RPM - Earnings call transcript Q4 2021

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Operator

Welcome to RPM International’s Conference Call for the Fiscal 2021 Fourth Quarter and Year End. 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 to call, financial conference this maybe non-GAAP made measures. During on non-GAAP you directly has measures in assist terms, comparable RPM understanding financial most To the these RPM website. to posted GAAP the reconciliations Please ask to Instructions] be questions. note analysts financial [Operator will only permitted that RPM’s time, to would call I Mr. CEO, this like to and At the turn now over Chairman Frank Sullivan, for opening remarks. Please go ahead, sir.

Frank Sullivan

our provide Growth conclude ended for the Good and me MAP on call results International Officer XX, details call of for our supports and fourth improvement Vice review for then operating Global our completion Rusty on RPM will the with With welcome fiscal XXXX. On who Inc. Treasury, Investor and will Relations successful President Chief Ratajczak, quarter to year the Thank our Tax Matt and fiscal some detail to morning quarter on activities. fourth the you, our are May of RPM’s Angelica. comments will XXXX. program. in Rusty first Financial then full XXXX half Vice of Matt outlook I investor today’s today’s and our Gordon, President call,

on thought point On We was by high select today. rising to will average pleased some levels of raw material wrong your April from that XXX% the to at answer wrong have and costs price. and of referenced April call way high-teens. costs the spikes Raw then increased pressure to have call, availability we investor now to better in single-digits give would our in customers material gotten we to back inflation questions. today, P&L That be our some across our structurally with Summing XXX%.

QX having In impacting in in material in cost from across successful QX this estimated this results raw year. we anticipate our XXXX than year raw notwithstanding, million QX, last $XXX we These an and impact meet operating to MAP critical our raw lost thanks program, our more revenue. improvement demand. availability market material challenges QX negatively production in our to days us It’s certain for importantly, to year. the more availability strong generated material fiscal had us produce More cost shutdowns and Growth ability we COVID of are to industry shortages likely

to XX.X%, Our full a increased EBIT and year million record. adjusted EBIT basis cash our to also margin $XXX.X record up adjusted Operating consolidated XX% XXX which XX.X%. sales increased was billion, XX% by and EBIT $X.X climbed our climbed to was nearly a margin flow points,

principal operating of has that point, culture quickly, Growth more MS-XXX MAP program better strong growth. plan, team been our disruptions team to cost Our the disciplines caused where MAP continuous of a required system, we of selected level performance. approach has successful of the and improvement it to the was manufacturing a manufacturing to take to more This financial lasting of light Growth the the across manufacturing, effectively incredible in is produce a driver the created formed products areas true recognized The by us especially that business and improvement had of more organization. this the to the In is excellence COVID supply recently dedication to allowing launched which chain sustainably. our challenges, the RPM in by pandemic center-led next center-led a At unprecedented RPM worldwide. program’s reached and the testament resilience associates of more and onset, we execution

XX production manufacturing footprint global our to advantageous reduced more by we addition, facilities, strategically plants. In consolidating

Our original XX by target slowed the were pandemic. was efforts consolidation plants, but COVID

year. in target original the exceed to expect coming We the

supplier have us across has created control just better reduce and with millions have current much consolidated through raw and negotiated our These position savings. to ago. materials raw dollars secure the longer supplier contracts, procurement payment X improved a our With created center-led base years necessary a would helped stronger cost team than initiatives terms term we operating also been that costs of material has in We spending are material working in we partnerships, companies, supply capital. shortages

Additionally, of to we to processes efficient Similar took Through X functions. more many steps ERP we we infrastructure our realignment, migrated of our initiatives significant as group-level reduced administrative IT developed platforms. locations, X in effective consolidated improved of costs. undertaken our and our XX organization accounting have were streamline XX% accounting financial controls, and

and number reduced we Additionally, the the and platforms hardware data creating we have centralized of cloud number systems for decision-making. a by of are to shifting manage we centers data-driven

of course billion and through MAP dividends a Growth shareholders combination of the capital have the share program, $X.X cash to to repurchases. we X-year of Over returned

Aside MAP together exceeded our Growth margin program, legacy has which lasting operating from improvement work in change profile and to the RPM. cash the people is reflected over revolutionary plan as return peer a of stronger our generated improved to generation, profit total how of at cumulative the the X the years MAP by RPM, Growth significantly in group

is today as better us allowing broader resources. company to leadership a whole, operating leverage with managing a Our RPM view of

the our associates operating The Growth revenues industry grow the workers more our continue averages to entrepreneurial Another distribution who behind Perhaps the MAP above unique permanent and COVID kept by MAP maintain the developed disciplines to been evidenced ability change culture particularly fact real continue our that has our manufacturing has growth-oriented to efficiency pandemic. to to generate program. future. our were flow heroes in throughout we into operating been frontline improvements the profitability, at our significant will success that worldwide, centers operational Growth the during cash or and well

debt one XXXX. to the passed gratitude to of away my friend prematurely Growth RPM’s Steve operating MAP Knoop, and a and owe in great leaders, also program architect of good We the is of who

culture. Procurement; recognize leadership Chief an these Vice strong and delivering Additionally, and into continuous Operations with focus Operations, the Kinser, I that President of President focus on intense to and to Tim integral Hyde, efficiency and were executed and our Sullivan, Gordy President Mike would operating results like a permanent of instilling Officer; Operations improvement Vice of successfully who Manufacturing Restructuring Vice program

reached have which some there expect in MAP from MAP to during million runoff Growth we will fiscal the ‘XX, savings. the Growth capture program approximately be While to to we incremental XXXX conclusion, in $XX

We lessons leveraging a learned chart the for will this also be XXXX. program to from course

conjunction program months, our and We EBIT be like to next turn more quarters. we call the I results to now about operating X in MAP margin who will progress long-term on detail. be to over a leaders. our working would will coming information our Over a sharing in remain the our XX% program Matt discuss Ratajczak, fully XX achieving X.X committed of a with the quarter to in goal fourth we for new will

Matt Ratajczak

will Thanks, my as-adjusted Frank everyone. and on basis. mind in good comments be morning an that Please keep

consolidated growth quarter, For to and ago sales X.X%, billion, fourth an increase tailwinds. XX.X% was the billion to generated we in compared the the translation result net period. $X.XX year XX.X% due foreign X.X% of of $X.XX acquisitions organic, currency Sales of reported the recent

most thanks center-led pleased but these our line supply chain been of strong and to fiscal $X.XX share they very and material we $X.XX with increased It Adjusted needed. team, improved challenging, top the earnings light resources procurement difficulties, to are disruptions. XXXX in XX.X% collaboration has to internal quarter. diluted growth shortages internal in get been to compared We of this have raw leveraging per materials are fourth where managing

Keep pandemic’s of expenses, period, by adjusted other XX.X%. quarter reversals created a year was the the the EBIT our was $XXX.X ago segment $XXX.X which compared which medical an and incentive onset, profit to factors. Our last that extraordinary million in impacted where increase lower non-operating to year’s situation fourth million during mind reported due was

as tied other the the interruptions performance. improved well by hand, we during experienced to costs insurance fourth higher storm due quarter, winter as higher incentives On and this to created hurricanes year’s business Uri

If impact growth XX.X% availability segments and sales and EBIT from of non-operating segment generated pressures four margin as impressive they growth combined challenges. you adjusted XX.X% years, of exclude of both operating supply the our overcame our

sales Adjusted record million MAP during bottom U.S. quarter, low Nudura higher Construction fourth our an The from Group the of was benefits to America was European increase EBIT our was results. $XXX.X by currency which foreign for levels and quarter, year maintenance structural the at Demand to million. due million $XX.X $XXX.X methods. net were as XXXX million during sales volume record cost, commercial more XX.X% and growth our fiscal so our as program Products Growth adjusted provided leveraging, This the of EBIT and way that of performance XX.X% generated repair prices. reported in which compared segment Leading the Products of of even XX.X%. North for a to an the in Organic businesses to remained Group insulated environmental sales. products as ago savings repair of was a quarter net markets. and the building roofing to and Turning and generated in line concrete installed represents X.X%. the in concrete a addition increase during for selling compared tailwind admixtures period. international fiscal to segment relatively now Construction, were XXXX compared activity businesses, Construction elevated record the traditional $XXX.X accelerated our provided and boosted materials all record fourth forms our well the to quarter translation

for also acquisitions Our segment’s which structures were of in and to million the quarter, increase repair sales and was results. contributed and XX.X% into $XXX.X a Performance the ago. demand XX.X% Coatings net year financial reported the The which release U.S. increased XXXX fiscal X.X%. strong sales from pent-up abroad, compared of an $XXX.X of maintenance has leveraged Organic the benefited Group million during the fourth construction,

been higher products the inflation. and American to because strength well during increased $XX million exposure markets fiscal to well through to volumes, were and helped the on as and as businesses businesses. pricing, as increased compared recovery offset bridge by and oil Adjusted a access greater MAP had industry to Growth $XX.X of North highway year Group Segment material EBIT its to gas particularly flooring This Foreign the period, commercial which segment was the international currency its in its as challenged products. facility to an the systems XXXX earnings Points sales program providing of representing during XX.X%. ago the reliance quarter international due translation of raw Performance fourth in sales and its increase greater apply X.X%. pandemic of million Coatings

we record to $XXX.X of sales of which in quarter million to Organic during an reported of decreased increase against Consumer in of sales pandemic. net beginning Our the $XXX.X million comped compared the was this of the X.X% XXXX, XXXX. the quarter of since net the Group contributed Acquisitions in fiscal fiscal at fourth fourth quarter the X.X% reported surge sales X% first demand sales.

translation increased currency sales by X%. Foreign

three quarters During and by products of grown rapidly the the earnings consumers DIY for this our were during fiscal the first improvement sales Consumer year, pandemic. extraordinary who demand homebound have as home it served Group

million of quarter were during As improvement became during adjusted vaccinated sales they orders foreign XXXX Fiscal more Organic X%. in translation Growth XX.X% reported though while partially million compared international fiscal increased compared longer sales programs promote home net the and some still and $XXX.X net EBIT fourth new activity of remain XX.X%, products. fourth to MAP no to from offset DIY XXXX, sales to acquisitions advertising were quarter pace fiscal was torrid sales increases which $XXX.X the many pace their of year adjusted of contributed Helping Americans which savings of Products slow period. $XX.X In fourth have during began remained increased the the reported The to quarter. XX.X% decrease currency price increased Specialty to invested Group million, to cost pre-pandemic the a homes, the the program, of quite were higher of prior selling to and than of XXXX levels. place, in quarter, $XXX.X stay-at-home sales its confined our markets, to which pressures X.X% from record strong. by million in sales EBIT

For of its with have quarters, the sequentially Its management operating period. a million pharmaceuticals million those our compared row, record fiscal nearly Products XXX% and wood, development prior changes, the three generated second past recreational results for results increased XXXX in an business of line watercraft, four including Adjusted the as the driven and in growth and $X.X bottom in organic were well OEM conditions. and food providing results Its $XX.X fourth top as quarter, our Specialty by Group equipment, and quarter of year market restoration among recent improved initiatives all by the cleaning excellent increase segments. a over equipment coatings highest EBIT EBIT to chemicals. improving was record businesses, adjusted

Lastly, I our in have a liquidity. few comments

available from flow to initiatives million. from $X.XX cash a year record $XXX.X to record end, due XXXX improvement of management fiscal of cash continued as liquidity MAP Growth and was billion operations, our margin last mentioned, to Our capital credit. working $X.XX included program. At Frank in million million year’s primarily our This is billion good $XXX.X and committed compared was total and $XXX.X

we year our call a May sheet, Total And through the debt stock With end will a Frank calculated advertising, more was are XXXX. our flow ago. debt. plus over as as investing and bank of to I This ratio, of outlook. XX, improvement operating of some $X.XX was the rewarding the our our healthy leverage net Our we a Rusty repurchased shareholders we Since acquisitions, record at our cash of for compared and as billion XX turn XXXX on fiscal comments to fourth including initiatives, the are X.XX balance beginning cash continue approximately was program. to mentioned, improvements million in dividend now aggressively our billion repurchase X.XX year stock. quarter, we of growth also an as $X.XX compared use under ago. to to reduce agreements,

Rusty Gordon

Matt. Thanks,

As discussed our various and macroeconomic of on quarter, factors creating are some product categories. supply inflationary last we pressures

As by in teens. be inflation of expect will which averaging FIFO XXXX we from upper our impact fiscal is half significantly the a throughout our lag result the our accounting currently methodology, performance P&L, that impacted first

with savings which We these continue costs increases commensurate incremental increased selling implement we Growth and are will as working necessary. to to to MAP price offset

our key material ability is demand. components importantly, raw impacting negatively More meet the limited of availability certain to

are Our half our most the first factors of in margins this Consumer fiscal in compressing challenge will significant for be Several XXXX segment. Group.

First, place spring have selling negotiations then. further and rapidly took material price since risen last costs

materials, shortages by productivity. due of or led Secondly, declared trucking severely which majeure supply insufficient raw plant of and has are low to force to constrained suppliers, shutdowns several intermittent being

Consumer expense cutting with margin half to margins. improve Lastly, several To service customers to Group the additional these Group Consumer has levels is in costs working price at secure the address outsourced production cases first of and challenges, the increases.

challenges three that it quarter XXXX. We line continue bottom top fiscal of expect the our fourth carry from other the segments half will successfully their and momentum supply first to manage and robust into

we creating QX low Turning sales of sales mid QX the XXXX increase of fiscal comparison. now to year-over-year XXXX, difficult to to X%, expect grew in consolidated to single-digits a compared when fiscal

Performance factors, low generate in sales is Group assume or economies Group increases Additionally, improve. double-digit supply in high comparisons was to XX%. continue double-digits. and year in some increases. continue constraints in Group Products organic Products We as projections our expected Group to our Coatings double-digits growth have anticipate when slowed prior up to Sales product these to that our sales are to experience the continues decline generate it global sales the Consumer The to categories. expected single growth production Specialty difficult These three our Despite four segments. is of Construction revenue to expected

to However, indicating be have that fiscal above sales since the the user base the Group’s products XXXX then. our expanded are we record, Consumer QX for expected pre-pandemic

EBIT expected prior adjusted our year’s four versus Group. XX% QX exception in Consumer was XX%. nearly anticipated on the in is expect consolidated quarter XX% decrease being again QX when adjusted to one decline our grow comparison EBIT the first to segments, to segment, a Based year three our last this difficult We adjusted of EBIT with our up in

to we XXXX, performance exception QX fiscal of Consumer expect with the Moving the Group. of again good

EBIT in will decline result adjusted that As were the anticipated by up in XX% to EBIT when XX%. a in earlier, against three EBIT significant are offset EBIT another difficult After pre-pandemic. to QX expect up our leading consolidated emerge we discussed other adjusted broader growth be comparison we a comparisons segments, when in anticipate being difficult sales the challenges, had year Group adjusted decline prior up was consumer in and distribution segment combined the the this through mostly We year and nearly challenges XX%. adjusted consolidated user to was flat chain than prior versus EBIT Consumer temporary it roughly with the work has that supply base larger

other of segments, payoff concludes additional This questions. expected recent Coatings in results pleased be Group. to catch-up at to take Group strategic Group Products we three are Products Specialty maintenance and business due now our and will continuing our For and comments to driving Construction continue our your changes good to our deferred formal Performance the

Operator

[Operator BMO from from McNulty John Instructions] the Our comes first question line Capital Markets. of

Your is line open. now

John McNulty

morning. good Yes,

Frank Sullivan

morning, Good John.

John McNulty

Frank. question. morning, Thanks taking Good for my

timing So for I one that be can how terms kind about of that of should kind these that the of to through which implement of level the each may raw the the kind would off? just us the you you in need of you we just hope of can increases materials measure some pricing so timing thinking they walk the and of when and price be guess versus of first divisions, we of kind

Frank Sullivan

Sure.

with point. this lot And businesses. will of the across X% point are based activity would next month X% QX, we in was anticipate effect X% we upon price and are in pricing upon in price of QX. of increase the to that’s we range, a various the at increases forward our So in price And different effect this the effect going based negotiated this about QX additional effectiveness or that the of the that in expect timing that on average, spring, in be at increases

I are enacted. increases already think, what’s additional as October. the we we in price we QX other RPM results report when Consumer on results pursuing been of as will particular top report, in in well obviously, But parts those of in

John McNulty

we deal the trying Got it. guess, construction of at that I look and doing it admittedly, share growth pretty is business That’s a versus when is about weird is lot back much should about there to helpful. then you’ve just what to And think been there but we’re coming core thinking comps gains a of the how the how we chunky, way be with. business, is there? market

Frank Sullivan

Sure.

Our of, its year first We Construction sales were Products EBIT Products and really quarter our see Group. our momentum driven market the Products gains, come. the the very just margin good of a completed of products Group independent often, going very Construction and strong by strong and consecutive it’s new third Group, of integration operations, improvement, Coatings to what growth, in Specialty entered share collection Performance kind you’re and of to more with our Group introduction

chain momentum by see that days lack of you’d being even growth disrupted critical bad, referenced. because really, issues than availability production Rusty of we that the raw We had project. Some were and literally is of elements. And Matt not of lost material weeks the availability have and supply it of certain stronger

in Construction be X terms range the had the years Products are we higher of momentum Group, that. than in good continuing. to that the And likely, for we’ve is quarter demand up X% and XX% is for in the So sales the to

margin our in growth You’ll three segments. and QX, return non-Consumer to solid a enhancement after see,

John McNulty

at in to to to it. one certainly With I last maybe XXXX should flow, improvement I about I shareholders? seen regard was you one we Got flow you place. really we should thinking look you guess, I flow, mean, in MAP you’ve buybacks cash the And thinking to speak M&A Growth look that as about at the since be can returned versus cash how can cash being in. can put sneak how and opportunities to cash be

Frank Sullivan

Sure.

of pretty EBIT the capital them dividends repurchases done the so on May achieving to acquisitions both between goal to kind margin committed original Growth of get are of can. larger ‘XX. our We’ve we $X.X typical to of to those small medium and and of past And return have commented We where continue pipeline a MAP a we through a share and pursue will billion we strong in XX% transactions. XX,

the Our billion, MAP short so total as in $X.X capital to a return Growth was of measured program little there.

we’ve capital pursue have got to to but much ago those, than balance to fun shareholders balance return terms a to continue X had years and we be cash will we how stronger of flow So growth. in with able that we

John McNulty

it. much for color, Frank. Thanks the Got very

Frank Sullivan

Thanks, John.

Operator

the of Frank from Research. Our Mitsch comes Mr. next from question line Fermium

is… line Your

Frank Sullivan

Good morning, Frank.

Frank Mitsch

official I was struck Frank. that Specialty morning, team? of by be higher we regarding the good Cleveland part Protection anticipate the baseball spending. Hey, will the Products, Products, Guardian ad comments of the Should sponsor

Frank Sullivan

is there into not yet. have That’s suggestion go connection But nice a great looked certainly, Guardians. but we a and that there

Frank Mitsch

the interesting goodness. of impact time got That’s the in even fiscal expect take going that impacted by you to first and higher long to raw quarter used an material get My fourth availability, a here Really in quarter. million to. because $XXX you

You force some mentioning what components those are you can the of to we majeures, components, etcetera. companies are when kind critical identify critical etcetera? as on track lifting kept outside so of Can

Frank Sullivan

Sure.

And shut unavailable, as which one roof So, intermediate elements us to been our as are caused chemicals days. certain to case, some of down have critical has specific X for, restoration in them in coatings. long production

this ourselves in the find storm investment materials by we areas that lack during a that in in have available so Uri, States were that winter number sourcing power and been raw disrupted COVID. of the outages happened readily And Texas United these the of

a boat. typically higher because X because California, there. we sit finding can sometimes of show for X Long in up to they replacement products so And When get or prices, they Asia, got supply at longer disruptions are obviously, Beach, a to they on line weeks now

traditional projects, this again, roof is restoration on Construction is and line Products, reroofing at but element, Another traditional in not black felts.

shipped and instance, furniture finds that seating And where also on waiting markets area. people or insulation, shortage seating the lot itself it’s there board foam. It’s and of materials have in a a is hospital, think surprise outside – your into in all in foam you of disrupting, sitting it’s order no roofing for school to places. a a automotive back for can I the of building which in is

a in the are those side. So instances more couple industrial of

material On producer the side, that major resin United raw in represented a a alkyd for our and category at other category production. spray higher in the consumer small States product almost of at and an accident Asia unfortunately, Consumer critical we’re paints was alkyd business. project looking XX% from replacement costs. paints qualifying Again, our resin particularly there areas, longer supply That’s lines,

but these temporarily certainly And big all of business. Consumer disruption causing so in are are temporary they a pretty our

Frank Mitsch

or fiscal Understood, very the with not that what months and ago of we gives or here X as as folks. single-digit What you into that’s that’s in obviously, high today, understood. at sit ‘XX teens, it’s we’re increases now from you upper half consistent and you part were coming hearing in second months is anticipating other and – And thinking? ago, perhaps raws then of to confidence moderate get that your going X

Frank Sullivan

facing of Pentas We We’ve think And price the biggest on benefits can you in materials. of an Growth chemistry. am terms been part get we momentum benefits. of in to have MAP guy, some product that second demand, think Growth our us the the lot and is well. I’m program I our finance from into MPIs and Again, a a I I as chemist challenge instituting have we from certainly I And to MMAs not think hour that’s serve name it, market half, a the demand, successful increases. disruptions and about I thinking. but MAP still for go we’re will the learning

to on we comment half. the first ‘XX XX% line, difficult talked QX, years is our were fiscal first estimate be of about ago while our about will Consumer ahead segment in the half QX I’d in current for very X and period in is top the our to other make where like in going we in we reasons a we’re have The Consumer

customer have So the X-year indicate a expansion expanded we of base. XX% over pandemic our would that

We’re excited about that.

these the some corrected are are winter into months them of envision early I temporary don’t And or year. – we being they things next spring get of but until

Frank Mitsch

so Got it. Thanks much.

Frank Sullivan

Thank you.

Operator

the Company. of comes next Gabelli Rosemarie Our from question Morbelli from line and

now open. Your line is

Frank Sullivan

morning, Good Rosemarie.

Rosemarie Morbelli

Thank mentioned morning to the that small you fact you. you Good everyone. M&A. are Frank, just medium-sized at looking

MAP a following You able consider program, acquisition. to larger the would have mentioned in you be past the that

you to are wait waiting? something substantially makes X.X So look we than through Do at you you before can sense recently? have actually been it gone think until what you doing have MAP higher

Frank Sullivan

But the be No, think to transaction publicly need available such significant – we were have can’t question. are X.X. ability of good integrate have think Group, that’s a larger I if don’t a today’s capabilities certainly the to to drive right you you need price. the Consumer And Construction our before where chain at think the yes. and No, a we that talent I if at solidify think prices, in and we Group I supply I competitive. Products we environment this be synergies, And out obviously, to have MAP we we in our in details bring made strides, particular, in one

the little a think clear. be is two more ground issue those about but until chain you become – for supply there. in areas, and shift quarters so is supply And I important But going goals, the of talk we’re in challenges bit, shifting it’s a to now the long-term getting to terms chain couple for going solidifying can everybody of

Rosemarie Morbelli

going looking And on helpful. the us is That though Okay, comparison the at of difficult some to as office back seems it thank and the very Consumer, the so you. then then are DIY on. and

the slow will you it that it sense on was that year-over-year U.S. decline basis. it But So makes – is internationally. down and stronger in it mentioned a

issues? do be comparison going DIY is you faced that same So think when with international the to

Frank Sullivan

that that every I that market internationally to comparison will be categories one the U.S., in we same of we because tend we part leader have issues in the don’t in know the the have the in of share. Asia. America. and segment not operate is true UK in, not export America certainly which like North in Latin market Consumer or in our in in biggest And markets next our true that is and Europe, We

smaller the cost don’t and challenge seeing of we our The year-over-year side. because and of the So on those material share the the markets will market again, anticipate challenges real be, same raw side smaller in also sizes. because

I terms were product and with sales year, years where to the volume the finish substantially pretty be X we and we pre think will we’re we in work ago unit need comfortable ahead sides. pandemic on just and when cost of availability

Rosemarie Morbelli

Alright. Thank you.

Frank Sullivan

you. Thank

Operator

from Ghansham comes of from Baird. the Panjabi question line next Our

line Your is open. now

Frank Sullivan

Ghansham. morning, Good

Ghansham Panjabi

Thank fiscal on then impact Good I’m the you question, morning And digits as on, that get just last sure the following sort to demand in of morning, as just well? inventory for much as for a XQ level an trying we is the of looks underlying in quarter customer How first accessibility there? you. double so just which adjustment how everyone. of and like of should down cycle raw what is would going what into true guidance the the terms Frank. material for in at sense characterize terms I’m beyond to on segment? your terms we is think that of about Consumer Good Maybe up sales.

Frank Sullivan

Sure.

in is probably predominantly RPM across lost and Consumer. it’s Construction million another estimate revenue, of and $XXX Products for Our

very of areas based got that’s our counties, cities, school of are also and dollars based it’s and kind and true As that in components market. It’s and states of are accomplished I of the construction where projects momentum Certainly, renovation incredible for being sales roofing billions or on impeding commented stimulus on what opportunities have we’re in infrastructure earlier, outages, we’ve that’s applied towards material products in strong. true buildings a lot continuing.

On the same side, pretty the it’s thing. much consumer

alkyd as We expected we’re fill have rates hard principally resin lower-than-anticipated this result of and a to meet or working that. disruption

part so of And that’s the issue. cost

principal then return, demand, chemical Our to American to of out our cost tolling. quite when interim. need improvement will is significant structure additional goal here we you’ll candidly, our the in at we a in believe get I supply things and cost will happen. North meet those whatever see And chain

Ghansham Panjabi

starting would that be XQ pursuing, price in or a additional that hit more anticipate sequential consumer Okay, then should XQ are improvement so great. something we initiatives as event the And well? terms to on in of selling you

Frank Sullivan

by I probably will hit think that QX. mid

places, working in price additional September. of for Consumer not a are just of August or the on number increases end We

Ghansham Panjabi

so you Fantastic. much. Thank

Frank Sullivan

you. Thank

Operator

Vincent the question Morgan next Mr. Stanley. of from Our Andrews line from comes

now is line Your open.

Frank Sullivan

morning, Andrews. Good

Vincent Andrews

just that? that good of sort you sort Thank pre I could or your sort order over morning based or ‘XX giving of what’s getting on the everyone. to qualitative book? your ‘XX assessment Consumer for landscape If that on say Is are you that just Is you and based of pandemic, fiscal bridge? when ask, how you over Frank, of XX%

Frank Sullivan

already demand we’ve a based It’s about function of just that, And we’ve of part internally upon big of think not can in function as QX. we but a the forecast a supply. talked that done call, we QX and for the what is

with on what’s our we And Board. our And two-quarter facing so disruptions. stronger supply assumption. the be forecast, that clearly, on with if based But that’s that regularly a forecast and based would driving it we do rolling Board weren’t

Vincent Andrews

And capital and you on could rising Rusty, give could some material but lines. obviously, costs same Okay. raw fiscal what there happen constraints working in some directional is to you to just ask along ‘XX? ideas those us have I Just production

that done, is some MAP there with should sort year? of if number done or CapEx And cleaner lastly, still lingering be the expenses number are the to earnings stuff? have that a is one-time then this you for associated Now Growth so

Rusty Gordon

had first. hands our working we capital from a so to we supply Right meet in trying year address that source inventory. on get our to inventory customer demand. That’s just But had any on a questions. wrench efforts great thrown Sure. can disruption can the now, we’re reduce really, I’ll capital. number a chain working of We

So that a negotiate great cash job our to that on us better with chain procurement have probably during has help stalled continue we the supply flow. we’ve done continue inventory. and terms On Sticking to should us. and team payables, challenge

share there. Nudura. our in, our grown applied after year roofing, need boosting a are a and talked Looking we XX% growing there, so year lot product And capacity Vincent, for know, we quite we businesses, in to each add areas. liquid which quarter, you Consumer year build of ahead ‘XX, in continue line constantly capacity spending need us. by that’s to a number also bit to That’s in year capacity capital fiscal we about XXX% more out a to We’ve as has will

Growth we few plan a to and the MAP we goes, delayer There will far be further incremental as plants program management. to As benefits. will have the few close as a charges

Operator

from from McCarthy of line Vertical comes Research. Kevin question Mr. the next Our

open. now is lien Your

Kevin McCarthy

morning. Good

Frank Sullivan

Good morning, Kevin.

Kevin McCarthy

remarks, to your feel talk the to margins. how outsourcing ‘XX? your referenced Can outsourced the and could of through fiscal or I how of In you production to that albeit you Just an Consumer outsourced for get last in change in in associated segment not effort much service, improve be. a or think is production what expense the the dynamics of whether prepared margin much you’d expect year, trying was at

Frank Sullivan

both, gross exact are case, talking and of there, number other cases, of then don’t and in couple basis that this in those cases, I the I other of Sure. filling, an new the qualification resin formulas Rusty’s margin to outsourced suppliers tell you And resin investment new a in some regain, tolling related hundred that their can but outsourcing, and, margin. hope suppliers on related points eliminating us some with to both some some points is have in and we of costing working manufacturing. in cases, filling about to

freight are a that and these know expensive. ocean and be time, as of chemical big don’t I procuring has to more here couple things wasn’t big used China, will it challenging I been a it thousand much Trucking. group. by issue Asia, the it’s freight, Consumer American that’s $XX,XXX. traditional if Whether thing particularly of now bucks controlled freight now which we’re principally are numbers some which lines supplier our said, costs. I longer snapback And of as supply is right, containers, be, North versus but lead from a more our bigger become a mean, they well for and

have And today aspect hearing every it’s so quarter much commented our inflation from and industry, and last in every hitting I P&L. you’re of as is pretty true the it

Kevin McCarthy

if apologies you but to for Okay, fiscal ‘XX CapEx then for your million $XXX I last capital relative what that’s the it, spent budget missed that is And year? helpful.

Frank Sullivan

made Sure. around adding about $XXX Related this year, to will the Rusty capacity, be it million. comments that

Kevin McCarthy

Okay, thank you much. very

Frank Sullivan

Thank you.

Operator

the next line Our comes Michael question of Sison from from Wells Fargo.

Your line is now open.

Frank Sullivan

morning, Michael. Good

Unidentified Analyst

for it’s Hi, on actually Richard Michael.

Frank Sullivan

Richard. Hi,

Unidentified Analyst

look you’re quarter the to touch the to to impacting inflation a push second the on the and expectations, fiscal going more you to you’re year, largely first you able you’re quarter expect wanted issues quarter, getting in in of grow half do transitory? Just again first at increases if be going second given in of the price the EBIT this are lot

Frank Sullivan

Yes.

We four will quarter in our the growing first EBIT be in segments. of three

EBIT that decline all get it going We we’re see, Performance be massive to to our sufficiently be Coatings, Consumer. States Products United will the in EBIT stimulus growing fully we couple more and then expecting behind challenges particularly Specialty construction will and offset products, quarters, we will our the that to And in that these as four issues would EBIT both And strong, products all chain in the of QX of in see amount line take COVID a than we the demand expect the and strong have the indicate our it with second some that the in of of in demand. that supply across and strong would in we that the interrupt half dynamics be growth a as That’s see that though. continued new because year And all strong us. only businesses segments we across said, the year. be is presumes Rusty thing demand

Unidentified Analyst

$XX can flow the us And working I going if you focused Okay, on that’s of remind well? how in of Growth great. maybe know the terms then to leg, where through just you’re a incremental segments? MAP next there X.X, XXXX, million is And you as can savings us follow-up, the on you’re on to there anything MAP this fiscal give

Frank Sullivan

that ought have Growth MAP flow through fiscal out quarter. and out. is decision relatively basis an what’s happening, in Sure. But given is come flow the supply I know to I something Day around would certainty And we it year, the the seasonal more disruptions I $XX that XXXX our know the go-forward except having Investor million throughout put around of that then for $XX that to don’t X. chain for to to supply time better chains – think quarter we third targeted million the X provided segments. low a had November how our something evenly massive of a challenges, around frame. solidify on It

that on spring better given and a what’s supply the timeframe, come decision around go put challenges, had something we the of what more details in around know certainty out forward probably X.X XXXX I targeted to solidify the Investor as to of is of chain MAP massive So then think is think on some Day our is disruptions supply that having – out. an with chain November we for I that basis our happening, in Growth more something

MAP think So, probably we spring, X.X. this what in more to on the of details some Growth give

Operator

of of from comes Steve Byrne line Mr. question next America. Bank the Our from

now open. is line Your

Frank Sullivan

Good morning Steve.

Luke Washer

Hi, good morning.

this disappoint, taking for to is my question here. Luke Thanks Steve. for Sorry Washer on

Frank Sullivan

Frank. Hi,

Luke Washer

the the line Frank, you done expanding more has about Can about really past to growth are have talk in four looking to You driving how collaborate you opportunities have that leaders opportunities identifying than incentivizing your as top you driving that’s more and segment up growth, that you What line talked changed you are channels, historically? it the sales past, in top for? talked internationally. new specifically cross-selling in relates opening see – sales you been

Frank Sullivan

Sure, question. that’s a great

to although drive we and us helped there. that So, changed COVID a couple things MAP getting some this, have was to Growth of of

creating in examples. are and past. have we what’s the gotten for now have We for talking in much have another growth and/or across And of is more we and a revenue one channel categories. we often in that more a One then years, XX had very another. you side, connections produce of cooperative two other RPM one we the value than terms improving measuring and couple company. sharing efficient collaborative XX across division having from leads area technology RPM years on quick transfer, Give company just cost our for where to the is much more have And communications driving call we been group metrically what about

of is companies DayGlo, with and our RPM those a Finishes Wood Group. finishes other produced are by which not providing wood announced fluorescent companies. tens of specialty world in polymers, under brand production. unique leader of Rust-Oleum providing color, also they It’s and for to And the of performance All millions stains is the high collaborating our Varathane dollars for are producer polymers it’s and really of polymers. just

today. specialty you not gone million business business, who supply RPM materials. specialty Arnette have raw of has Stonhard. chemical are coatings, might $XX we multiple And $XX we are companies, part called from as Polymers heavily Their that’s growth investing chain terms to have in materials, specialty chemical the coatings critical a in of supplying imagine, that, raw We given challenges million

measuring concretely. are can that lot tons more but I of you give So, examples, we a

having We channels boxes. coatings big in Group some success solid into roof really Consumer are of restoration our finally through introduction of Tremco the the

spring our introduction in disrupted was off. the ‘XX, is by post-COVID that taking big COVID, kickoff mentioned it so was in of the that have We Unfortunately, past.

strong for And be so could hundreds sealants Products Consumer repair the roof years, of coming Group’s products of Construction millions dollars. customers Group, I the in home restoration potential our concrete our center think, coatings, into and

talking have is results that’s this so now time going good coming a and lot on years. to and we in area the us an of some spent that about And produce focusing really for measuring

Luke Washer

have bit out bit Sounds I specific sounds the later, to looking you But to as going could And are to examples that from of MAP wanted are really MAP original that kind talked program? that that is XX% an you like. see that that about MAP XXXX? this to also good, drive any from program talking EBIT have or of Frank. initiative to looking to a it little a to to going targets sales less you program. MAP there further touch X.X, level at are take the margins potential learned know X.X had the about the lessons you your And be learnings you program, little look I original we on you X.X be the

Frank Sullivan

Sure.

small So, initiatives XXX our COVID disrupted medium improvement ability our into these continuous plants. to or and area, MS manufacturing in the take

have is is were certainly going there not have of to able forward. dollars we which procurement There a to of that our gotten of so of not that tens been successful, level millions And whole highly get spend another activities, to to. we benefits would get indirect that

that So, that’s revenue the we an on areas area for big Growth of side, a be will X.X, MAP with spend there growth. of us. and to then really where some much are And opportunities more number to have a part

We which have our some ag capital industrial business, has chemicals. in got opportunities exciting

it food paper use product would and we is for that for various in for last compostable patented, that both cardboard relative food packaging or Our X its is using temporary coating It’s plastic called VerdeCoat. working but on completely food is a all also or years, been to temporary purpose allow of the the serves fats other packaging that biodegradable. packaging, like Mantrose have clamshells items, a and and including business

X.X. our MAP Growth are more of in talk number So, exciting to for us, particularly there Group will a about in Products areas detail we Specialty in that

Luke Washer

Thank you, Frank.

Frank Sullivan

Thank you.

Operator

from UBS. next from question Our comes the Josh line Spector of

is now Your line open.

Frank Sullivan

Good morning Josh.

Josh Spector

morning Good congrats. everyone. Frank, good morning Hi,

and XXXX thoughts versus particular developing brand, Just on how the are last where give just Construction on within and things your you wondering can are there if some currently EMEA versus you quarter? illbruck in

Frank Sullivan

Group Schoger a they Melissa we Europe. decentralized progress. there, and Hoogenboom, had reports Tremco businesses there. And and Paul as had tried had businesses our operating scale. the businesses took Construction we now Flowcrete. great Products leadership We have made We independent under We relatively illbruck. of she were the different collection all Tremco to Under in Sure. of that And are

have functions. back office We integrated

come. cases, EBIT low-double digit in there margins better focus We efficiency, from we that’s cases, some is created mid-single some we area sales And scale. greater EBIT and to And have digit more where greater went forces. in an consolidated have and really coordinated, margins to

appreciate Products team I was better certain Group we decentralized that. real our an focus performance. that And extent, it leadership line really bottom growth and and drive to much solid Construction was in has so, brought And And area line with that are position a question, to to a top because unfocused. discipline

So, a there. lot of we made strides

Josh Spector

Yes. and Thanks. perspective trying or there, room you have if are further in with Appreciate that understand America that, similar than segment seen to things of you Frank. I what guess the for is perhaps what generally to volume rest North the a and recovery more regionally? was would go say was trying from I there

Frank Sullivan

that’s growth. States. economic experience about is behind good I a clearly America, would have of some of big pretty Latin in we And rest pretty operate the mess resurgence high-single you The our is say and for we it that quarter in demand and is digit, organic say The recovery is see seeing people is we world our and are incredible. COVID solid There – low-double headlines. Europe, digits is results growth, in operation probably Brazil. fourth This generating, leading in I three are a to months that six driven. No. States is quite months United the and is the that the in, because United candidly, also the principally room it’s the U.S. our

in Colombia. are We

Mexico. COVID challenge are a is rising in But still We there.

great an largest run that in again, that’s a And they they their of player South East not issue in market. And by but COVID COVID business African then also well, out our presence continues Asia-Pacific, have we challenges. India. extraordinarily to a and there are We be although in Middle big And an team. have is Africa performed

of unless So, are that is the world probably the would behind things year rest U.S. that, in where we a say there, I turnaround

Josh Spector

it. you. Thank Got

Frank Sullivan

you. Thank

Operator

Zekauskas from JPMorgan. next the of Jeff line Our from comes Mr. question

Frank Sullivan

morning. Good

Jeff Zekauskas

Hi, very Thanks good much. morning.

accounting. the You use FIFO

FIFO didn’t, So, if take know rise May it material how the quarter, you words, delay? long they of they and raw did, turns if costs? after the other long of is LIFO material out that I reflecting that didn’t until how costs your end would your raw but were it In level

Frank Sullivan

delay a the somebody, FIFO our So, XX to because years we are decided FIFO XX accounting days LIFO. then versus on days. peers be And disallowed is ago, to FIFO I regulations probably about change or LIFO on think and X

about But we versus peers delay So, the changing. don’t where days are XX days. are and we to of our flexibility XX that have is

Jeff Zekauskas

do prices before your a you them sounds box? with the you And to boxes, that you are a you and big once Okay. until like in you effectively negotiations it in trying year. – guys And year commentary, to negotiation Is have big have or comes with of your true? them next lift large different wait negotiate the do kind can with

Frank Sullivan

early price increases X% with of most consumer price the customers Yes. or and in all summer customers discussions material X% raw our has and Rusty at commented, We had Consumer escalated in to Consumer situation and further intend fall. our as that from price end we customers, all rapidly in have of the And fact, negotiation spring. with of the of range averaged our our negotiations to the there, with

Jeff Zekauskas

FIFO Okay, and lastly, do May relative quarter? great. your for is then to XXXX what quantify the you And benefit LIFO for

Frank Sullivan

talk a don’t is think on about, there get LIFO – there LIFO to that FIFO reserve people is think there I I is Yes. benefit. a no

Jeff Zekauskas

much. very you Thank Okay.

Frank Sullivan

Thank you.

Operator

Our next question from Research. comes line Harrison from Mike Seaport the Mr. of

Mike Harrison

Hi, the called In Specialty, results. out good you morning. Frank, strong

business a Specialty changes development are level You you maybe little confidence your more in Can improvements what’s that that in on talk business. going we initiatives. seeing right detail about in recent And and that management business? sustained mentioned give some

Frank Sullivan

Sure.

businesses – Holman, he he RPM Carolina with at business capital First great been Those the issue asbestos RPM, that was Ronnie He Bondex is part SPHC Coatings and our years Steve ago in who starved of behind us. the Knoop many running done and North all, succeeds has bankruptcy job. lab to relatively Hickory, has growth ever that’s of were been the XX division, because a of process since. of part were has Chemical them of ran address

leadership have last in leader business. operating have Ronnie’s we new Number years, of DayGlo, Powder things new happened a In leadership. X leader the under Coatings our at places. company a one, a lot TCI two at changed so, we And

Mantrose Group retired a long-serving new leader at have We our Food have that a leader and there.

about been sales X.X get MAP there leadership Growth number those to organizations and our about that’s program asked We so very perceptive. revitalized. MAP think had of Growth talked has a an and on to And changes emphasis really and to earlier significant I somebody

God and or combination some opportunities that, And us these what heard and Board track can’t do for these McKinsey markets our we growth new Company businesses MAP laughed different or the DayGlo Specialty with that some And them, added I very, to in work specifically are our said and Mantrose our rolling resources & of on hired firms and the in those bless the of businesses, business. be tell Board, on with opportunities spurred me here, part strategy what And that divestment. views their coat sales. my some businesses. outside business consider in on McKinsey, As at their are. companies; are would if growth our Oliver of it to with have Group get past and any is, exciting beyond over he our Wyman with top we to literally work to Growth, And triple we father, his our I would that have grave. other we consulting or very business, industrial perspective of we the if we have three But good double Products our the leaders path,

generating momentum the in we that So very right we we really and what X.X. about detail leaders there And excited will see. in and we when are positive talk to MAP we those Growth place in are are about a now, good more reveal businesses

Mike Harrison

non-operating Alright. you higher the And segment then Rusty, was for and the elevated to costs question incentive a comp. mentioned due maybe insurance

placeholder million into in segment? is costs, non-operating guidance to $XX range that forward quarter million fiscal any for a per the something ‘XX, Looking good $XX for

Rusty Gordon

in range, you right Mike. Yes, are the

Mike Harrison

much. Thanks very Alright.

Frank Sullivan

you. Thank

Operator

Our of Arun Viswanathan last from Capital Mr. question Markets. RBC comes from line the

open. now is line Your

Arun Viswanathan

my taking guess perspectives. I and Thanks your question Frank. here. get Hi to your thoughts for I wanted

material So, incurred you raw of have obviously inflation. a lot

number or your is get the if you coatings And especially You We in are curious, I being guess could of or a support on folks. material have segments, you, it is how thoughts on the across suppliers, as do you placed just am your upon placed of I that any don’t you companies? go of with different Consumer pain dealing shoulder feel your demand. from well? here customers squarely your a lot lot get the inflation the doing from being segment, sense been partners a this your where to Maybe partners, your hearing to are I just it that some meet again,

what Thanks. So, of on are I getting raw material am wondering increases? sharing some these just you of kind

Frank Sullivan

you. Thank Yes.

And are Texas outages many and power it’s get double suppliers own related the their to the I things. the impact this had, and in of that’s and U.S. working particularly to disrupted production time our chemical of think then order. back supply winter storm

was COVID winter in in many offline underinvested around more until I or storm think than industry far how that thing disruptive bases people the chemical realized other happened Uri The was the supply to through China gone People COVID. up the people the shipping actions vast the that containers. of took roof. have relative majority globe controls waking Those in fact to are and also

You’ve got China California. and port problems Beach, in Long

for Asia sit So X materials from when to they’re Beach, or X before get can Long they weeks offloaded.

go could on. and on I So

a epoxy up are been a raw raw kinds resins, of is up. We price. on But significantly us, clearly, in costs. All that, terms Acrylic have Two of were resins have material for that materials backwards. in Penta had an up over very about ingredients the comments Group most ingredient disrupting of other for suppliers critical terms and of primary paints. I huge our to small in globally. Consumer the resins, particularly the like are chemical short things us to those. alkyd that is are talked It’s important that. material project raw supply some

it circumstance. I alkyd anybody a North are that’s America, roughly producing That and resin so Ohio, of resins. offline. for in as ended up producer there was supplier the alkyd XX% resins earlier, challenge an they alkyd a sadly, tragic a in explosion then real commented supplied in And And one at

And work so them. to we have to replace had hard

with have them. We worked

all So, disruptions. are expanding these working the and better than And the level supply of would within is given cooperation of opportunities. work we think, terms additional chain, expect, you I overtime in both

supplied from So, from and raws Europe in that States. Asia we the are were supplying some traditionally United

expanding specialty that We of to some – have, unique don’t chemical RPM are our own we in chemical this I capabilities are circumstance. and the responses think,

Arun Viswanathan

Thanks. Great. follow-up a as quick just then. And

upper-teens some raw material increases that that how assume kind how capacity there up consider from of of over chain would to the that we do are raw quarters? If as progress ratable you kind well, tightness inflation maybe in help the supply loosens some of are coming – you potentially additions four up the say, pricing you you fashion, your that moderate When next expect catch you have materials Do here? the of should to a to experienced? expect kind

Frank Sullivan

as things will about that. about think think I that the two we tell Sure. here you we

in worry these chemical good a about, pretty are happening of coming think and chemical part would at base America working teeth out in is to worry hurricane now, we the the our North of Texas be rebuilding rebooting, which is Coast supply way principal in that the that way the coming everybody their back of thing a and much we should that positioned our we industry pretty pace. the feel and about, the disrupted like But quarters. worst and happening of in I major Gulf further heels. North it that be unique and things is put we on RPM kind months area that America, The challenges it’s could we

what’s think, perceptive weather. don’t to, And so the am I telling predict I question. very relative a we just you

feels it we to the one like better. the On in starting get worst it are hand, of it’s and

mind. need “Alright, prepared forward, one we the are be be On that’s the we And look to other of how we can hand, as things we prepared?” ask that’s things on ourselves, people’s that and the what for

Arun Viswanathan

a Thanks lot.

Frank Sullivan

Thank you.

Operator

There are time. no questions at continue. this Please

Frank Sullivan

associates through our for businesses COVID you to X.X participation and last years these call our our to thank I today. on throughout particularly grow through the Thank found ways who now your along, MAP difficulties to chain October. forward of Growth results quarter details we look in on operating you first program. and our all successfully to supply executing meet our the We improvement when providing want

in RPM week will the person, time for Meeting grateful And first plan a nearly RPM. Thank and X of in be great October also investment your first to We have day. during the the in and Stockholders of have interest remain we you, Annual years. which

Operator

conference today’s This call. Thank concludes for you participating.

for You post please standby may disconnect. now Presenters, the conference.

RPM International (RPM) 26 Jul 212021 Q4 Earnings call transcript