RPM - Earnings call transcript Q4 2022

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Operator

Welcome to RPM International’s Conference Call for the Fiscal 2022 Fourth Quarter and Yearend. 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 information on these risks and uncertainties, please review the RPM’s reports filed with the SEC.

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

opening Instructions] Frank Following today’s be At Please permitted that to will remarks. the presentation, this be Chairman Sullivan, time, financial will CEO, ask like RPM’s Please to call sir. session. analysts turn ahead, a only to note question-and-answer there for [Operator Mr. questions. I’d and go now over

Frank Sullivan

Thank you, RPM and for XXXX Michelle. Good welcome to quarter morning our International the and yearend. fourth call Inc. investor fiscal

accelerating performance, reflected pleased we'll and your Webcasts indicated. an which presentation Presentations section across questions. provided be Joining as then fourth me and of are results share financial comments commentary at otherwise comparisons on the and quarter year, Mike that a quarter fiscal the Please Gordon, call. on and the Laroche, www.rpminc.com. Vice prepared to on Vice and XXXX. take in outlook adjusted for note Rusty our accessed Mike be President, of consolidated for of a quarter comments will details President broad remarks conclude unless XXXX generated performance supplemental all the the fourth Chief be first on Rusty our slide XXXX. on our to our our fiscal remarks, provide can RPM the support I’ll RPM’s our and Controller and quarter website After Chief Officer. Officer; fiscal RPM will to We throughout this record basis We call will today’s our Financial and are Accounting It momentum

Texas to few supply, at chain in through the a of ramped and inflationary challenges alkyd supplier like team manufacturing for last short supply to quickly the some exchange constraints, September. year, of responded The a raw RPM. industry. As of which ever-changing up scarcity our in to purchased response due facility explosion production we a headwinds. our the very share we I'd materials, resins, in suppliers examples In dedicated to foreign primary one businesses address were quickly nimble progress

our working to literally thousands been around different R&D high professionals qualify addition, products all In to have clock while reformulate the of materials, performance. maintaining

business, and example for equipment challenges which the to its was products found by these chip supply Another shortage. semiconductor our disaster and deliver reconfigured customers. is hampered alternative It its restoration accommodate

As throughout our of quarter-by-quarter in to you can across steadily Also accelerate took coating the building our chart business, impact having been construction our momentum were particularly see making and on to investments actions the Slide X, the fastest-growing high-performance systems. we've growth that reflects generate we businesses this the year. an areas

well along and fourth with produced efforts the associates' sales as Our activity industrial consolidated a solid quarter that rebound maintenance markets as and in energy adjusted construction EBIT. in record record culminated

our narrow largely to the availability fall. access to raw and materials last increases Better began acquired with up results facility as inflation adjusted materials started record to segments. driven group, four the by sales and adjustments outlier of in consumer EBIT segments our slide, operational achieved record in in The which note you'll we efficiencies, all On next and three results lone production in we was price to catch was pricing year-over-year improved. gap the EBIT due

in successful an RPM, teams NAFTA the and made the incremental from Meeting fiscal program quarter our also October Investor share operating around 'XX. with improvement ongoing our XXXX, details from priority be time about the operating we Shareholders. progress and plan concluded new which at it at our Annual end in at scheduled and first will a program, release Growth efficiency million quarter operating subject, program, earnings of On the We're that $XX savings developing We of you improvement have remains top during calling our benefited to Day significant of in the MAP efforts. driving to follow-up highly

that beyond. are the our momentum a call successful confident to Laroche, building MAP to to turn will more are XXXX now fiscal XXXX detail. in I'll we financial segment for Mike over contribute We and consolidated the discuss and results

Mike Laroche

good Thanks, Frank, and morning, everyone.

that quarter quarter, to $X.XX of fourth of the net Acquisitions compared For $X.XX sales million. the a the XXXX. sales record foreign exchange consolidated billion sales million. per a XX.X% the quarter. or was $X.XX XX.X% the year-ago in $XXX.X $X.XX, to growth compared $XX.X Organic contributed an or Adjusted currency X.X% to was of sales diluted of decreased we earnings reported same an increase generated which of or billion, while by $XX.X were fiscal in headwind reported XX% million, share record increase X.X%

to Our million XXXX record in XX.X% $XXX.X consolidated adjusted reported a $XXX.X up EBIT fiscal the was compared million quarter. fourth to

the net to compared XXXX quarter. sales contributed million, sales $XXX.X acquisitions record was quarter and fourth up generated Group Organic Products of Construction fiscal XX.X% growth X.X%. fourth Our XX.X%

strongest as Despite was record This markets The admixtures those to fiscal gains. currency material a business $XXX.X experienced XXXX offset sales being envelope with headwinds selling significant XX.X% roofing concrete CPG is and were sales America year unique its and macroeconomic high growth for differentiated generate while and double-digit increases headwinds, quarter propelled service segment's levels, growth forms providing to concrete. were by operational when international improvements. fourth reduced sales strong products systems, by continued challenged restoration a insulated earnings pressure in adjusted inflationary increased prior raw price sales mixed well producing to segment Foreign model able CPG as building comparisons translation and record well significant Latin million. Europe by the X%. as as repair solutions. EBIT its with to were Results at

Organic providing X.X%, as by translation the well partially PCG's sales markets, foreign Coatings $XXX.X international increased results. period. contributed were Group ongoing year-ago quarter X.X%. generated million, PCG's XX.X% net and A coatings sales an vertical a technology all in currency end and and businesses FRP of growth. over Our XXXX rebound beverage drive systems, fourth markets XX.X% a acquisitions including of food offset protective were headwind helped the success Performance increase fiscal record sales as grading, flooring double-digit energy, in company's which

fiscal of mix operational In sales in SPG's has products revenue addition, that volume new and was the comparison improved business had improved million cleared EBIT performance sales equipment Specialty improvements. were record despite as segment's increases for high driven a under of major coatings systems growth, restoration fourth management its Adjusted top the and prior driven Its Products difficult record to selling quarter The to year continued net a results. in a price a increased factors and in semiconductor and growth good it teens product rebound Uri. reported which disaster by line price XX.X% adjusted $XX.X excellent Group additives strong leveraging of increases, prior grew to backlogs to XXXX, by the EBIT management. was chip winter XX.X% of the by bottom sales storm Organic million The The business, X.X%, quarter. OEM by demand shortages in sales adjusted of the EBIT which inflation. to to sales its way last coatings that EBIT X.X%. the fourth XX.X% foreign XXXX translation for of catching up quarter to due leveraged fiscal with began SPG's and its in fourth as $XX.X companies as cost sales experienced were fiscal XXXX, price quarter, were offset by well growth. Leading million year's in record increased XX.X% food selling fiscal were of $XXX.X favourable majority increase $XX.X of which the currency unfavorable an higher XXXX the added an bolstered the adjusted double-digit acquisitions million segment's increase compared quarter. fourth increase compared impact increases of line businesses caused

price record by of sales was and achieved foreign of lines professional of fourth improved alkyd growth Organic supply line compared and X.X%. net The plant XXXX. resins key XX%, sales Group's increase as offset remodelers increased which produced to was quarter in we last product XXXX, Our sealants. Consumer partially the of by fourth with well the increases by fiscal Consumer of top translation quarter $XXX.X fiscal X.X% currency for million of an cost the growth unfavorable including manufacturing as acquired September high driven Group

its remained XX.X% prior million continued reported material to respond headwinds While due was price XXXX grew, macroeconomic was up markets supply European Group EBIT adjusted on Adjusted challenged increases and wrap EBIT cost of industry ongoing costs year shortages. with demand. a raw process million, to labor building and the and resilience by To inflation, region. to have decrease inflation EBIT in Fiscal North shipping few fourth been and an increase better from in the allocation. In $XX.X American has $XX.X investing compared higher customer to for catch capital a markets improvements impacted to in instituting capacity response, quarter adjusted the chain Consumer period. up, I -- comments challenges of

that release $XX fund our million XXXX. is Combined, share at and towards in of this investors in shares. repurchased dividend earlier $X in liquidity earnings program of in we million $XXX make November cash. repurchase early reward notes the significant payments Since Growth to with goal and enables reduction with This our April, of was to last us and established us onset MAP at roughly Our initiatives, convertible stock. our growth internal XXXX our cash repurchases common million billion of our repurchases acquisitions our our $XXX addition of puts to

our to Rusty I'll over to outlook. turn discuss call Now the

Rusty Gordon

Thanks, Mike.

the a of The to dollar focus Looking continue we of a on challenges. strengthening quarter impacting translation be ahead our number will to expected navigating headwind is the US results. first XXXX, to international fiscal of

and to significant raw cost increases labor materials, continue expect packaging. certain for We

well took inefficiencies, disproportionately by fuel Despite continued of accelerate Ukraine. enabled to bulk is moving RPM from in measures impact fiscal are our of the expected affect over have to expected We challenges, XXXX, These should the consumer segment. although been higher and conflict in by course pressures an also transportation, which it these proactive creates the are forward momentum high driven have the they energy being fiscal exacerbated cost as production to business XXXX. we into anticipate costs surcharges over as carry which that less prices unreliable

and operational continue as minimize implementing margins to levels. We cost order improving price continue in needed and efficiencies closer historical expect to pressures restore increases to

remain economy, anticipate products that there protection the in will useful a of customers' efficiency those and services our extend life demand that our is restoration. undercurrent for While and we and recessionary strong energy particularly meet the assets through improve

Based are funding for on future over these for market on quarter XXXX last expect sales onshoring growth security. pharmaceutical, quarter in we mid-teens fiscal strategic industries the technology year's addition, organic trends opportunities first growth the we infrastructure record making initiatives including generate responsible factors, industry focused and In first sales. and consolidated to investments food, and energy of in

up teens. to; four is anticipate increases price the will quarter segments anticipated consolidated highest adjusted improved continuous new our Number growth that of number generate supply; It sales segments, last each For resin in to catch and it selling same the with made consumer Fiscal growth we XX% likely group should of four alkyd the number the improvement EBITDA the one, that and year. investments is due to increase allow in first capacity inflation; initiatives. to XX% two, versus period three, XXXX

you'll on XXXX our MAP event to be we calls prepared and equity week provide Mettler Investor to Relations have new to RPM him our and initiative. concludes them announcement held pleased forward details him with your our as He questions. [ph], will Senior as and hired first analyst quarter and join Relations positions on of more that Matt the raise the Investor Relations. our like Investor you. we This a level. us function be We're Watery.com, Director I'd be to that of announce take remarks, Matt we joining and our results Fairmount look Santrol. having this with now will to pleased have previously closely working Schlarb will near Toledo investor our Lastly, Thank

Operator

first Roberts from Please Instructions] [Operator from John go ahead. question Credit comes Your Suisse.

John Roberts

integration nice resin you margins between you alkyd if and the want a or versus morning, Does always get quarter. you higher? the having It's further capital would like possible? deployed trade-off integration Good having your to even to that capacity have

Frank Sullivan

Sure.

think is I relatively Corsicana unique. plan the

at we desire well have Group I have backward point close next of We as expansion and than plan as not integration significant in in to believe business with categories that investments site Corsicana investments other few integrated the kind time the three on But our to as spend for other of that this probably another to $XXX backward use do internal do any that at new We Dura backward a we million Stonhard we years integration site. our over integrate line. backward well this into plan at additional product time.

John Roberts

Okay. for RPM? recessionary the to And the you markets here at noted do economy. risk think are undertones you then Which most

Frank Sullivan

us, challenges doing the function compared and in America It's For hitting its in energy the growth specifically. Europe attribute and and would inflation shouldn't slowing Latin activity current of is in both surprise. we're I biggest Ukraine America. the of some relatively of quite principally on Russian that year. it's to later, The North most well the and Europe to challenges impact, markets war which on economic last we a Europe, a see areas be strong anticipated

Operator

ahead. Harrison, from comes go question next Seaport Please Research Partners. The Mike

Mike Harrison

you construction talk growth break of pricing much might and the looking to guess that can was do forward, What I recession? you growth in -- and how that growth feel or of much organic wondering spend to reshoring referenced if can impact that you about little into some if guess we expect I organic around solid? slip keep volume? XX% trends onshoring macro bit down as construction how how infrastructure that a specifically, and underlying Was And see pretty business like the business you looking a you're you much be enough was would

Frank Sullivan

Sure.

Group. and been to single both for continue cases, we general, in Construction in have shortages Performance it particularly Coatings volume impact really was America Group we, Products Products And good the could dynamics, Construction particularly face high So In digits. growth to our about that unit in feel Group, projects. the North mid- but our our better,

components involved we in, of fasteners those of are to Some and but a those that others shortages slow we're or projects. down intermediate project board chemicals of construction related other insulation shortages directly product on related purchase, to or that types not

tell came been So and hundreds plan continue 'XX, that those both of which of Performance that from our good pretty have will some could for face and $X.X that billions the of hardcore demand Group the February of which quarter, the be and dollars you of and organic feel bill, of rescue again, bodes those the we in well driven go in the better United growth that infrastructure about to strong, at least and I to continues we literally, challenges. dynamics $XXX serve Coatings real the principally the Products infrastructure, are will trillion markets in in billion Group the into Construction States. American

Mike Harrison

might Can this CapEx coming cash year. just flow All initial maybe we're fiscal 'XX? you and flow cash free sense unusual like to a to for look it as some give of pretty in on of relates all leading negative what guys working all question And you I for think Obviously, as capital, working us thoughts as a well we're trying capital Rusty. get for a better 'XX. free for to right. be the QX fiscal situation for

Rusty Gordon

had Sure. usually up inflation, supply rough When flow a fiscal in a we of a because And build cash as transportation. was flow. inventory could supply, Yes. unreliable sign margins you 'XX. had was for combine cash for We and as bad so decreasing result that's unreliable we where to year

into our fiscal we'd increase though get balance even like really don't to need enough -- finished to service have goods inventories our that, like. of and did result customers a As better supply and inventory

over still challenges, getting as supply as majeures not that's better a the face the bad year. have as force we nearly but of year, last a expired So number few

expanding for to a better be We back anticipate in So said now much margins. our as again, flow. EBIT would year guidance, cash we're that margins going we

capital it offense looking more expenditures, As relates and to in we invest our are to play businesses.

fiscal to know don't pay areas, those the We disciplined be continued RPM, have -- at we're you crazy on hand, a And 'XX. closer and have including a area real multiples. probably as high-growth we're in high of for And been a us. to buildings. -- Acquisition, high-performance as multiples. That's very growth spending as lot other result, about

So at. we acquisition be continue would been historically activity we've to to than lower anticipate

questions. answers hopefully, So that your

Operator

John Markets. ahead. Please The next from go question McNulty comes BMO Capital of

John McNulty

my taking for questions. Thanks

as I as may you? versus how one, 'XX So kind you in level, or push the the quarter? and of give some about to maybe guess for the the first we into volume there laggards that that change us can color as fiscal high stood think overall, of if segments price to any And leaders kind half of are the how out

Frank Sullivan

Sure.

momentum, mix -- but you'll you see QX. Slide catch-up of or three records. segments, you near EBIT as build the think dynamic principally will at four in in ended. that meaning to group, our the and perspective, digits tell be provided QX, In level, better consumer across and relatively price around I we Products single significant and the our Unit different a Specialty cost single quarter, And you, will Construction in cost be great our to of volume in that all-time volume delivered high will momentum consumer, higher quarter the And we've mix EBIT we the are was price/mix just down those our should the that quarter. were segments, flat we I impacts in provided. from quarter. Coatings. dynamics in X, EBIT digits growth of margin, of for can X high Products a got it four was high So see do, in unit our cost in in businesses the even by mid- we the segment, in margins X a ahead We In we that of all lot price see ahead segments. of guidance we fourth that Performance

John McNulty

or And Got think to the I of level. how little throughout rate? potential year-over-year, I guess margin more through guess, that run XX No, catch how with about improvement that's are materials how maybe it. mean assuming of progresses the we XQ, about that, maybe looks points to away the helpful you're it to that like for back a I I year? by, corporate when look giving up raw of is continue the should a kind kind decent pricing color. I guess whatever, the improved Do either you envelope, year? then bit? the of even XXX kind thinking you for the at basis margins

Frank Sullivan

improvement And group. in consumer finally a initiatives The very largest price cost Sure. mix that the we're operating our there. you'll -- relationship to see fiscal up of undertaking catching a challenged It's efficiency function and on also 'XX.

improvement continued reasonable with XX% growth line range. Rusty see you'll and improvement So the the in our . should than better indicated to be significant to there that we three QX other in see bottom QX, segments. earnings what XX% in you to heading happening or go And in any for we're is are energy what's Europe we more either read, recession to hesitant relative a and it that. because comments markets. what beyond further inflation leverage and boy, week headline depending on

it's will improvement rock growth every growth, beyond next EBIT of predict earnings the in of that. X difficult alone be months to in solid let So anything and terms months, five segments. one to our three But sales

Operator

The Morgan comes Stanley. Please from go next Andrews question ahead. Vincent of

Vincent Andrews

business, a in talk the lot natural anxiety a volatility a you a can there's could over electricity. other mean have of of what better be sort would markets of energy in your particular, there if and mitigation you -- from about your was any place? lot disruption, Could talk exposure perspective bit the Wondering EU, gas of or collateral you plans just in And supply what of would about good, but indifferent and and geographies? what more happen not if for little consequences there European obviously, a that what in sort

Frank Sullivan

Sure.

to all facilities, are to. And far, so in a economic our back demand they're it's manufacturing paint further oil positive challenges primary think, the our to be product gas. picture particular, have Again, the a the be going finish on is a is that a throughout a certainly than certainly a And very lessen and strength because about and happens we're gas than Natural significantly of nicely, back turning of U.S. weaker that's natural impact being what part into And it $X the seeing with U.S. Europe negatively but better able and dollars. I look quick of some can in and cases, will get facility, And is it or -- that. natural in results translated slower is then billion. to I shift, feedstock So more all translation Russian out foreign of globally. of with Demand economically When European the business threat less Russian America. could construction It's off our is the in the the Europe, you're primary a the and of the where big in consolidated energy -- suppliers. dollar, basis 'XX, than Germany it And attention you Europe. to really exchange in chemicals North those Russia dynamics. part and gas some European, think, impact that geopolitical very if facing something negative dynamics we'll dynamic what's gas not of paying on higher happening costs things we Western to

Vincent Andrews

up with And apply this is in there of segment two management runway PCG a questions in from is? everybody that you that that Just how learnings sort where would about to else PCG, in your improvement a the you Or just anything much segments? mentioned is as and take that. process? follow-up, your guess And just be sort question systems. I other sales One catching is of of left can

Frank Sullivan

that's PCG cyclical, benefiting, gas Carboline one, cyclical it's the from and oil a our of And certainly, particularly spending higher things. in not couple is and upturn. unit in A markets markets. and Number energy

the United bill . Act infrastructure States, and the benefits well. Recovery Coatings particularly our serving business the in -- In that pretty earlier, American of -- indicated pricing and in And -- of money, we've utilizing dynamics detailed huge data some those but catching practices shareable cases, particularly compensation because benefiting are others up doing, and in to And RPM a between Performance Coatings of Construction -- commonalities of and sales are it's and lot Products Group the of it are excellence and approaches Performance more some what Group. to a structures market the our places. As might Rescue the the chunks it forces commercial our RPM the

Operator

question UBS. comes Spector from ahead. next The Josh of Please go

Josh Spector

construction in Question margins the specifically quarter. around and

quarter, typically, think have margins the I fourth quarter been relatively of you construction margins years. outperform have similar first generally couple and past over

the us next maybe some can year? you about where see those and lower over margins curious So the drove what you more comments heading construction in give

Frank Sullivan

call One productions. I alkyd Construction relative is that they resin that would to -- Group -- out even Consumer Group the owner of our challenges. the There's our are drove Sure. the plant, Products Corsicana though

construction from negative million So for we million $X utilize that there's better plan. further should products through $XX as -- or the a that, hit or year that get

their sealants. Group have the silicone year is our Products Construction or polymers of of of largest last Products hundreds, silicone-related terms The up fourth in Construction our XXX% of products percent up is And purchaser silicones. for a year-over-year, second Silicones the primary costs largest silicon are silicone and a area lot hundred quarter. in Group, the couple versus been

we DAP is where silicones business. buy in our area other The

of are And so the drivers those it. primary

almost work because a those statement products consolidated anticipate the certain you'll we to that sustainable points. as were basis -- to in, their a and the results generating through years. are And those the on extent, record couple to MAP otherwise -- that's XXX of those Excluding EBIT note, world And silly from their EBIT. but continuing next expand a figures construction two basis factors the are impeded EBIT that's up what program, we Growth in

Josh Spector

to rest follow-up another volumes what on just Europe just segment the able with to you seeing in construction, of that in Europe. the And relative world? you're helpful. but That's related Are quantify

Frank Sullivan

construction we been Well, in it's true has facility have in really it's challenged. flat all to mainstream and slightly and our businesses. -- Poland the Poland, nice of across And a down, products very

fight. Ukrainian have We --

hosting Polish associates who have a are their homes. We families Ukrainian in

concerns And that, of going and products there's our construction and of manufacturing of segments. Europe, base unique it's across things and on all across particularly lot significant U.K. our so about a that's pretty there, energy costs that's to weak group than got Poland. challenging a Other demand

Operator

question next McCarthy Kevin The comes Vertical. from of

Kevin McCarthy

of product percentage your frame sales been had or it Bottom Slide was in either I remarks, help any us that an reformulations. used X, I impact, material what products. quite referenced you undertaking. prepared that in think imagine word process? of you Can you thousands the your you terms through positive of of have and would reformulated whether as cost that negative And executed

Frank Sullivan

thousands of on that. over formulated literally Sure. products. fiscal I don't can But have a We 'XX, work -- good number.

unable lot had due raw it chemicals control were checks. it's reformulate get. we intermediate to in the So to more But of them literally to face of initially around. shortages. the And recertify modest material Those that are primary them, to smaller tough reformulate the a you quality some was

of very channel as be an resins and based of a lot had would seed oils, example. larger very has places, just into coatings in more -- categories favorable footprint. few seed bio-based that's a favorable In -- the we've a environmental One performance oils reformulated and and

reformulation. reformulation QC recertification impacting the you've And performance. this the doing what sure that our materials can and That's board a that it's And got of is last drove availability light year, in I such so in sense during intermediate then an over isn't our quarter the of process raw and codes address workers to or quarter really XX% time COVID you. of reformulation The across but year RPM the this to process, think, up for the and customers inflation about unique -- the in you're labs that's was terms versus terms we in to your go this with that folks have the most make the chemical -- it checks of period. material with frontline industry. real last And issue of get the our of certainly, worked this heroes, not in material -- better in lots through quarter-over-quarter, there's in

Kevin McCarthy

Okay. level And XX% first Related and silicones to do latter on to that oil. up quarter? in you trend then that, you just the commented How to that comment. expect inflation on follow

problem this at are raw anywhere the among basket are also, So children point? And then starting family? to you sort of the see there other in relief material

Frank Sullivan

packaging, consumer, quarter-over-quarter, of in us Other So that big over the not XXX%. mentioned challenges particularly up year-over-year XX%. the buyers MDI areas were I and that up like up critical is are impacting some up for XX% of silicone quarter biggest chemicals fourth year-over-year -- intermediate these costs, metal were this are XXX%.

got and freight and costs surcharges. costs You've fuel

So not challenging. again, it's to us, incredibly unique been,

XX%. There's stay issues. both price in then 'XX. RPM that's action budgeting the a pricing it's hard of to of tuned inflation additional we've fiscal is we'll first really Our occurring the judge. inflation availability And in fiscal additional have would occurred over about 'XX Most that needed And issues 'XX cover increases anticipates companies of quarter we've of to in number that and And what and/or anticipated. occurring. to

purchase underlying seeing directly don't our are we primary impact that flat We purchases, or base declining. but chemicals

way in a period such, we're direction. really oil than and move buy You're direction. to has chemicals the in the the underlying prices things hard oil are certainly moving prices tell its yet. time made we it's of And volatility in right where certainly That is the seeing other core the right not into

Operator

question of next Frank The from Fermium Research. comes Mitsch

Frank Mitsch

answers done shout highlighting appreciate Well I product played. in well out one of and early the your solid. rock

Frank Sullivan

to I headline. give was a trying you

Frank Mitsch

under consideration. It's

should XQ record margins that was segments think comment? about a X record that you X or of should a comment we near margins. made? all-time Is -- comment? mentioned how that was Or Or the see 'XX all-time that You

Frank Sullivan

So -- margins direction. EBIT -- Performance at Coatings all-time Group is record

that margins had a record We're to coming quarter. Our Group would And quarter record expect and mentioned -- in last for big our we're get for EBIT build And missed silicone. equal challenge missed, and been I fourth them the Construction before Products just we about impact, just of just percent Products they upon buyer -- to of then if margins is record fourth real The big a have EBIT as and a Group back quarters. well. us. you silicones there Specialty is to it bogey year's

EBIT QX, So of in our including consumer. segments, margin year-over-year you should one in see every improvement

curve that of I as had you good have the But mind But we're posting think weak earlier, we in the in we we met three I we consumer quarter. the of of pretty And really think light be cost are, ahead first And we keep guidance curve the mix dynamic. the and said results be We that comparisons. price couple to ahead some be to pretty to I the that's excited. will thought industry of in fourth we'll in in should impressive. in quarters able quarter. four in where We're be provided. all of broadly terms look a next places, our the

Frank Mitsch

see inventory the increase just your I customers your How expect follow about inventories given to that could throughout do earlier. assume inventories you I'm when seeing you'd you the should inventories. you've chain? question And do issues. that if how because had more on your the chain the customers are Very Obviously, think we to up curious, And supply helpful. normalize? And also

Frank Sullivan

Sure.

fast everybody and of got what for that not a you've as fashion, little think but people very in of lot of -- in what I general. fashion lot a business they we're have retailers don't knows want do. Thankfully,

our playing industries. in in talked MAP and that's But year capital detail, out challenging. XXXX goes a this details suspended in our will And mid-August in In some case, then be, out in our that dynamic which October. in was about working our of about annual so report certain kind goals, that's we

we So so we could doing our valve as were In we're waiting production. we're raw best get, accumulating intermediate we to not but areas, materials. or a as for chemicals producing particular a start as that could material much raw accumulate certain

partially and than raw whip -- material have had certain higher have have we is relative strange unique places, ever which or a -- a in literally inventory little in are we so something, our the chip we've would like to our products a in in Group the waiting business in Group for or that the can partially RPM, Brands we you And for on or again Legend element. other Consumer Products chunk batches finished so Construction that Legend completed, and waiting of Brands, and relative that's thing some a are of key level of largest and not but case is other then

and cash but the flow few back then more dynamics that cash realized my dollars in and back than This had we the availability. don't we'll I inventory improve expect significantly in raw have year. free get we little And something will fourth we to had ever is to fiscal they a and we 'XX. first lot flows, in back hundred that history with flows people get quarter relative positive. year of a the some negative we'll material probably generating other of record of the that get 'XX. to the so for cash believe is And And we in to and something of million anywhere to

Frank Mitsch

so helpful. Thanks much. Very

Operator

you. Thank ahead. Jeff comes of go question Zekauskas next Please JPMorgan. from The

Jeff Zekauskas

guys have have You been and inventory FIFO rising. costs

Your of case? caught raw gap, next gap? second FIFO there the base costs about that And of Or LIFO materials still quarter that your FIFO -- is meaningful costs maybe costs Is because a fair in and will a your are year? peak up? as

Rusty Gordon

Jeff, Yes. here. is Rusty this

months. to XX of in see to go continue correct about as FIFO increases On far we the As you're X the days from average, we're hold last going P&L through that inventory. goes,

say carriers of days will lot the I because quarter's freight actual and work penalized would out come later inflation suppliers, somewhat through XX our A out fourth was So people first in of the FIFO. our quarter again too latest we're purchase sick quarter. too. order on at our seeing facilities, POs that in

a New around Year us fourth in had we hit So the that production lot quarter. of inefficiencies

flowed news from on of sales through standpoint in that efficiency that be our good QX. better should have So we the through, coming cost and front, should

Jeff Zekauskas

fiscal In were digits? that. your Got volumes Okay. -- for down low my follow-up, 'XX, fiscal single in consolidated

Rusty Gordon

marginally. year our fiscal for not volume was For It is was consolidated a pretty very tad yeah, up flat down. the up was but 'XX,

Operator

question of ahead. Byrne Steve America. next go Bank of comes The from Please

Steve Byrne

for you this a that surged of one doubled. effectively have resins it into Is first which are that those your the alkyd say in go of second? that mentioned or expectation? raws fair fair fiscal that Is just maybe -- your drivers Frank, to the fiscal to during in the margins materials resins, quarter So key -- plant

Rusty Gordon

Yes. here. is Steve, this Rusty

the XX% capacity. you resins ago been since plant-based have lot because that have go, A so America of North alkyd a out alkyd took of correct. the resins Russian invasion oils gone resin production are more as far the And rising of Ukraine. As of alkyd up year explosion

as So in first they here we the up speak continue to go quarter.

alkyd you expensive buying going be resins are correct. externally continue to So to day. is more every And

up Corsicana, of alkyd is We plant ramping our and continuing. are more our progress in-house, Texas and supply that getting

to we make and more different resins done our So to varieties alkyd of get resins in-house. sourcing continue of should continue alkyd more

Steve Byrne

incentivize an this consumer maybe How a at not production isn't So little not you guess that by RPM Tremco this businesses even businesses why could sourcing you the not Rusty, plant? plant then plant, And Tremco and that plant fertilization was plant I resins and drive -- brand for comment cost And and you broadly. from a acquired was by do Tremco, sales? more who sure between when indicated right? getting I'm acquired

Frank Sullivan

Sure. this Steve, Frank. is

doesn't plants. have plants. don't RPM International any So we Inc. own RPM

and operating owned -- our the fiscal think where expect that That's expectations team our Our plants primary Products other segments and And very them use also to our they And Nudura, of plant, site to were the businesses. 'XX, by is as in operated And while their for producing Construction in I Group. investment which we we strong our resins out a driver a not expertise. expansion in a we're have going so also manufacturing we it have four operations when company for with Corsicana and Products them or expand Group. is site that we Construction the they are had focus the acquired areas. significant

but working our -- many be shared expertise that across not I the biggest beneficiary to because our say the and manufacturing Consumer shared functions, that it's and cooperation of The think, I'd be, a of But and and is it so makes sharing an manufacturing definitely that's to multiple businesses, Group exceptionally RPM somewhere, and well wasn't, working got shop. it's it's will businesses manufacturing report and RPM for approach 'XX. across across assets and Growth don't Lastly, in asset. it's in we manufacturing communication center-led is most a it's the really that particularly and have fiscal in operations, post-MAP in 'XX to possible asset

Operator

of comes Capital question next RBC go The Arun Markets. from Viswanathan Please ahead.

Arun Viswanathan

say back curious, in we've areas how get you channel, the just at elevated inventory I also for just other you levels Obviously, of box? So that would levels yes, Consumer your I what but the wanted to would heard I issue, to guess. is within retail your Group, was box the inventory partners? big characterize big

Frank Sullivan

still multiple need are they in to consumer rates categories below where be. across Fill

high that's an looking multiple categories. true across and industry product XXs And you're today and -- at so XXs,

as in -- there inventory and still 'XX. as are So our case, fiscal into will roll dynamics be of fixed we, core we fixed

so And X for the been has last the -- that inventory true and years.

Arun Viswanathan

Okay. some that in material into is demand Have go see we more prior or group, And possible performance cycles? outsized that actually category, increased small it you if you seen the see in in maybe that recession? project do a

Frank Sullivan

summer. the expansion of these capacity in We issues business actually through in that -- business. a prior have and the seen -- And And we consumer $XX million see what's we've and our of freight raw consumer issues. recessions were certainly availability multiyear end by our uptick an material DIY all could

to we cost We consumers. as mix will price find ourselves the and position, work hopefully, cost-wise, in very relative capacity-wise a good year into

and pretty there in good of aspect somewhat recessions, we're in countercyclical past RPM. shape all So been that's

Arun Viswanathan

one. I if then And just Great. quick more one could,

more little bit So the this does bit to I on focus capital more but be switch an program, allocation? really and a Growth would initial was MAP the capital guess, a flow? the know cash little on next SG&A focus I initial Thanks. to program for MAP allocation

Frank Sullivan

Sure.

addressed working capital into The details, in flow, focus indicated SG&A. on will Rusty a with so program a in expectations. and growth benefiting I particular improvement do from new revenue we improved be along But some think MAP as And areas, focus get most margin we'll have the on particular gross cash October.

Operator

Mike from Please Fargo. comes question next of Sison ahead. Our go Wells

Mike Sison

one. Just one quick

then will Your growth EBIT come some up materials maybe with simply even XQ cost outlook the and sort savings such? XX%, How of like that much adjusted QX and it could better. growth of sounds the and be for growth from raw maybe of pricing, XX%, volume catching

Frank Sullivan

in strength good Pretty Latin America. North some growth America, in

small very demand the larger concern weakness is and shift and in Europe. much about -- relatively Asia

might that Group us I were earlier see single-digit unit on segment, by up products as might things And and mid- for pop Construction our so construction by and/or I to would up. Performance availability a in raw high again, projects both Coatings challenges, expect part qualified are that commented which of to components any projects Products growth that material -- Group hold

last expect some couple that quarters for year volume a again, the Group, most and see quarter-by-quarter. improvement our 'XX. to I most up And price fiscal finally some costs I with for will profitability unit think of consumer volume relatively of of catching you're relatively which operating flat our the in we've the going although of improved combination in unit see we'll flat, efficiency Specialty pursuing Products that been in has growth of be next efforts with would been

Mike Sison

Right.

So get up half price about digits, to way if the it raws? probably is the levers maybe other volume to mid-single be of in half the think growth the could that you about growth that

Frank Sullivan

in first why unit and story. plays first out we results. detail QX. the on how I comparable a quarter quarter we'll be we provide Michael. think That's price that, report it results And Again, when delivered to through segment-by-segment really between But went it's I what will

Operator

Panjabi Baird. of comes last Our from Ghansham question

Matthew Krueger

Krueger Matt actually in sitting for Ghansham. is This

your that? want at to So or a we're from perspective, each talk first can where off, versus however you pre-COVID about portray you businesses -- your demand baseline, of volume

Frank Sullivan

Sure.

units. we've efficiency. Products Group, growth, from but pre-COVID also meaningfully Specialty price of improved our in terms in both affected of sales are And So obviously we lot a

believe are slightly their north EBIT below that. margin record I We of is XX%.

in there and Products 'XX. back that Construction to 'XX. In get Corsicana expect Group, build silicone at upon in we we fiscal plant, the the to expect except would EBIT margins would be and hopefully, we so And for fiscal all-time issue our

Our continue Performance to the that throughout Consumer margins Coatings Group record and is dynamic. on that. It's build most we'll EBIT our Group generated really

and worse As organic group our as seen 'XX XX%, And before. in huge. the some hit a of consumer fiscal was our summer segments. fall you recall, quarters particularly We higher operating inefficiencies high -- had as our really some then in in the and of growth level -- -- drove other some

are And so terms pre-COVID of unit fiscal XXXX. ahead profitability in we of margin revenue meaningfully our and volume; obviously, in ahead, significant price, in

certainly to of earlier, that, we regain it. expect As I all said of a lot would not

and it our profitability had segment, regain Growth including we pre-COVID Consumer that by our record of level -- to a take of Map goals, us a years will So Group. to in couple

Matthew Krueger

wanted switch Got bit talked to it. to rates. just very guess, then helpful. chain I supply things over material But constraints. raw I a quite round and challenges That That's we interest to And sense. makes about out,

how higher any other impact expect So reasons? And from across rates higher units? rates your housing to across interest do you demand seen various or have of you any your business impact affordability

Frank Sullivan

relative X.X%. fixed P&L. rate in at our good an from about and RPM really balance in rate And that average rate shape an -- environment, Number rising address one, I'll -- two interest our ways. perspective, we're of specifically fixed sheet on XX%

going As we're the you've in is new funny not to dynamics, got markets, seeing all housing. a up. United broader we in impact home still construction. shortage but demand There's yet. States And the headlines, read it any There yet the for to a relative in rents instance, relates

You've got mortgage rates going up.

meaningfully. near the out seeing into new into solid. home light are housing goes problems single down time component larger particularly Construction outperforming all how our some DIY volume business, It significantly has we and is in The that dynamics high not Nudura of and It's that and light those activities of our commercial which business a Products pro-business play in slowing in that DAP of completion be will have goes pros digit is So chunk business the in construction. terms over its and residential. unit term, Group, of The the interesting commercial demand.

So dynamics the as reading our the not do recessionary here you're headlines we sit in of business today, that reflect some about.

Operator

further Please There continue. at no time. you. Thank are questions this

Frank Sullivan

he now founded RPM. in called Republic roof XXXX, business. RPM is one had XXth of Metals my Powdered aluminum one year is year its the in grandfather product, When This coating milestones heavy-duty in illumination. across

were billion this feat generate in sales for our of and a business year is To revenue $XX,XXX. humble X.X considering First be fiscal $X.X beginnings. decades year quite

XXth they leading build our you for is longevity ended. credit a and business, milestones years industrial according to manufacturer than is to in all belongs world. both coatings impressive corrosion put producer system, and hard the company which do is Thank to to which just year. drive the you worldwide challenging year the associates success, of anniversary to growth these particularly this especially the this and span our is more business, its for of our XX,XXX work a -- forward is -- fireproofing fiscal in an move XXXX a better day of was celebrating when XXX Carboline Our every The XX and average Topping high-performance for XXXX. control S&P consider flooring also Stonhard Achieving you life business

balance focus continued thank sheet trends, us. to Our like gives quarter great results also and confidence a that us in people, I combined their and we for day. to you, RPM. ahead in with investment October. shareholders bright products and XXXX would have first future MAP a XXXX innovative program of -- a positive have market our remain Thank the We providing strong

Operator

We your your you lines. that concludes this participation disconnect ask call for today. conference your please gentlemen, thank and and for Ladies you

RPM International (RPM) 25 Jul 222022 Q4 Earnings call transcript