics Consumer of million consumer increase up sales They also sales. for the or $XX in resulting group. and The products million end X.X% a XXXX our quarter. from

$XX.X million by increased XX.X% sales million. or million in in Adjusted second last compared quarter. $XX.X translation X.X% to $X group the Consumer year's increased EBIT to currency Foreign

Our Consumer tackled and significantly performance projects. as our our group’s consumers broad was by market driven leading leveraging homebound position more outstanding distribution, by

capacity in paint filling investing foreign acquisition to making benefited translational stable also favorable Ali quarter. Industries. cleaning costs from exchange, are The the sales, help overall product aerosol We and this material were demand. of meet and Raw the line vigorous during top

the sales to based Specialty segment’s strong seeing sales number MAP raw in inflation $X currently Growth broad contributed were are year increased to and million, increase a compared were of High million. volumes $XXX.X XX.X% an in we X.X% million to leveraged line. X.X% million Organic sales. to or or of Group sales bottom However, $XXX.X period. Products savings materials. Acquisitions the ago $XX.X

have which the pigments turn EBIT increased as drove in to at Group this $XX.X segment fluorescent as currency XX.X% the $X.X of Foreign wildfire sales this activity, demand million results tracer fire X.X% which well million Sales quarter we to this translation at or increased equipment Management Products $XX.X retardant second fire helped our for that million. boosted hurricane and in water dyes. quarter. in increased restoration used changes Specialty fiscal by were to compared around segment XXXX. are implemented Adjusted the by quarter,

we Additionally, have and of to HEPA demand air strong filters. of segment’s our equipment disinfectants, the purification expanding Several markets lineup improved. for end product experience continue

of volumes, demand we products and and sales lumber The segment’s the Zealand. protection increased MAP For operational and wood in example, improvements as improved chemicals industrial have U.S., increased sales bottom in a our in as savings. result Australia result forestry its line a Growth expanded of business to sales New of higher

Rusty Gordon

our Now, Rusty will you walk outlook. through

Rusty Gordon

Thanks, Matt.

in to adjusted XXXX with our ahead we Growth line to As XX% growth to the in range from strong continued fiscal look EBIT mid-single-digit leverage more. program, growth quarter, we or sales of third MAP bottom the the resulting anticipate consolidated

modest because Our during year, sales painting each quarter months winter relatively falls and activity construction the slow. provides when activity typically third it

percentage to enabling consumer terms, to over retail unpredictable As meet reduction the a result, weather. our it working unprecedented months. in the there From Also, this activity benefit greater is last segment volatility products of given sales inventory replenish X and restoration peers segment, upon quarter third will after demand seasonal a building to Group. in innovative will XXXX with fiscal expect negative Construction we to by perspective, to be group service continue renovation and Products in challenging flat This focus construction outperform to solutions. a market the continuing typically its

the most serves sales Group, Coatings end in which expect at the declined We RPM. challenged markets the continue Performance to

have to of shelf to the number both Number leading market on restocking group line benefit unprecedented continued to double-digit is due acquisition, and more Consumer of than after continue growth retail expect position We demand; bottom sales three, factors POS number from to better results. its the including dropped inventories Ali continuation anticipated. the number and which leverage strong we a two, due into top one performing

We expect the quarter as from to into Group positive sales continue Products third growth Specialty well. the

business from has customer New manufacturing last the shutdowns base back development, as fresh brought is OEM for and has management their and up ideas processes spring. picked recovered

to our be inventory. Across the manufacturing down unprecedented due consumer do and Consumer RPM’s A our interruption to to severe. demand, margin vaccines getting tell quarter, serve levels. working the for to that capital should most new segments the economic safety portion recent management improvement fourth to of for moment four planning has there means this flexibility as as year's will about necessary is work Since of simultaneously spend four and inventory. which so will reduction let capital we our Additionally, you caused Sales all COVID-XX, RPM, me when pandemic a due segments. cash to help by optimism drawn much well quarter, With customers, the be group the not consumer what working us back fourth fiscal to up comparison in has better flow rebuild life improve while highs processes which all soared is easier surrounding normal the sustained. need was in last to to stock our will an reducing XXXX

anticipate gain base we housing people have homes. DIY our since demand normalized the return and expanded rates, contractors due levels the picking activity Consumer But elevated to user more their to again as interest would recently often For still expectation access out of end expect and up turnover, category to good of more more venture Pro low residences. business entered to consumer, we as continued DIYers

greater an of consumer We cleaning we that also is as believe area forward. interest go

year. boomerang effect getting expect future segments, a improve will would facility also PCG and maintenance our likely CPG activity and has been our challenging deferred back for what up. XXXX normal to For access construction contractors, as calendar improve the We from catches a in

catch followed who recession, the those great that industrial from RPM in deferred segment maintenance. For growth recall you'll XXXX in and former last at our the experienced double digit up XXXX

momentum comments. we SPG, providing Due to are impacts year fiscal economic team. to we of For This COVID-XX, earnings to management rebuild guidance. uncertainty up not related wraps the full continued continue new formal growth under our the XXXX

your We will take questions. to now pleased be

Operator

[Operator from comes Markets. Instructions] with McNulty Capital Your first question BMO John

Your line is open.

John McNulty

Yes. taking question. Thanks for my

RPM the to of amazing my an team passing left and behind. with obviously legacy you who Tom condolences First, the

Frank Sullivan

John. Thanks,

John McNulty

sure. For

work question, it because the of some first and of see remarks. rest level materials those a to you your year? the to offset you of that can expect timely price speak the fiscal it that you And in of through, some obviously Can in speak you type of the raw the in made guess you also some we've to you inflation prepared So, mention fashion? or so as the to headwinds have I ability of seen some inflation through

Frank Sullivan

Sure.

which epoxies, raw seeing procurement were. metal We material cans, So consolidated continuing areas I expect to and offset of challenges we're providing, our initially think, fully like categories. benefits the some through other think have in stable those highly while been it's leverage silicones, activities, original certain pricing increase spring. price industry very we're will our likely activities some you in our to what across see Growth I of beyond then, benefits now, that And terms this expectations MAP and

John McNulty

even new got businesses? terms it. the some drive point your thinking growth a Fair in this needed coming investments growth go And to got are initiatives, grab of in mention investment enough. how Got of you then you how paint of you've and some speak these of and guess, I the expectation? capacity. also, new the programs on, to about number you've at And programs going Can you're made

Frank Sullivan

investment businesses as categories. we And a we're expanding are We're the one, MAP today Group. activities Number and needed Products it. speak shift Growth to capacity expanding number of capacity Sure. the making in drive Construction aspect we these consumer not-so-subtle in of to making a also our in our growth to

which activities. Nudura, construction major spec shifted sealants challenged have our big Products roofing, And expect and The see in had a pretty market some dividends in combination of big, are can particularly you to much think Group, modestly I organic any Tremco pronounced that Tremco positive of in more restoration to the type Construction they very would globally. that growth most paying this Dryvit rebound. and in actually efforts we activity business, of come our the and quarter,

you're seeing of we And few categories that mentioned today. new product the a so,

at focused made are years. get to exceeding which I we reference fiscal organic MAP is additional that, expect the same continue deliver We would Rusty as savings fact driving into the on growth And to the in Growth, expectations time, our keenly think, we 'XX. coming to to

John McNulty

for color. much it. Thanks Got very the

John McNulty

Thanks, John.

Operator

next Rosemarie G question with from Your Morbelli Research. comes

open. is line Your

Rosemarie Morbelli

are than for many on again, Thank all sorry will And up about. I join morning, terribly think passing. regarding Good I to like with Tom's my years worked everyone. Frank, I and you. condolences more we him

product different investing mean, product capacity thinking we lines I are your Looking this, additional at of face you in your which you lines particular businesses. towards investments, what growing. which are

Frank Sullivan

which it and goods, capacity we're broad drive capacity Sure. And whole also expanding a also in roof Products are so paint and restoration of across is of We're filtration legend equipment. facade brands in categories. in expanding product at we're major group projects the our range given across in and this at specialty capacity Tremco terms in restoration aerosol only clocks capacity, their a small facade, expanding we number gas much air oil also the We're pretty and About Group, expanding and capacity cleaning investing product capacity coatings, project sealant, a prices of spectrum In products, of not and capacity Group, businesses, projects, is sealants particularly handling and that impact In and Nudura Performance product categories. their air of and gallon some are on categories. the board. unique area point looking consumer, the that We're pandemic we're expanding capacity in our Coatings Construction across capacity. -- for areas. restoration

Rosemarie Morbelli

Do eliminate some categories some you as Coatings, to Performance to may see you back pre-COVID on not go the capacity need the level?

Frank Sullivan

We our time would And MAP original closures the pre-recorded history to we formal eliminating by next highlighted past. to our and levels years that's across categories tell completed been our back or as a I pre-COVID few get Growth. to will in XX believe we expect in coming will fully had remarks. in you we finished, by over been facilities. RPM that the capacity XX of that exceed the manufacturing plant closure targeted I We've we're the we the

having capital very we're into and efficiency. growth a areas of so, And into reallocation deliberate

the to around manufacturing the expanding while So by globe footprint done MAP time smaller. we're capacity, with our will be Growth, net we're

Rosemarie Morbelli

your Thank towards efforts could I make some to was comments your paint portfolio? you. if architectural And adding regarding wondering you

Frank Sullivan

Sure.

paint the in DIY through spring post-COVID that supply about that opportunities customers. across summer challenges had We get have number in a we we'll past market. this of the category unique of that better we've in numerous as number a think across have of consumer our of the in major areas kind the a architectural of And sense commented I kind

Rosemarie Morbelli

much. very you Thank

Operator

comes Mitsch Research. next from question Fermium with Your Frank

open. Your line is

Frank Mitsch

quarter. good and Hey, on morning congrats the

know me mentioned was Frank, in care take luck eulogy importantly, amazing -- Pittsburgh. to browns congrats Saturday I it's I've happier the guys More one I but don't on good on if a And the in to on add an be of nice before note, I've life. of best your or heard and condolences. that what let Sunday. your thought ever the man

your little about And much about on bit generation, on or when interplay the is respect free and record flow looking think pipeline How M&A your cash and RPM a like hear M&A You resurface uses. cash for do Didn't we what spoke to buybacks. with side? versus might strategic the they buybacks?

Frank Sullivan

Sure.

levels, improvements. allocation and margin record will of at for as capital strategies is capital as it future foreseeable combination the expansion, that generation cash excellent continue just way So well for the deployment working

the debt For been of suspended that indicated program some we to share We've our reduction. have we able repurchase affect favor debt in time meaningful reduction. had being,

Going is pipeline industry M&A and of The pretty full forward. growing. our activity and

Le and medium transaction the So and more pursue to I to industry small second we continue acquisition transactions over months, we the next you'll think quarter. XX size like our activity typical XX completed see in the

winter share in to That's spring. take our relates meetings it something that the will Board Board As up and this repurchases. here

Frank Sullivan

Got you. Got business you. has been a Obviously, the sales. strong very standout, consumer

opportunity you that results Were going been third out? what think consumer were take did that you side? sold in How Because on -- think the we the there to do about Could you're mentioned the sales you could better? have the rebuild You any have quarter to during regard? lose been fiscal inventories.

Frank Sullivan

to DIY lost categories. to not have we some many go us. unique relative rates. It's impacted clearly, It's Yes, sales

know consumer in organic people second the had XX%. had quarter the in our of As growth and mid-teens. first We an quarter, and organic growth we

of been DIY the terms foreseeable organic catching that fill, the remain to in ’ for We activity or DIY period on and not of about calendar. growth lot continue see we've remarks. And quarter. there able up XX strong growth a comment at continue for I our market to see our bullish in higher We the additional think will of time pretty position both And certainly in in the Rusty rate, a strong where us commented and in market opportunities third we in growth. very orders as for prepared were some

Frank Mitsch

you. thanks. Got Many

Frank Sullivan

Thanks, Frank.

Operator

with Panjabi Ghansham from comes question Baird. next Your

Your line is open.

Ghansham Panjabi

Ghansham. morning, Good

Ghansham Panjabi

your Year New and Frank, as well. morning. Happy my to Good guys. family best Hey,

Frank Sullivan

you. Thank

Ghansham Panjabi

Yes.

Europe. ended how tracking, from then, given just early business? obviously as downs have up things that anything to Since And they're a sense what just the in give in us quarter your in your picked to line, December, businesses? you is to lock across like January, have your pre-trend a can across specific different first November, So if progressed lockdown

Frank Sullivan

great numbers formal that then think, the or numbers as and great What mid-February would of in could possibility otherwise provided lockdown we back United in that to because followed I lockdowns. or U.K the disrupt beginning RPM. for That's, certainly the guidance in that Rusty further that that Sure. businesses. lot has the If lockdowns meet off into you And question exists a our interrupt to The exceed expect But from by Europe are is the is comments for throughout Organic the we quarter could very another our across start. what know. been States, quarter, strong variability made. a third the tremendous. growth a QX. forecast, leverage of different The we continues bottom line has would be

Ghansham Panjabi

can’t Got it. Because sense And to you deferred that of quarter? assume you reasonable then sector. second XX% specific you catch-up too it in the in Thanks. to energy a us terms Performance, in the reported as what's how sales you decline give I the out Can And long. phase? in for dynamic for deferred impacted the maintenance called

Frank Sullivan

Sure.

Rusty negative Products Coatings certainly, rebound. we that meaningful back Performance calendar growth double-digit as it rebound We And on the has economic a our Group back the organic recovery and in generated any businesses the severe made. those spending can then, businesses Group XXXX, heavy on think in and Coatings industry look we was area, prepared best been Group expect in in at so in address particularly gas, again impact, way I the and we and remarks XXXX Performance categories our was energy oil the Construction would as and activity. that

In quarter, well weather And Growth the there and Coatings we're around hurricanes the Gulf this Louisiana. that impacted major see negatively the the benefits quarters unique to you'll facility performance their Charles, activity their on coming so earnings really Group. Lake performance impacted MAP in manufacturing by poised the and the in I and some think circumstances of activity was

So, performance part that earnings of the quarter. circumstantial was of

So where The to are the opportunity Group, fiscal 'XX. it are. Construction think with into we pleased drive Products I has really our they performance

product attack are facade we new basis. market taking combining We prior businesses share, we a restoration holistic are categories, to are on introducing independent

lot expect a of to there's accelerate there would in happening that exciting the economic of we things so, And again see type recovery. new

Ghansham Panjabi

you Thank so much, Frank. Perfect.

Frank Sullivan

you. Thank

Operator

Your Andrews from Vincent next question comes Morgan Stanley. with

line open. Your is

Vincent Andrews

fiscal where of good But within a questions. us Are they're Thank sort just business, or that DIY to next and you're lifecycle of help sort follow-up this of that consumer morning, year. the of the months come of of stage, of types new into on certain in the and you couple I extent could early later, If understand earlier maybe just confidence evaluation you DIY, and doing different projects. that a can sustainability projects, the the seeing cohort purchasing evolving of product the noticing you're they're the everyone. customer, is that seeing a that that people the types now trends at were there's of any mix in were your sort sort six doing

Frank Sullivan

Sure. Craftsman Both neither base and of had that significantly customers, in some larger organic paint circumstances our type same more big small skills we've their finishes, certainly projects. is stains businesses wood robust business. and terms experienced we've what in accomplished and could our pretty major what example our of of own. normal on requires project of from good expanded ways in DIYers a are has our we as growth a the heard And And customers that confident have and the that

impacted The that I so that And Pro. this area that one And pretty to was we was grow stay. can the negatively from is here we're there. meaningfully all base confident larger think

and And residences so and to paints our caulks repair on kind products like to access most to sealants small our XX% impact closer XX% residences, project, gaining products, as or But that and restoration. of applied XX% from inhibited project of of might been be had Rust-Oleum primers. the resins patch small contractors well as our XX% of its DAP cleaner Pro where some or to categories. in And are of interior commercial

we behind business COVID last I'll been we've make confidence people that So the testing. back comment then in And see are new that the categories more us. once have putting pandemic strongly coming

which have ongoing in programs We are test new paint. to architectural different opportunities, had three still

And all about this and through we're you so together, business consumer put pretty period. bullish pandemic that our

Vincent Andrews

just could I if ask Okay, follow-up a alley acquisition. on the

projected? helpful. and proceeding that better you can on color from just synergy mentioned will perspective, top the provide the than both or incremental Is be it's You that any line

Frank Sullivan

it's on to line the Post what businesses Yes, immediate acquired. value we're that bring able with top do RPM MAP that Growth to some business. we both to more to and

manufacturing operations expansion, in manufacturing, working with have been Our some automation folks of years X and capacity look a also forward Ali for on and terms efficiency improvements. some

ability anybody and opportunities Ali DIY we're marketing take So I advantage folks in across folks, as of the And marry exciting about entire the is and Rust-Oleum and the terms approaches. as excited the to of up new sales with believe category. expertise as that. Rust-Oleum, pretty any the space in at which marketing It's sales good

Vincent Andrews

sorry I'm and loss. for you, Thank your

Frank Sullivan

you. Thank

Operator

next Kevin McCarthy comes Research. Vertical question Your with from

open. line is Your

Frank Sullivan

Kevin. Good morning,

Kevin McCarthy

you're it would up, do costs the Frank, pass described, and those then looking any most were along in confident increases and morning. you challenging think come And you ahead where raw to Good fiscal more ability could the Yes. do businesses as say where you you be quarter. -- have second as confident material declined price

Frank Sullivan

have well. from benefits period as is across any going Sure. not the in We've had consolidated meaningful had -We price at activity, our anywhere quite givebacks of RPM. price which deflation that of benefited purchasing a we've as category well

we've price some very aren't In had increases, that price terms unique whole and enough the of some modest needle. move very categories increases, to big

It's in especially epoxies, how businesses mind for we silicones, one of we months. forward, our and likely accounting. in as the things spring the metal the that the acetone, product an Going I worth areas summer, few price speak driving price as well it of most to increases, keeping be a of relates in coming end perspective, particularly on of time. are cans, increases number categories first as transpire categories number are are U.S depending as mentioned, number a the RPM from to chemical of across in areas, packaging, meet on a were the in as this the FIFO that seeing

increases of categories, versus others market. So, a terms days in across lot the following the impact in both these ability lead XX XX happening hit the our peers. for of we have in to price probably And but some our wouldn't what's of to also P&L

Kevin McCarthy

out any Frank then And along. be may I that ability Are I guess is increases, already there and to get trying example? Okay. terms what your you was out raise customers you to that would areas with pass for market in in at of, the price your where to call proposed

Frank Sullivan

past, ultimately experienced we've margin which side But the on throughout businesses. changes price delay don't see those it's is do always terms we that I appropriately businesses of XX-month where that And any I to decades today. the see price both we our in ability on just DIY the sit anything in the have typically industrial pass on and been side, And passed that consistent what DIY that our Yes, anticipate in X think categories. in with on on a a increases you be can not is with in have because price. will lag tightened product in marketplace few our price of plus with we I period. ability pass businesses, of expansion for timely timing to relatively And in some the consumer dynamics, and future. the our our lag price our consumer to in increases this

Kevin McCarthy

you Thank what's you would for that. And on what for In impact could recorder what I then need is margins? a secondly, replenish to Frank, may. sales the and the that And and door have weak that business? normally seasonally inventory level of if consumer,

Frank Sullivan

a to news dollars, which consumer, performance consumer tens strong good certainly in as coming well for referenced of dollars of Rusty millions third millions strong of on. up inventory and QX anticipate we COVID everybody. tens as really catch story that's Sure. and earlier, some capital into out And think quarters. well. I our But of of continued we performance significant expect I low referenced working would as have is, of the there quarter of would impact there impact unless type

Kevin McCarthy

to the comments. in Thanks family for the and And best the all you Frank XXXX.

Frank Sullivan

Thanks, Kevin.

Operator

Your next with question comes Josh UBS. Spector from

line Your is open.

Frank Sullivan

Good morning.

Josh Spector

Hey, good morning. Thanks for taking my question.

quarter from the at in the quickly. impact hurricane on able Just all? you performance top question line bottom and to a the prior size a and follow-up Are

Frank Sullivan

don't I might them. details. comment we have have is that something I Well, you able be to on? that those Rusty, don't know

Rusty Gordon

Yes.

expenses, of the or expenses. through In Charles few it quarter. Lake of terms terms was from in there three a sale, hurricanes And either in second that nearby was right unusual pass disruption million of dollars

that plant, in our did just customers but not the disrupt Gulf So region. our

there some the sales was definitely PCG. into played at yes, that So, you impact saw decline

Frank Sullivan

benefits those the why quarter. challenged comments, actually, way. pronounced. circumstantial despite positive very to see a I segment you'll pretty end my MAP And think the And that's in on Yes, markets, in in the was it Growth mentioned the I coming to quarters the PCG

Josh Spector

trying rate to and Okay. is the a quarter in exit the was over what what XX% declines normalized of next guess performance of way start or like, around the as two at was the about quarters? about look I'm demand to couple think next think recovery Is you Yes, think we this quarters. the there both both last about in I had last -- to in the

Frank Sullivan

they'll our industry amount and easier you'll there's because pent-up maintenance of the results into recovery, annualizing any a be be comps. spend think think the economic as I But we with 'XX I significant positive beneficiaries heavy that in of. get fiscal part do will see

Josh Spector

Okay. Thanks that. for

Frank Sullivan

what comment you of make think QX last the I I'll that guess expect is, out I the segment, QX, of impact MAP look positive we a if And and of sense in at you'll better get Growth, when have And profile sales from what results positive would a sense leverage continue be we you of down or better year-over-year even of to it'll a type margin flat. as revenues to give return.

Josh Spector

That's just how much run be on realize. this fiscal your to rate I in Growth And helpful. I expect Are to target here. mean, the Okay. and can at versus quick realized savings one, savings to one that quantify 'XX you you fiscal reiterated point? last I able just savings expect 'XX you if to appreciate. you MAP

Frank Sullivan

to we're pandemic. to been $XXX that into be benefit timely I'll Rusty total COVID excess the get activities, 'XX in to defer that that Again, we're as than confident highly to confident from has fiscal But our ability million. by we to highly that that impacted well other and say will program some execute continue Growth of MAP our the of savings

Rusty Gordon

or $XXX savings we Josh, Again, MAP said FY more to 'XX. as on we favorably million of call, the impact last expect

Josh Spector

Thank Okay. you.

Rusty Gordon

Sure.

Operator

next Viswanathan with question comes Arun from Your Capital. RBC

open. Your line is

Frank Sullivan

Arun. morning, Good

Arun Viswanathan

my Good for Great. I as consumer performance. I condolences first Thanks you taking well. Frank. ask the my about to segment, the morning, And to guess just question. margin wanted

in outs levels impacted Consumer performance? it, percent. about think about of you Do 'XX, that by close potentially quarters? those QX margin on XXX you margins how the subsequent in some that If the lot had basis a kind characterize feel Obviously, higher but drop in and segment off you was going to of 'XX to to there, you QX recovering of you stock kind point EBIT would see there's do

Frank Sullivan

I first only our address we're highs But fixed you and if see broadly obviously, significant our to next from a to Consumer look all then expense. absolutely which that our there's our quarter and quarter can we are seasonal expansion. level subsequent and less of continuing and are businesses, in businesses are some year-over-year, detail. Sure. margin particularly of second as our meaningfully third into fourth and quarter one quarter, quarter get I revenues, But in the it address think Rusty seasonal. And

continued margin quarters we to quarter. think I what's detail subsequent we've to over Rusty the year-over-year differential continue. driving and But margin experience more significant that a to could add improvement And expect that's would little So that.

Rusty Gordon

as Frank. correct, typically Yes, they fall, get fall months as do. into off That's we the sales Yes. normally cooler in

But stronger is QX, in I would costs, the XXX So, QX had more leverage sales when doing look and think points in basis so up EBIT QX. I we're naturally to on higher lead year-over-year, margin fact and pretty Consumers well. Arun, in that we fixed

Arun Viswanathan

you investments construction Thanks portfolio or as you coming to opportunities to could there some inorganic share described And alluded to to products, is that capture guys your that Do well? you've additions way Agreed. for gain make share. capitalize you on you that these believe then potential potentially detail. on have to through your of that,

Frank Sullivan

the So we've can through that capturing that I share believe we activities and are taken.

may a comprehensive number can fundamentally our product what groups our there businesses more But speak, lines category, base. we basis but products opportunities four in and be completely going consolidated that from As broader across distribution group. the acquire we will into regular construction expand segments, on opportunities happened that by that former in we into a inorganic pretty groups appear, six four -- a have more of and

basis Tremco across sealants, Tremco instance, maybe as business operated units, Nudura or past. are pulling FACADE we on and five way we Construction growth is that and and six in for market opening the an North different us the organized not are the we now driving experiencing in Europe operating the is Dryvit with so, together for were a approaching And that the we America in restoration up the Products integrated and opportunities businesses organic globe Group. And

reorganizing Products Tremco to a perspective integrated So integrated billion market basis. the from construction biggest with is pretty part has into group, more $X the on which a of do it products a Group Construction

the We it's have business something units accentuate will there into driving continue share add that more to leadership take we to acquisition excited do inorganic to share, will opportunities it's But those as really different There gains not growth. and mixtures need about. organic, to approach a shifting there. market marketplace, we're keep exceptional And we well. integrated be whether market be in from organic

Arun Viswanathan

quickly real lastly the then on raw And that. material for thanks front. Okay,

you could any or categories, disruptions that MMA about? you okay, you're have where you foresee material supply of overall inventory in with the You face procurement? things epoxies, level potentially availability Or your that raw chain feel and/or specifically concerned issues do some like

Frank Sullivan

metal in and last particularly months in quarters cans. certain areas, challenges packaging over have we facings So the and few

We those terms lot of some challenges up. are in in faced categories have A of being silicones. cleaned availability

going forward I of couple last over the the So have categories. as we those think we've quarters concerns don't same had in

categories, a us happened in about in certainly I that's for and And think so areas observant particularly packaging couple silicones. an comment what's some

Arun Viswanathan

the Good Great, in quarter. thank you. luck

Frank Sullivan

you. Thank

Rusty Gordon

Thank you.

Operator

with from question next comes Harrison Mike Seaport Global. Your

Your line is open.

Frank Sullivan

Hi, Mike.

Mike Harrison

our and your you Frank. Thank to and family, you condolences

Frank Sullivan

Thanks.

Mike Harrison

change and give you that there management the business? a processes new results mentioned You ideas, development. have new the occurred talked of made little your more some in that sustainability what and been color improving business Specialty Can segment changes around on about in in confidence

Frank Sullivan

Sure.

years. new that have charge of our he R&D wood million $XX as our that started and now grow leader by Ronnie nearly and two Holman job. great We of in this just about $XXX segment who's a years done leader acquired businesses OEM helped coatings probably larger businesses charge for in group. of coatings is a Ronnie group And been a who's in effort million ago, a was RPM XX to

We leadership, new have the Day-Glo.

Mantrose-Haeuser our at new have We coming leadership business.

Valvtect across Pettit there. We new have leadership about a and Marine reorganized happening what's and our excited really

perspective, accounting take And away that leaders administrative have only not are so those functions of there's business essentially leadership growth. a consolidated administration from on but from there a refocused cost changes that been number

consultants. something teams Growth also MAP father and today. changed work use teams, sizing consultants we're the business specialty we have done outside We've we opportunities. in of And both that on and and to the hired I of doing our have RPM. success, My because in Day-Glo mentality market team program. good our past our to mentioned a that work We some would not not food and with McKinsey with market his focused Mantrose-Haeuser the lot partner Jim Karman just Tom We at our had decades, for did

to MAP happening. meaningfully our our culture excited think there the on are was thing did that a not that sustaining it as focusing businesses to changes shift in and I I on growth implementing were change our well impact picture, most to Growth in do to be to only efficiency, but that really negatively focused as that have culture. to mentioned the So efficiencies in with goal primary in not Growth of RPM And get MAP but it entrepreneurial way our growth, big we're the terms about earlier cultural

RPM, And been Group. across Specialty I going to and so paying Construction in and are people Products that, Products dividends Group, and coming far, the to have see particularly our it's think quarters in the particularly we do in that able

Mike Harrison

All the with we your in right. bottom efforts. progress struggling those or changes the then last into XXXX? online some demand That's better made of sales was leverage That online you've about you wanted an portal, that season. line very was And to get online the helpful. if to I busier also to kind sales as that ask were wondering in sales enable potential should you season area

Frank Sullivan

have Rusty dramatically. ability may more But improvement percentage improvement, box more Sure. seen has in have of service base. gains, and online we like could traditional our And customers our again, significant and some small I ordering customers a and improved to Consumer our detail. they're growth our big on you, tell ability in meaningful some to And group, particularly but Amazon. huge online in fulfill

Rusty Gordon

question And online perceptive, the a team because our in your but year. growth distribution. close our double, up quite lot very is probably focusing to this of is XX% we area Yes, it's are improvement sales in not initiatives of operating

to this continue we're has improve to So I the right, going think you're landscape that year, shifted. because

Mike Harrison

much. very All right. Thanks

Frank Sullivan

you. Thank

Operator

Fargo. Sison Mike from comes question next Your with Wells

open. is line Your

Frank Sullivan

Hey, Michael.

Michael Sison

the say guys. during I to you with to and as well. Hey, those were enjoyed And condolences fun days wanted meetings. Tom just fall all back, then My meeting always Frank

Frank Sullivan

Yes. Thanks lot. a

Michael Sison

one quick But question. just

cash flow looks some the free of flow million like the 'XX year. $XXX of you'll and in generate half second was it half cash first above free The

So is run potential, on flow cash this ongoing of sort right can RPM free generate forward? kind of basis type the $XXX that an plus going rate million

Frank Sullivan

go-forward as to excited it both that. And a requirements level terms turn again of and we cash a about picture well I we're But generation, capital have of our big margin think on big Yes, RPM picture, as details working over I'll new like in to basis Rusty. profiles. gotten

'XX beyond. as more Rusty details it can think provide I relates to and fiscal

Rusty Gordon

our target said And months. I XX last you for million, the from might on over running million $XXX was our Day, that Investor remember if believe. of showed cash $XXX trailing months, slide you Yes, operations we're a operations, the we’ve XX over flow Sure. Mike from look cash

we're that. So to pretty close

and the spending, spending. over dividend of If year you capital million the this we'll $XXX look do capital at

I dividend think is pushing the close $XXX million. to

It's cash guide answer take free as because your $XXX to we're flow. flow, last months of is the hard the XX normal to over the of what on million certainly any yes, at cash So running, pandemic. we're question for rate free

including government tax. some payroll $XX deferred payments have we about for example, For the million,

businesses, We because of as down inventories, drawn suffering discussed, have the are other we but pandemic.

use to months tracking to we guide, target. tough be towards appear it's XX So last a as that MAP but the

Michael Sison

Right. Thank you.

Frank Sullivan

Mike. Thanks,

Operator

Bank with Your next question America. comes Byrne of from Steve

open. is line Your

Frank Sullivan

Good morning, Steve.

Steve Byrne

Can much Yes. cuts might the how of reverse? portion that discretionary quantify Thank were in you. spending and quarter you what

Frank Sullivan

and see our you'll we meaningful pandemic Yes, I'll our had in will and tell picture, to defer of promotion can the spending have normal a spend that you fourth with of is guidance, detail But spring. in that reductions that advertising Rusty big more part some associated quarter again. Consumer and come in back. I in in a discretionary terms third the that's this Group

originally level probably in MAP was will of terms Growth coming be just our of targeted Growth. and spend while will coinciding be kind back outlook. of of businesses, of to it already that where with even number that's part to a our it across there a So lucky, part discretionary a And our activities, of some MAP because return, new of in will below we

Rusty Gordon

travel of said, around probably with conferencing. video somewhere without saving things the of quarter And finding biggest we're we terms a we're costs. costs, Frank in lot in the travel so that million $XX we're can a area today, Yes, accomplish like of travel with of in world standard new north

So I going talked that's of don't about year. costs down, to think doctor, because spring, the went back. In this will come normal that medical the to we necessarily all been nobody back

So be that's interested you area another might in.

Steve Byrne

costs? of just Growth? being, maybe on how fronts. you much from couple into so you Growth say you the say what that was brought so to Would much or One will achieved how wanted in up of drill a to material million that MAP savings lower risen you've to can $XXX that raw MAP that far target from And since response, of

Frank Sullivan

was know, this. certainly me say, the can and is exceeded then lower with centralized And the material our I exceed balances that in expectations. $XX part -- category. Rusty $XX has efficiency is $XXX would our we've other raw on million between check activities, will and our original and plant don't of raws from commented combination million specific in function for million was that or area maybe consolidation that costs and target manufacturing a procurement gains lower $XX million I bucks operations that the on

Rusty Gordon

$XXX be of might Yes, the assumption to I MAP, and savings cycle, million believe, said, the question be cycle. would X think commodity about $XX assumed we the I commodity we in procurement and and related million Wave

Steve Byrne

all right to That seem Rusty? you,

Rusty Gordon

Yep. Yep.

Steve Byrne

Frank. you, for one one just last And then

to have MAP plan, might you reasonable think this initiatives? close that Growth from new it As this anything productivity path is you initiative, out might introduce down a the that next you to you learned initiative kind that of lead of

Frank Sullivan

guidance to MAP specifics. strategic a doing is partner tracker. in we'll front more to savings be was to been with what outlook, a able Growth MAP of MAP kind little call a a we'll we're in the be to came to MAP MPST, think when as and are stay. what the manufacturing better longer sales post I out In in of we've -- to detailed, suppliers And about. very be which put something global talk But are MS ability to XXX weeds. large operations, able MPGT, element that that what the talk sorry, We'll are we to elements of Sure. procedures, MPGT, on 'XX just The of here I'm position which the -- Growth is Growth that project which program is maybe well the our address fiscal term some a July, about we and for clearly to but there

this across about of disciplines And in track it's efficiency be having literally summer. and of to doing so those that process we'll to what of procurement savings been into taking of we're SG&A and the and a across more thousands able as some terms able we've categories well. talk And we're both growth impact

Steve Byrne

good. Very you. Thank

Frank Sullivan

you. Thank

Operator

question comes Silke from And Kueck JPMorgan. your last with

Your line open. is

Frank Sullivan

Silke. morning, Good

Silke Kueck

remember morning. Tom good old Sullivan. I'm Hi, to also enough

so, his And to to sorry about I'm got glad know I I'm hear passing. him. But

Frank Sullivan

much. very you Thank

Silke Kueck

benefit the have there and Construction I the Consumer Consumer Or In in sales think any the on two ballpark that's quantify segment there -- the million to way it? have of of terms, something in segment, COVID-related a the like quarter? $XX questions. one way mid-single or to been just One segment. Whether digit? may is is that's something what that's about

Frank Sullivan

better has Rusty I organic might the can I a you range. Consumer solid is X% historically do. growth in or answer tell thing The have than X% been only in

levels. in clearly, first the quarter growth to historic mid-teens relative QX extraordinary XX% organic organic So in in a is growth

Rusty Gordon

store think think They've look is over base. Lowe's to about of numbers Silke, Yes, And and I to you out normalized XX%. it, at compare the the to way that more running Home comp could best been Depot. sales

that the to it. think best way about probably be think would I

Silke Kueck

-- -- like maybe know it, business U.S. Right. And X% in down of Lowe's calendar similar market it the RPM calendar a view Is specifically? Product that basis, a I ahead question way too I've is had that the is like thinking in is home have improvement and sort on Consumer a leads the you on and X% the it's alignment don't their for announced, XXXX. or -- Consumer. I see year to like That -- follow-up think so, about that

Frank Sullivan

Yes.

that I see the we're rates or is referenced, seeing we all, it. how months X the of part 'XX. And then not year. calendar X growth for our We double-digit of customer is universal or the would not see base. calendar first you continued Lowe's in positive balance expect And of to first that to First from see growth the perspective, across of expect what

see that customers significant lower some at expansion in have albeit continued market, pace. a We the DIY

Silke Kueck

is improvement as the And And the segment typically the you pointed quarter my out. quarter with in -- program the sales slow. pretty relatively has are comparisons margin the the MAP helpful. Construction question Construction Okay, largest the been segment though fourth even segment the high and for is growth been on that Construction easy the has the

good of you sudden growth? like do volume had XX% And a something that so, you are approach if that the business think quarter can margins that all in like fourth

Frank Sullivan

that reasons. providing comps, not a April going on on to Sure. But and some dodge I'm to April. particularly going hard secondly, we're We'll for May. to add we two Number so our fourth -- give should We really tell. in you had in it's one, question do details easier really quarter. be

which organic expect the coming. is that in line you Construction mid-single to Group when of our talking post Products out growth the in As pretty leverage is this to continue, bottom that's digits, I see extraordinary. quarter, leverage what at in And the least about, would recovery directionally start you're they to

Silke Kueck

very Thanks Okay. much.

Frank Sullivan

Silke. Thanks,

Operator

closing to remarks. Mr. turn call the for And to now back like Sullivan over I'd

Frank Sullivan

you. Thank

efficiency. focused used their learned growth Growth always, MAP both. the we operate that in As we we've solutions learned our over meet through the remain of And our hard can long-term appreciate our that the for communities dedication in decades over also greatly our the businesses, develop that continued I'm and around and serve you. in generating grateful on efforts is safely customer's new to for shareholders We that investment we their work market are RPM. needs, It's for operate. world. to value found associates We what innovative which do ways I

do to continue to both. expect We

look results your We healthy you I Thank investment you and quarter a Year. to fiscal Finally, to call, for our conference updating call XXXX wish for third a happy joining day. families great April. in Have on in this you the on and New RPM and your morning. everyone our forward

Operator

today's concludes call. conference This

disconnect. now may You

RPM International (RPM) 6 Jan 212021 Q2 Earnings call transcript