Earnings call transcript Q3 2023

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Operator

Good morning and welcome to the RPM International’s Fiscal 2023 Third Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matt Schlarb, Senior Director of Investor Relations. Please go ahead.

Matt Schlarb

Thank you, Sarah and welcome to RPM International’s conference call for the fiscal 2023 third quarter. recorded. being is call Today’s

The Joining the today’s Rusty and Chairman CEO; live Accounting Sullivan, LaRoche, and being can be website are Vice President at Frank accessed Officer. Chief Gordon, and Officer; replayed President, RPM’s is and also Vice webcast on and or Controller call call RPM Chief Michael Financial www.rpminc.com.

materially may and different. on current results involve risks uncertainties, Comments risks could please based to information and made SEC. expectations review filed More statements be on on these RPM’s include forward-looking this with actual which call cause uncertainties, that the reports

GAAP During you measures website. RPM made please in are this to basis on has be note maybe non-GAAP Also, third assist comparisons that unless all these as-adjusted comparable to To otherwise RPM of terms, an measures. the the financial conference understanding quarter to references indicated. and XXXX, posted on the non-GAAP comments call, will our reconciliations financial directly fiscal most

a section call. Webcasts It We have accessed this comments website www.rpminc.com. and be Presentations supplemental our support provided at the in the can on RPM of to presentation slide

like this to At the call would turn Frank. over time, to I

Frank Sullivan

updates. good financial call. results Matt performance and Matt call our morning for you, provide on third thanks quarter, business today’s the for and Thank discussing our us provide then I on details joining today’s begin level will and by high Mike some will will

prepared remarks to conclude our our pleased answer we Rusty Finally, be after questions. will with outlook, which your will

fifth levels quarter. several initiatives to execution adjusted sales of including remained This on helped markets. customer in execution other certain focus MAP quarter, consecutive destocking EBIT for our on XXXX and third associates end and and both In the focused RPM to record headwinds, overcome the slowdowns grow the

opportunities conditions appropriate. our expenses we focus are growth continue, MAP XXXX These to our to in addition expected the and market top changing structural reducing the where improvements to actions are in initiative. taking of began narrowing slowdowns part these our to ongoing by third quarter additional address As investment actions as

illustrate structural good ongoing driving to is example green A program. how our are belt we improvements

XX must this in associates execute belts, improvement training and serving $XXX,XXX green become two at continuous they of undergone earn certification, has initiatives. the have future. resources drive with to savings, least During underwent belt and RPM training additional are identify green To focused each. both associates savings XXX the quarter, to now now its internal and who structural on projects

over past we have slowdown. the war the Before discussing begin like a and we including supply severe five successfully elevated navigated quarters, segments, several in demand highlight that challenges, recent disruptions, to I’d inflation Europe, chain

our generate record-setting dynamic balanced environment strategically in product leverage entrepreneurial to of ability culture Our our model agility broad in associates our the to the and condition. value and portfolio changing a business market this demonstrates performance of

reshoring growth protective Turning facilities projects. to of sectors concrete highest fireproofing our to construction and These engineered and growth revenue. third businesses strongest systems These quarter our The The targeting achieved revenue such the businesses. admixtures flooring and market, have the electrical growth themselves our coatings include as additives in positioned our microchips. vehicles manufacturing businesses, businesses primary and inflation. response the in continued and by this segments on Slide solutions, of increased record pricing X, was was providing all infrastructure businesses, driver generated four for

conditions destocking and their sectors and weak in experienced customer that demand conditions. construction OEM deteriorating impacted on and the economic interest by and The been areas has markets commercial U.S. Businesses and higher rates, construction market serve commercial impact residential housing these negatively market activity.

of increasing at the in consumer and retail. retailers were advance as declined inventory about volume takeaway unit from segment, Consumer our season in spring Additionally, cautious reduced

levels X.X% our XXXX rising year-over-year flow. which during material and at the In our third fixed basis. inventory, MAP normalize inventory This most at we we offset the in their resulted facilities continue plants, destocking improve with to Inflation our production cash costs continued benefits reduced generated of customer cost to addition lower to utilization quarter.

Foreign adjusted EBIT $XXX record group. remain in recovery the EBIT exceed well quarter profitability our our currency benefit. quarter. MAP to headwinds, unfavorable during track margin organization due Despite one million the the we execution We in part remained of these ‘XX year also successful third target on of across in initiatives achieved MAP as the in XXXX large to consumer as

by Looking which by X%. benefit the Europe America, sales to represents followed at infrastructure again grew growth the was Latin over declining and XX% reshoring-related the quarter, weakest sales X%, America, the where with areas region North geography strong slide. X.X%. sales fastest grew spending. third for from next sales of in in These

percentage Foreign sales to by mid-single be headwind all continue exchange the sales Absent a FX headwinds, in and meaningful range. rates would these mid-teen overall quarter during X.X%. have increased the reduced to in regions

LaRoche to over cover our more Mike detail. I’d call in to the results now turn to like financial

Michael Laroche

quarter Thanks, or and or to was $X.XX a X.X% compared million Frank. sales reported Adjusted to third were to the the $XX.X driven $X.XX of FX $XX.X prior X.X% million. acquisitions was decreased compared X.X% primarily $XX or $XX.X million a EBIT adjusted grew X.X% X.X% $XXX.X diluted record. in million period. the growth quarter of Consolidated billion, net sales year prior interest The Consolidated Organic in sales XXXX. $XX.X period. compared $X.XX million of quarter $XX.X earnings which expense million. year decline increased to per of sales third by to record contributed million was share by third higher divestitures in to

a On not million furniture of expenses from from gain $XX.X other recovery million an pre-tax adjusted of which quarter warranty charges XXXX, non-core our are and and non-cash the initiatives, a in EBIT adjusted several these Consumer items we excluded impairment our which the change the include assets EPS. $XX segment. indicative ongoing related third result on and in a XXXX $XX.X million go-to-market business includes basis, of MAP of insurance a PCG, of the in gain Europe, operations strategy $XX.X to our During of in segment SPG million sale

which we segment our by X, of contributing led prior X.X% sales On results. offsetting also and was Sales this in flooring, impact Europe sales strength million, the period. weak our growth. and reducing weakness net Construction in growth parking the sales record share growth increases X.X% increase included demand achieved reshoring-related and compared Next, also $XXX and quarter to Organic third spending. Slide X.X% admixtures structures foreign acquisitions year from of remain restoration for and markets. repair Group in and concrete growth, and commercial discuss residential products, construction soft. for an customer facades destocking. our contributed Sales gains by benefited pricing revenue Partially X.X%. market systems translation Products CPG’s currency with certain infrastructure of was was Demand This will to

decline at was Adjusted the production reduced resulting demand $XX.X unfavorable lower The $XX.X million, prior million. from fixed and was that caused plants. EBIT cost of decline when by utilization adjusted normalization a inventory XX.X% our EBIT was year initiatives period from internal customer

adjusted comparisons As a EBIT faced challenging to reminder, XX.X%. prior increased when year the CPG

on record Organic and of foreign X.X% sales million The added were the driven a fiscal next to all spending growing nearly slide, Revenue quarter an XX.X%, coatings benefiting businesses translation X.X% by its continued $XXX.X pricing systems projects. reshoring third was from of headwind. energy and adjusted markets, all year increased acquisitions demand and growth. businesses, are Coatings contributed segment’s increase These achieved compared protective fast volume to currency fiberglass the strong EBIT. Performance Group and Strong infrastructure growth period. vertical in net grading, also was growth. flooring sales Sales achieved XX.X% the targeting and prior

quarter increased of in adjusted driven PCG’s sales by by to This I results impact was XXXX The to of impairment EBIT in third a headwinds. strong XXXX XX.X%. benefits, of quarter partially addition record $XX.X the million mentioned. excludes million. growth $XX.X growth XX.X% asset achieved FX increased of previously Adjusted and offset that the MAP EBIT charges when third EBIT non-cash adjusted strong was

year reported third X.X%, million, Products increase headwind a currency of foreign was divestitures X, net quarter X.X%. Specialty of the prior by X.X%, of Slide sales X.X% and reduced Organic increased Turning of Group the translation period. acquisitions to an compared sales to record $XXX sales

were the deep led to in quickly the in we and quarter have freeze operational by sales strength restoration Third disaster in respond to able California, business, improve made flooding efficiency. was prior December investments which to to thanks

customer felt a impact contributed OEM destocking. to demand Additionally, which driven markets, strategic as sales refocus inflation businesses continued business grew the and the growth which were was response also growth. pressures increases management. by to Offsetting of economic of they sales in this Price serving dual weak and Food Coatings experienced Additives double-digits,

SPG mix compared $XX.X excludes cost year gain the furniture sale million Unfavorable and and of lower the or on adjusted EBIT pre-tax to EBIT Adjusted prior decline was a non-core drove business other the assets. leverage XX% million $XX.X fixed period. warranty the the decline. of

Consumer $XXX.X foreign Group X.X%. X.X%, slowdown to takeaway. inventory was preparation following price Volumes acquisitions a third catch the well increased retailers cautious a X.X% which spring sales to a Moving Organic increasing The million, season continued were for declined growth from cost as to as the by increases and up record. in driven the sales of with slide, consumer sales Group X.X%, was Consumer levels was inflation. quarter headwind about as grew in currency contributed translation

as was Adjusted of successful as in to MAP the well year the third EBIT quarter of key an a XXXX period. XXX.X% increase compared drivers the implementation million increases of at prior $XX.X or were The initiatives sales solid record increase profitability.

the This as that of that quarter to high low an third reminder, XXXX and resin from a severe profitability Consumer was contributed disruptions year-over-year supply the Group not plant strong cost alkyd a at growth. suppliers the an extraordinary result As offset commensurate material increases. price caused inflation by explosion in experienced of

was the supplier. the quarter XXXX adjusted the resin prior $XX third insurance associated impact of business explosion lost gain excludes EBIT with the in alkyd year result million a receipt recovery recovery. of pre-tax caused of a of This business the interruption a by Additionally,

fiscal Turning continued $XXX.X two dividends to cash we have areas the million bringing to these in to in and combined our shareholders third million return during paid total year-to-date to We $XX.X Slide share million. in quarter. repurchases, $XX.X XX,

normalize add spoken inventories Looking elevated have chain at our to that to been initiatives about to times raw we resiliency our material capital, of during have periods our supply shortages. working today several

unfavorable positive financials. a initiatives see these While impact having we are starting profitability, our on temporary to results in elsewhere our are

to Our and cash prior expect working the $X XXXX million our future. of the compared flow we from benefiting end operations million negative a inventory $XX million period. in capital normalization was third Inventory continue in the initiatives November since declined in levels year $XX the quarter of to

update an debt our provide to on I maturity like would also schedule.

in reminder, and the January a bond an term pre-funded a As we of to loan in of XXXX XXXX. fixed was a And our November in XXXX at August X.XX%. maturing attractive that extended XXXX, we to facility rate credit revolving XXXX, maturity

May significant our of As amount vast have a over result, debt not or until no liquidity $XXX XXXX XXXX we later. and the million, due maturities of until coming

I’d update. over the like to to business turn call a provide Matt Now, to

Matt Schlarb

Mike. Thanks

forces past transformational along transformational events. are highlighted created Slide examples years, are events businesses Over our renovations with these these few drivers supporting in the of several investments political driving XX and changes have projects worldwide. and how A societal are new on that

our facilities area with to wind and are of to helping services blades energy. supply are products create protect coatings protective diversifying specified key engineered that is for and LNG facilities ensuring the solutions, safety From improving transition turbine fireproofing providing at The energy. and

energy Additionally, both we offer solutions existing structures. and savings for new multiple

capacity these or base have driving growth closer batteries for Globally, times changing to spoken several ongoing the EVs its is markets seeing several preferences of significant is across and reassuring. customer are electric about power one consumer of vertical and investments the manufacturing the We and This dynamics. vehicles. significant transitioning

the meet transformation We solutions providing this that growing and facilities to are supporting demand. this EVs are engineered batteries by for the producing

is to helping these transformations. XX, Moving to legislation accelerate Slide

spending the increased passed the infrastructure U.S. and to on expected addition XXXX, stimulus Congress where North for benefiting America that manufacturing to recently capacity legislation In is to and are of in passed we from institutions, reshoring multiple XXXX increase years.

contains have strong we significant additions projects manufacturing the that in The in microchips is relationships, U.S. capacity whom U.S. chipset the Several chip with the of the for started or have manufacturers, incentives announced first

EVs the for The in in percentage is the which U.S. the the a tax stipulation North extended Reduction credit with America. purchase Inflation of of second must Act, that the be battery manufactured the

have battery As a number underway. North result, projects plants or construction America, are in the for growing been of EV announced manufacturing

look Slide battery are have XX, of our which and at assembly EV requirements, and a designed take and demanding engineered the role construction facilities. On Now, we meet. let’s these specific facilities in are operation playing to the products

include Euclid the cement high-range facility. needed foundation is additives reducer the and portland benefit example which provides of both examples and Some that a multiple that during the admixtures amount Chemical, water construction. water lowered of One

patented protection times, safety Additionally, steel used construction durability against TUF-STRAND Euclid a offers applications. concrete XD replacement are macro facility’s which overall synthetic worker Chemical for a enhanced increase of reinforcement and providing improve as better cracking, fibers,

X projects is applied be protection. environments been Thermo-Sorb outgassing of for to clean quickly Carboline’s is passive to structures up EV schedule. Another to fire large applied for room hours It plants VOC, the in keep to on which can steel and extensively field interior and has provide tested

provides in impact the manufacturing and facility. Stonhard’s system Stonclad abrasion the motor GS floor necessary Finally, resistance epoxy

GS environment and clean in also to static Stonclad is Additionally, which resistant room electricity, a is chemicals. controls critical

to Stonhard is this system completed project properly on Importantly, the ensure installs time. that and

the example that the an warehouses, quickly highlighted was construction earlier, a of were at growing time. which agility As businesses of ago, RPM’s these serving Frank of years couple

to slowed, of strong we to and services. our of because able the entrepreneurial of growing area construction sector that fast nature been and products this As people have of portfolio pivot

I’d On RPM’s market innovation. to growth driver has for recent another Bringing been integral slide, years, In for new R&D decades. RPM, to like products following has strategy the ongoing. growth been to highlight

because of chain introductions have disruptions. However, new product limited been supply

on are we largely offense. are these back resolved, issues that Now

minimize decade, With These example, waste. Consumer reduce patterns our As X. paint project recently can dial. to segment, custom over Rust-Oleum and spray X biggest the in the introduced of match can X user technology, by a spray precision, output innovation their rotating in spraying the the in spray an increase patent-pending the simply the drips customize

retention XX% corrosion and provides the resistance formula Additionally, stop to formula. rust greater traditional rust advanced the color compared stop

slide omnichannel introducing will during marketing points with product the at The their sophisticated an of code reach example provides a this QR are all We campaign shopping this. journey. users on that

[Technical Difficulty]

Operator

is over me. the operator. holding. your Thank Matt turn to I’d This Schlarb. to you Pardon call like conference for back

Matt Schlarb

technical back I the am at Yes. call for to everyone. We will interruption. apologize Rusty Hi, beginning to that outlook of the start going over turn who the section.

Rusty Gordon

continued customers become experienced and Yes. to economic cautious. in as third Thanks, conditions and quarter caused elevated instances, pronounced in credit Matt. we some become the challenging rates tightening have The more conditions more interest have

us While and in our immune, repair balanced strategically focus slowdowns, from and not portfolio of our on economic are businesses is reflected and maintenance this outlook. helps insulate we

admixture averages. sales we expected than more XX.X%. office prior weakness digits are to as For in record historical below to year concrete in residential sectors segment, certain low which by versus are increased distributors by mid-single CPG decline while is be offset Strength sales, such continued to construction inventory holding expecting and

as spending and PCG XXXX on to mid-single to growth top well as record of benefit is MAP XX.X%. project sales increase low continues double which when the sales as results infrastructure from digits This declined SPG year to to compared year remain is from are prior digits segment markets, prior reshoring benefits. expected weak. grew economically OEM XX.X% when record increased sensitive, results

prior sales year inventories year Consumer we due sales increased results results well retailers are to cautious quarter compared heading This record to sales flat lower as be pricing is lower grew record strong months. about consolidated the on X.X%. increase top mid-single increased building as of fourth XXXX anticipate XX.X%. Overall, seasonally will when as volumes sales when takeaway being prior partially consumer digits offset was that fact higher by into

a approximately customer fourth record be million single inventories in impact insurance and to million, XXXX. fixed as be normalize down will initiatives would of fiscal full growth the We guidance EBIT. This implies as anticipate range includes XXXX softer pension to X% from reflects of annual sales a also high This $XXX growth XXXX. utilization range fiscal compared cost our non-service of EBIT It the amounts to to digits to quarter Both billion and year in months. XXXX record of uncertainty in over XX% negative fourth that the to results represents of flat of coming XX% the adjusted Turning increased EBIT demand records. fiscal economic quarter $XXX which to adjusted year expenses. $X.X well these and lower

paint Given prioritizing X on over this profitability, strong focusing highest improve initiatives that to difficult on focusing to spray the levels, with mentioned, new Matt control. and continued demand of in markets in aerosol including benefiting execution our MAP leveraging This products reducing reshoring, several flow, resources custom in inventories. position uncertain are infrastructure we environment, XXXX, data-driven growth expenses we our our what including aligning initiatives and normalize X opportunities, spending introducing can and on structurally from Rust-Oleum next investing with quarters and cash just includes

quarter beyond early economic As into limits uncertainty XXXX, we look visibility. fiscal the year fourth

certain However, tailwinds many control underabsorption our we positive to we that of complete start impact continue material profitability negative while will including the the and expect inflation abate, as normalization to inventory cost headwinds of initiatives. we

concludes This prepared remarks. our

We to answer be questions. your will now pleased

Operator

first The Instructions] John comes go Markets. McNulty, Capital from Please [Operator ahead. BMO question

Frank Sullivan

John. morning, Good

John McNulty

morning, Good question. Thanks taking Frank. my for Yes.

little it to that’s think can And some guess, side. lot that? well kind So is may side in expectations weakness and as bit of lighter. sales be when construction to on much come like quarter of seems that but had admittedly, that your the destocking you sounds margin profitability in where on I tricky. with quarter. help markets, line customer where there, How it were where were, came earnings about the just a seems and the in like fourth This there through the business? taking of was a you’re you destocking of be a the the may help as particular, place end through a lot us of It’s you the that

is that lot the of So hunch a destocking. my

I’m So ends. what better that for just feel trying the get to destocking looks like a when

Frank Sullivan

Sure.

take and pretty disruptions supply our destocking Our production have impact where improve hit $XX actions everywhere. would would months best last XX would which our have looked in to that activity seen impact, million is the of profit. expect is obviously, of I areas, slightly and or our the in level if take not hit in unit just to much just we same of took the bit, a about we that result really historically, would we as have of out revenue absorption to is the inventory a little that Products the manufacturing QX a quarter destocking lower to the of relative halted terms then expect Group other will so in higher volume. number there. And guess the been not in QX that whack efforts for And gross the levels, in to chain related a higher have particularly Construction

John McNulty

it. Got

work then inventory what in about come it of that going think might what starting Okay. kind time be helpful raw materials about pretty the thinking I off it’s I sound when much to how And for kind higher the buying lower you’re on take of front, are P&L. your a you are you be color. But think system? raw that’s does to that work they? raw as like lot you in. of tailwind Admittedly, should through No, a we baskets How the material products guess cost participate now. notably material little to across through

Frank Sullivan

a couple up. is move there. starting resins that in alkyd a still XX% quarter-over-quarter out consolidated outliers certain we right see quarter, direction. resins in were to And is packaging plus are basis, the Metal pretty but we’re of up up big year-over-year. But X.X% still sequentially, – on the Sure. There are things

X%. So QX versus QX, we’re of seeing an about improvement

John McNulty

it. Got

Okay, thanks very much. Appreciate the answers.

Frank Sullivan

you. Thank

Operator

Please ahead. with question Aleksey next comes from Our Yefremov KeyBanc. go

Frank Sullivan

Good morning.

Aleksey Yefremov

between difference? sign customers in I to destocking versus everyone. versus And of ask going in kind do lower underlying volumes was categories? would difference And saw about January? you of your Thanks. characterize you your two the destocking you you these abating know Good demand. morning, at improving any this also or what how How early

Rusty Gordon

Sure. Rusty This here. is

demand is the inventory pieces is $XX the third what In saw knock in to effort down and million second hit end the quarter. destocking. we of two There normalization terms as also by there it. absorption lower from quarter, our really There our versus of RPM’s balance was the we customers’ inventory

about pieces, which a might over in So million, case a between hit, those little is $XX worst It high be the unusually like that. two $XX Frank in there was million the us. for said,

impact there So definitely P&L in the on is an extraordinary QX.

Aleksey Yefremov

are lines was just their to this, the question Do up on closer And destocking a follow-up more signals along see trends the destocking in anything the efforts? itself. guess your my the I you end that of customers

Frank Sullivan

to going general you’re see spring late chains and think their I from us this supply work also Yes, in normal back to way summer. and

this of by we’re is unit the normalized and So a – and our that seeing greatest anticipate product right-sized kind the issue of both businesses space. separate. our doing businesses things consumer and the Then lot I where construction these be industrial customers, weakness we’re would construction is our in levels that to seeing at or of chemical in And destocking, volume summer. we’re

Aleksey Yefremov

much. very you Thank

Frank Sullivan

you. Thank

Operator

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

Frank Sullivan

morning, Good Josh.

Josh Spector

Hey, good morning, my thanks question. for taking

seeing in And you’re in your on Obviously, versus about comments had and as in in visibility can actually tightening credit interest or if resi. outlook, slide you any impacting is different pressure well. know impacts your just some on, comment I we guess, month your that way? comments pressures side and order commercial rates So for the a your there, the ago? you now so book about

Frank Sullivan

Sure.

construction. from coatings separate of kind highlight would I So

housed and recovery. record our coatings versus last margin were Coatings businesses Group. X.X% really EBIT and I at look comparable you principally and quarter Consumer And more consumer in strong performing sales quite our on We in them, a our peers. Performance margins coatings we’re of up year well top if Group are Our think on

here number XX.X% coatings categories driven differentiate in their almost go North markets Group, in the start grown those in new were the slowdown of by those we’ve of space would are each really be been down and revenues businesses would of calendar expect see those by construction been was to that trends Performance the and and and commercial the infrastructure that months their trending up construction be ‘XX. capital new spending. the in hit balance January residential Products EBIT In and of I America. Construction a in Coatings has And reasons. XX.X%. in $XXX our million commercial light strong industrial calendar construction on continue markets, Our seen what for Group, pretty negative in residential up I for we’ve particularly continuing to to Their a to commercial it’s piece We construction, and ‘XX. for

Josh Spector

helpful. of Are I that’s some an see there? I that been you your there if So on Have declining any can this products, books No, you’ll Okay. Or follow point? vein. the guess, yourself. expectation up, demand mean, mean, could comment And is apply softening? in you percentage I if your I order at of seeing same you kind difference

Frank Sullivan

bifurcate that. Again, I’ll

In business. terms in seeing strong books our spending, order would pretty be industrial that capital of flooring we’re

businesses. flow it fiber does application their business, coatings seeing grade Carboline order and into flooring our Our protective good we’re into own

the our roofing to Tremco also would that a ourselves here where meet real we currently deliver business, of better is I in take the think application or full we the contract. volatility our some performance lot allow to expectations anticipate us do than either

seems We have pushed strong the a book, the spring and it really later to have into order summer. been but

commercial to my earlier And we’ve months activity. deterioration sequential so comment, three back construction seen in of

start XX% the construction. weak to Roofing as to get this fill. Products business start is maintenance early can tell that I reroofing as spring, so to has you about good think new as our business late in And results, But summer The news the to see Group whether year. and backlog had the Construction to Tremco repair calendar will and/or opposed a spring it’s

Josh Spector

Understood. Thank you.

Frank Sullivan

Thank you.

Operator

with from of comes Byrne Bank Stephen Please next Our America Securities. question ahead. go

Stephen Byrne

inflation much couple versus years? you. where your growth last there was a you Thank offset delta in EBIT material volume? want you to the of get the to much back How more Yes. would cost of price margins? of How would to raw quarter seen over need price is the much to How see revenue you’ve

Frank Sullivan

price price where only Sure. – a Steve, provide quarter, In In or the – in consistently only on by pretty was about we segment-wise, place Group. unit the volume don’t had unit volume Performance we XX%. was place where growth consolidated Coatings while segment, basis, the strong our

On by this month to low And category or down has it, let’s summer. any the that’s perk relative consumer flip call POS we’re up side, the, range. to again, in month to attention been another strength mid-single-digit that paying spring or

Stephen Byrne

price, this in And last to push where the you to need order Frank, recover raws the from X years?

Frank Sullivan

to be. In most need we’re where we categories,

a and our is some some have still metal up outliers some resins which bit prices challenges as little raw price there businesses consumer TiOX. to We other have that perked have in one materials. those our of our businesses are packaging Alkyd We year-over-year. to coatings coatings related business, of roof taken particularly certain XX% in of of specific some

And likelihood we the of there there adjust happens some what that in be will are so challenges to is looking the and with up. to flat coming or price quarters

Stephen Byrne

I you e-commerce Okay. PPG? large of there you that? is whether given can had and you whether an you – initiatives recent are risk recall Thank your thought, business, can agreement I Walmart of Walmart. just to you comment you, update have on this paint on at Maybe And with with for Frank. customer a how any give an

Frank Sullivan

Sure.

basically with growing. PPG paint new Walmart, From initiative interior paint I wall calls, and million the announcement. yesterday. years not loser in by more ago announcement zero PPG and the America prior recent specific new X.X while at tell can we you, saw provide revenues While we had about customer, And in do I put was don’t were North paint than wall the or $XX X We Walmart. that in years that relatively of exterior talked ago interior exterior the net out with we will

us. of the the And PPG so is a announcement and That that’s category category reshuffled with a major replacement vendor. being for

that of not growing that are We wall from major we’re I program north as Walmart paint vendor. at $XX said, million and And ago years was zero. X

Stephen Byrne

you. Thank

Frank Sullivan

Thank you.

Operator

question Suisse. with Please Roberts go John next comes ahead. Our from Credit

Frank Sullivan

John. morning, Good

John Roberts

Frank. morning, Good

You lost alkyd you share? When shortage. think Rust-Oleum you get the in pre-shortage back do your share to during

Frank Sullivan

is a and a that and share that have expanding. But positioning of paint as could answer that is, other that only and position, my good from at gain don’t supply have it’s a is Depot some our to I question. of it don’t than where good to not it’s spray capacity Home would It it today. all I the back back, chain competitors, we answer when take we understanding a to

John Roberts

excluding Okay. expense that you charge, impairment MAP And the the the in quarter trend? $XX million expect to was then

Frank Sullivan

I about think the roughly same.

And the going $XX clear position that’s want the really $XX good hit sure a Our really is MAP and by to destocking program itself. I make well. our when into you that that in think under P&L million MAP initiatives I take we profit again, And account we’re the actually by impacted gross million.

to working in they normal a inventory and should circumstances, continue as to throughput a margins. in right that. MAP be, we we we’re So going on levels In really snapback get the initiatives the and you’re back position, where profit our as nice gross see

John Roberts

you. Thank

Frank Sullivan

Thank you.

Operator

go is ahead. question Zekauskas Jeff next with JPMorgan. Our from Please

Frank Sullivan

morning, Jeff. Good

Jeff Zekauskas

much. very Thanks morning. good Hi,

how savings $XXX If by is would you do you ratably your your in it sales? divisions, it million allocate had across just MAP or to

Frank Sullivan

that gross that we’d I have generated know profit at in is have I of is by answer don’t that Most specifically. for Across would look areas it and divisions, that we good to and know a margins. the impact don’t sales. that communicate It that,

So some basis relative in a consolidating more mix continuing in it’s it’s there on XXX procurement as savings where and the data to medium is are MS work on better, basis to utilizing going our of manage see plants. we to ton to small prices categories a are

our share in show So gross the work MAP profits. lion’s will of up ‘XX

on our profit And something. so from when that perspective, shows sell gross up we

weaker and second our And and in our quarters with so down obviously much seasonality with given quarter here. of somewhat weak go a the or very third strong up fourth will business a first seasonality it

Jeff Zekauskas

you your in lower the a Rusty maybe quarter. year-on-year be quarter? lower by question million were $XXX in payables the will then And payables for fourth your year-on-year think Do

Rusty Gordon

purchases, more resiliency the buying if to Well, situation think year and not in that sake uncertain our Jeff, X look were I supply of we exactly, we back we’re would for probably due ago today.

would we think of that versus the same last I of this year So the not level purchasing year. would same in level have payables

Jeff Zekauskas

you much. Thank great. Okay, so

Rusty Gordon

You are welcome.

Operator

Research next from Harrison with Partners. go comes Mike Please Seaport ahead. question Our

Frank Sullivan

morning, Good Mike.

Mike Harrison

Frank. Good Hi, everybody. morning,

to be about bit some kind growth fiscal turn of and we’re growth, starting expect appreciated? us with to ‘XX, of headwinds but guys of see our Just these positive you expect I in definitely in modeling I cost as you abate. attention that sales maybe comments wanted of taking a XXXX, But is would improvement get little earnings guidelines that to a if talk or to limited, terms to continue the any could that margin visibility mentioned Rusty, you’re be could your to you actions think you to internal some help

Frank Sullivan

Sure.

absorption $XX our and the own So key detail million say and take volume. of is July. in of position think, $XX with I’ll we impact area activities. associated on quarter that broad destocking inventory then million second we of ‘XX, I and fourth half volume we to look that a will leveling from a to more is because the somewhere when Mike, provide that, will you obviously, give in I at. And And release be some thoughts unit aside But lower in an hit between our

those and throughput, to next the second in year. And half so see correct particularly in more improvement should normal be gross a a return there of we profitability, meaningful we when

to about. that’s something think So

consumer with issues challenging about commercial I that going to pretty and that good made. be We and And supply it last construction this capital as line the takeaway. we commented, I the that. improvement for residential markets to relative the we playing the really years in much X in growth chain in believe ways earlier, feel are and the we spending Rusty until that, we are good Performance Coatings doing of strong don’t need adjust getting anticipate repeating, As And spring see to what in to to by consumer Matt business backlogs ‘XX. and calendar driven we better comments is in indicated industrial offense next but we spending, underlying infrastructure rest year. have probably and capital our Group, our do those markets in very anticipate we’re of

year I think broadly July. Beyond basis that, results some we more we ended we would will and when segment release provide provide – detail on for consolidated both by our a

Mike Harrison

question the was helpful. business. That’s then Alright. consumer I had Thank other And on the you. very

low, indicated partners the we’re busier retail into are your being inventory You keeping kind cautious of that season. levels heading are they as key

thoughts how we key and with season the it’s consumer other – it’s interest play depending levels Just you’re of I if pickup DIY if happens or are to inventory know – kind weather on the or in could predicting on any variables don’t what see factors? rates out what some whether

Frank Sullivan

call adjustments. – – months the seen as we and takeaway the or are I would see consistently pretty I there, Sure. Again, POS, of for have in for terms improvement I to spring, indicated, get mid four we completed and so we negative low it, takeaway. customers I inventory both time some have both would consumer our this consumer will think seeing that through mid-single last, months Also we digits. the in us five anticipate by we will

and growth offense. unit if be it seeing inventory and volume sales consumer is are lower opposed to purchasing internal purchase, So, as between a external there and will a adjustments on to we reflected difference our relative playing

new foam a patented with our products, retailers product new got spray going DAP. number have into We a of

first at to weeks, the early Stops spray that be end should distribution. see it be of fall, that’s new shipping patented throughout our summer, throughout the in be will by Rust going summer, retailers a in will have and we retail the the introduced coming We you much nozzle pretty

and carry the We are a and about larger campaign it are start in that, going advertising May to us through summer. we promotion will excited around that,

are uptick an it’s will we the last at see we we that get be. is position to the and going that we question, performance there hopeful some we whether loss, good to last an earlier believe we in XX pretty the that Depot over. So, that is piece particularly to for Home then in that share And area. But back. led business will where months, experienced that it’s now tell Time are believe

Mike Harrison

Thanks much. very Great.

Frank Sullivan

Thank you.

Operator

from with Our next comes Ghansham Baird. Panjabi question Please go ahead.

Frank Sullivan

Good morning Ghansham.

Ghansham Panjabi

else. a And sensitive just Thank are of which course, interest notable Is stepping over on you – that rates higher up obviously, of is several are it mean run everything morning based with Frank, stickiness… to just markets you Frank this end rates you. patterns? Good past there year. kind how everybody essentially amount that the Hey fair out, of see and I towards bit different quite back, sell go thought of into a and materials, of I would in rates, am sort context historical asking raw playing or have you anything

Frank Sullivan

So a think yes, to manufacturing unique not I it’s you different first in at all, segments. least of could from perspective, us, it

calendar are more of are do in certainly, old are rest businesses, we think experiencing so cyclical and our ‘XX. cyclical recession. that the going as And it for a I earlier, good in to seeing fashion We I commented are more businesses

to guess I call a are my at August they or economists September in started look, and February. recession fancy you in recall, we these as know, typically will recessions, it and in don’t say, all hey, So,

we I So, think are there.

never past talked the had and here, to and both is this I destocking have inventory broad think what about our channels. we on call call, inventory on the what’s with we in levels address different this that our levels with and industrial experienced we segments time have have

to when to and consumer, about consumer until talked destocking, we reduce related really have historically, segment. it figure seen sophisticated had up have We over those inventories, time our And we how or down. only typically to fluctuate out customers continue inventories this period,

And different. that’s so think I

years. because dollars our the never show there of have good in forward, inventory that scheme commodities, gross said, we as there return our think impact – still actually about ourselves positive I impact for un-absorption with the our of shooting inventories the own right, ‘XX will we of strong will news, that terms forward, QX stops, very just that’s margin line. profit MAP when coming In in a is if going have up We activities. Knowing tens the good bottom of on gross down potential we experienced am type to I is And stop that’s that in overhead recovery as cycle experience bullish going and of these when our of I the I hits. volume, grand millions absorption think foot overhead in we actions of And that going the experienced in on of QX. things, get

Ghansham Panjabi

relates think digits? if think destocking Frank, what but sorry, this, I for you was am to which XQ, at the your I volumes as the impact And mid-single purely I customer from were missed down level it

Frank Sullivan

Yes.

think in is that time, remember. for production it’s of a across million million at I holding literally inventory a think which volume number total. million And associated to lower $XX internal days So, adjustments, which own eliminating think unit a something – of or is I our the way our in $XX $XX RPM outright can’t and/or operations, with sales shifts million including week about and $XX I

light and that. incredibly and areas recessions in in that’s eliminated to past that couple have a like in of certain But in there plants week, closed is shifts my We of for unique RPM the career. we things a

Ghansham Panjabi

Thank you, Frank.

Frank Sullivan

making simple Thank is inventory stop way you. reduce Yes, your to to it.

some And quarter. of so that’s the in happened what

Operator

Our next Mitsch Research. ahead. Frank with question from Please comes Fermium go

Frank Mitsch

Thank you so much.

Frank Sullivan

Good morning.

Frank Mitsch

Yes. Thank Good much. morning so you Frank.

color you hit of XXX you the sort MAP any end hit terms in EBIT that And high what the that? need quarter results. XXXX, to Following do to on XXX the think fourth is low about of the positive range? end in to do or fourth think to contribute of to which I EBIT your how will If quarter, up MAP a much

Frank Sullivan

months I cases, benefits to that commented is sales biggest And either of our the are see making P&L costs. sequentially. that’s end the think prior the through our which I QX because see, basket positive in material get or we is most in extent as are to on summer, Frank, at you MAP delta the the margin are starting and in the the earlier, So, of last in driver our better we managing mix raw good other conversion MAP in benefits both past beginning our here better of increases some price progress. into XX Obviously, to factor

the on unit will bigger will are how experienced sales. volume It could those million QX that $XX depends we just than we because good it base certainly in be revenue and the factors. be really larger So, a have

Frank Mitsch

are magnitude typically in it. Got of a curious on thoughts capital. the if the working And that of Okay. anticipating you cash any had that be third fourth quarter. you you that, the am for in use order might the is got improvement Obviously, working of terms I capital quarter then, Rusty, quarter. coming

Rusty Gordon

the Sure. third down the went improvement our offset Yes. payables year-over-year In quarter, we off purchases. because because inventory really, in was cut

of MAP goods us. carry in that structural think a inventory, on progress we to of to improvement. really continue offset it’s the on finished and of we working ‘XX other So, to in quarters like lead even I one purchases. you front see the as I going XXXX the as in But see to fourth days the Frank, are capital, will because reduce future best the quarter to you quarter, things side the But do the terms think of payables amount are part benefit of going we reduced line fiscal first been have called though are

But at to we it We started will QX. in as right you direction benefit cash think steered the forward. get in from the ships I have flow the operations look see

Frank Mitsch

so Thank you much.

Rusty Gordon

welcome. You’re

Operator

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

Frank Sullivan

Mike. morning Good

Mike Sison

you Frank, we morning. improvements couple business are a last a the years, lot over the in recession. have and noted Good guys. made Hi of you in of have

thoughts your past. holding And in your would the of portfolio there in a be maybe able new should just the I been curious, resilient general recession. What just on than businesses And of perform? you current it grow be probably just to and are the new the should or perform kind new RPM should am thoughts it thoughts how stable, So, more down? has how

Frank Sullivan

Sure.

the given I as that. comes there. our the we had haven’t that the underlying factors I is Two, two in improved And one think solid we negative One, across historic volume we The board. past, that have pretty back, see performance to conversion have think there today RPM our costs concrete of dynamics. will total is has of And million past. residential the and North you Nudura along growth exposure to a much and construction. aspects in to function insulated that about have some didn’t strong is new in in that $XXX new we brought construction today, residential other exposure America forms that, the it’s a we have

Group, in goes with of we stains our that’s manufacturers. door so and wood nicely a is the profitable right there. tell group, domestic it I We domestic coatings do finishes into and And housing. do window cabinet We lot manufacturers. a can have Products hurting a work lot Specialty with today. you And us work OEM successful area our hurting that’s us the very most of

furniture, Some typically on to that components are construction. involved of residential offshore. coating moved And of that although goes all in that’s most

but that’s didn’t So, for exposure past. larger, today is albeit a that and helping. on that weakest us Hopefully, the much an RPM the probably larger have we in area

Mike Sison

fourth the like sure it? if is about am than the than I that February April. not you total? way sequential get normally, Yes. the think than have about when I guidance much. April think but sounds going did gets the not better Is – question, for quarter quarter, kind And throughout better to It just data, March, improve is and the to better near-term May of March in improvement one then your And

Frank Sullivan

comments our more been made January good. earlier. cyclical not March February really the In businesses, and have Mike, and Again, just I impacted repeated, it’s

And good. the you in the I Products Group Coatings so that – Coatings the Construction is and in Group Group. Specialty you can Performance will backlog see tell

We expect that to continue.

in dollars big industrial As Matt infrastructure highlighted, spending. capital and driving

we wide of in is spring. in upside That consumer is getting you can have plenty why the there to So, the range be could things at possible a QX. look I in terms couple of tell of be better cautious reasons POS to that’s and an upside.

products versus division Europe. we year. starting that last the sequential record levels improving slow business and some Again, part are And improvement see spring Our the of in as our been construction in summer. Roofing to has

Some just of rounding that’s comps. easier

elements will the to provided. that summer as pay are possible the those the So, we guidance upsides and in we spring that to attention the

Mike Sison

you. Thank

Operator

from Please Andrews Our with next question Morgan comes ahead. Stanley. go Vincent

Vincent Andrews

Thank morning you good and everyone.

Frank Sullivan

morning. Good

Vincent Andrews

quick ones me. from Two

combustion First, of electric of any in having I sale you talk referenced content about automobiles vehicles sort bit little vehicle? existing an just a at an you is versus, versus into don’t guys But incremental there engine and is all. how lot you internal could that cannibalization recall a

Frank Sullivan

Sure.

new automotive that are and we a but we into have these in coatings, not auto, So, are coatings industrial not presence in very go construction. strong

coatings. corrosion steel go various into or Stonhard, more franchise industrial concrete at across And businesses, concrete a polymer whether coatings, of mesh for Dudick, really the whether number it’s of in architectural elements fireproofing So, it’s that good Euclid a actual decorative Euclid, control flooring. the coatings or or into of flooring fibers case

of We – the have onshoring globally be seeing that. beneficiaries in and battery big construction in And that also the influx and a those of the to should that of includes we plants. that manufacturing And microelectronics includes a been leader are that’s EV areas. we government-subsidized, plants these extent the partly

entirely construction, coatings. or industrial So, those of strength automotive not in areas are of to specification it’s and all capital terms related work, but spending

Vincent Andrews

the And because sort incrementally if working we that credit having and make in is the in capital of starting your folks for Okay. back the hear to issues paring just tighter mean even can of banks of the are less Terrific. have more potentially to expensive. issues back or markets? outlook going terms And for RPM over you to just I the will are the that already about customers What and with do become customers we with the assumption credit put on that? year balance to customers, the getting thinking

Frank Sullivan

Sure.

seeing receivables. We are any in not impact

even Amazon residential way continuing. or and turnover, not construction, And is been headquarters can see in commercial hotels, to is most space. is you other billion then buildings pay $X hurt area that is of an or that has housing impactful area which that days it. we a The that and is new concern the tell office So, attention The the could sign I market broadest right that’s which you and Apple now down. light And new is the down of over. is thing mega housing commercial,

And we – chemicals, construction big so on. and that’s of are projects sealants are those are of some that some some products examples

and And weak. are office hotel so those it’s space, areas and hospitality all

of not those really more credit America. North And receivable principally just so weakness an issue it’s or categories concern, it’s a two of in in construction,

Vincent Andrews

much. Okay. Thanks very

Frank Sullivan

Thank you.

Operator

McCarthy Kevin Vertical Research with question go next ahead. Our Please from comes Partners.

Frank Sullivan

Good morning Kevin.

Kevin McCarthy

How morning. Frank? you are Good

Frank Sullivan

Thank Good. you.

Kevin McCarthy

updated on the of have the this seeing allocation potential near-term environment you pipeline Would capital M&A deleverage you in or to versus may of any just in welcome terms are thoughts amplify pace what repurchases? in

Frank Sullivan

you activity down. obviously, the now. Board. deteriorating our of staple in of private a discussed things a the from is It equity in with slowed depends our think On stage, we slowdown financings the we And slow regularly where banks small price private we headlines, Sure. stock read but I acquisitions, the and to dried Repurchases is space, for there have certainly face results, fair are old the medium-sized markets seeing And have up in dramatically. if – grid this up we that hanging There and the expectations dilution. more to the to is for same has some that relative activity, to pretty big value reasons Even the acquisition M&A right that down. tends time-to-time, amount down we And that value of at big the still target. much in gotten from on on really aggressive. equity are slowed M&A stopping multiple

slow, and the M&A that market expect stay So, very would way. I is it to

of discipline, multiples either. We few not don’t And always else somebody’s high last on is record I a of we the had anybody years results ago paying good have year. and are historic think

fiscal anticipating M&A So, a small but are big here growth of not we part there, get being a add to we ‘XX. transaction for our and might

Kevin McCarthy

helpful. seems interpreted to that trending And prepared MAP may, mentioned I cost range. then that to beyond your program, your of if you taking mean and in additional secondly, remarks above That’s itself actions you the I north XXXX are your scope which of target be and

might help So, year? the to next cost expect anyway we into quantify incremental moving that additional or

Frank Sullivan

as the Products as And Sure. particularly that north it it’s of that’s in in our stage, our But Construction Group I talking ones the At as dictate, area. be much have this and more of been $XX Products Group. Specialty circumstances recession-impacted we could it’s well don’t some know million. SG&A about, occurring more, businesses,

And both expense so, undertaken headcount have those in reduction actions some we and reduction segments. of

On to product the of XX% thousand continue the XX% Specialty KopCoat’s and million, was much are to as few at will couple as a hundred that it a spend had tremendous pesticides Group. growth that be it areas. $X talked of be about very has year That’s determined rates side, in years used This less bucks. line of provides a Products past our ability a And patented herbicides a in product flip at rate. million for to got or line. patented or the we essentially and in $X part the couple adjuvant ago, We a is our

to We nice, last notwithstanding That’s this new has year, will We construction. was in going presence market segment. the schools. talked We methods I of Nudura institutions example. element one in you Products that commercial, year system got Nudura at and unfortunately, part in spend a so net allowing about are Specialty the completed a And the durable new Kentucky is light Group, Nudura to and like ICF new Nudura, operate one construction deterioration in into residential residential the give that a zero. our school key of for of and school most that.

product so energy efficiency the revenues and in And a weather specification construction effort better is this we growing and security a safety area. year a notwithstanding of spending there on environment, decline terms a terms in be Nudura promotion not in event in will of in aggressively and

of one significant that’s seen past, So, those the because areas. of in in we pullback. a have decline the residential Unlike construction revenues

spending be again, SG&A Construction are momentum forward strong in the category will areas that broader to spending in be to the in year $XX going are building ‘XX in this or more. And of there tune beyond. We of we a where million some a growth Group, terms spec Products and and Specialty for or greater in really Group Products in distribution increasing

Kevin McCarthy

Thanks lot. a Very helpful.

Frank Sullivan

you. Thank

Operator

Capital go Please Viswanathan ahead. comes [Operator RBC from Markets. with next Our Instructions] question Arun

Frank Sullivan

morning. Good

Arun Viswanathan

businesses have [Technical be margin ‘XX, compare or found potentially it… your any MAP is would in at that you of on standpoint? from net a But And Difficulty] all, your divestitures gains

Frank Sullivan

up bit, breaking are you that to was a hard so Arun, little hear.

Arun Viswanathan

me now? you Can hear

Frank Sullivan

That’s bit a little yes. better,

Arun Viswanathan

Yes.

Okay.

Frank. be MAP if I divesture portfolio there is Sorry, was curious No, part MAP ‘XX the standpoint? will of Yes. existing just – versus the any mainly that

Frank Sullivan

Sure.

any of hard had taking which Guardian We across activity, terms was a for decade ago MAP there quarter. future ‘XX. And business, which of not be the insurance our – an the and a both furniture. in around look product Protective are actually of that of is portfolio very in was became protecting we a Products future. competitive then consumers. while on providing without two actually, we We and being could this examples, an commenting nice, one in which for the basically part area happened felt that insurance business very And fabric profitable that’s That business it business

we equity assurance and and so was the a joint sold and into insurance And other sold during private quarter, that business it business.

adjusted product to out our related saw nice a there. and and quarter. results. was business. lines that adjusted obviously MAP of contracting not That for And a we also an at UK We was component hang results. But charge to the impairment we money, that with make Guardian business as in well. exit, to was took a and business part Protective and in quarter, parties of working a carved adjusted to you which that that million out generated high-margin in Products people on looked of the That of total It our our did $XX terms great we an home a the couple of So, and are gain areas which business in there ‘XX. our USL of cash sell contracting

and result improvement margins. So, profitability in but reduction a of the net an in revenues, that will be

and we at of that structural that MAP future. ‘XX, those part certainly talk are of two happened we so And can as others looking examples about the because be they have could are changes already there in

Arun Viswanathan

Thanks Great. Okay. a lot.

Frank Sullivan

Thank you.

Operator

This concludes turn like for our conference Sullivan remarks. over any back Frank question-and-answer closing session. to the I would to

Frank Sullivan

you for call our and Thank questions. participating today your investor everybody for to in

in the levels where our events actually MAP do challenging our to back QX, XXXX they initiative that actions they in profit necessary in and the a And us we very profitability of to I will are those so the will back also had but be outlook adjustments QX, should gross both behind we somewhat about particular, that impact think had on flow understanding quarter, we couple capital get are our and working specifically are taking, While inventory conservative are get quarter in of good. the that we are and and one-time our excited in then where impact actions inventory should but cash get for next about we we and being the the be. they They are to negative months. a

fourth providing we we on detail remain results on about taking activities our are year-end when that and margins years. And the release about in we forward ‘XX we the coming look quarter ‘XX talk excited and in our fiscal So, impact you its to more July.

call Thanks again, RPM. Easter your a blessed in all on a great and day. for And the participation interest families. thank to your you to you and Have

Operator

presentation. now conference concluded. for The Thank attending you today’s has

disconnect. You may now

RPM International (RPM) 6 Apr 232023 Q3 Earnings call transcript