• Consolidated Sales: Declined 3.0% versus the prior year record.
• Adjusted EBIT: Declined by $31.9 million due to lower production volumes and FX impacts.
• Operating Cash Flow: Second strongest third quarter in company history at $91.5 million.
• Working Capital Efficiency: Improved by 70 basis points, approaching a goal of 20%.
• CapEx: Increased by nearly $21 million year-to-date.
• Liquidity: Strong at $1.21 billion.
• Consumer Segment: Slightly positive organic growth, but faced material inflation pressures.
• Construction Products Group Sales: Declined due to unfavorable weather and FX pressures.
• Performance Coatings Group Sales: Declined slightly against challenging prior year comparisons.
• Specialty Products Group Sales: Declined due to weak specialty OEM markets and lower remediation activity.
• Geographic Sales: Declines in North America and Europe, with FX impacting Latin America and Asia Pacific.
• Dividend and Share Repurchases: $83.1 million returned to shareholders during the quarter.

• Warning! GuruFocus has detected 4 Warning Signs with MAMA.

Release Date: April 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• RPM International Inc (NYSE:RPM) achieved its second-best ever third-quarter operating cash flow in the company's history, driven by improvements in working capital efficiency.
• The company continues to implement its MAP 2025 initiatives, which are positively impacting financial performance despite challenging demand environments.
• RPM International Inc (NYSE:RPM) is leveraging its products' ability to extend asset life, providing value to customers during economic uncertainty.
• The acquisition of The Pink Stuff is expected to expand RPM's offerings in the cleaning space and strengthen its position in several sales channels, including e-commerce.
• New product launches in the Consumer segment, such as the Mean Green refillable cleaner, are driving growth and have received industry recognition.

Negative Points

• Unfavorable weather conditions and foreign currency translation led to a 3.0% decline in consolidated sales compared to the prior year.
• Adjusted EBIT declined by $31.9 million due to lower production volumes and temporary inefficiencies from plant consolidation and startups.
• The Specialty Products Group faced weak specialty OEM markets and reduced demand for disaster restoration services, impacting sales.
• Raw material inflation is expected to increase in the mid-single digits due to recently announced tariffs and duties, affecting profitability.
• The Consumer segment is experiencing cautious consumer spending, resulting in a low single-digit sales decline despite new product introductions.

Q & A Highlights

Q: Can you discuss the macro growth assumptions in your fourth-quarter guidance and any noticeable impacts on your order books? A: Frank Sullivan, CEO, stated that RPM has been in a low growth environment for 18 months, which is not expected to change soon. Despite this, RPM is positioned to outperform due to MAP initiatives. The fourth quarter is expected to return to profitable growth, driven by self-help measures, market share gains, and new product introductions.

Q: How did lower operating rates in the February quarter impact your operating margin? A: Frank Sullivan, CEO, explained that lower sales volumes and inventory reduction initiatives led to reduced production and under-absorption of fixed costs. Rusty Gordon, CFO, added that organic growth was down 1.8%, with a slight positive pricing impact, resulting in volume decline and reduced fixed cost absorption.

Q: How does RPM's portfolio hold up if the US enters a recession? A: Frank Sullivan, CEO, believes RPM is well-positioned to outperform in a recession. The company's focus on repair and maintenance, as well as its presence in resilient sectors like data centers, provides a buffer against economic downturns.

Q: What is the impact of tariffs on raw material inflation, and how do you plan to address it? A: Frank Sullivan, CEO, stated that the unmitigated impact of tariffs is about 3.2% globally and 4.3% in the US. RPM is addressing this through alternative sourcing, vendor partnerships, product substitutions, and price increases. The company expects to offset most of the impact.

Q: Can you provide an update on the MAP progress in Europe and its outlook for 2026? A: Frank Sullivan, CEO, mentioned that MAP initiatives in Europe are progressing well, with eight manufacturing facility closures and consolidations completed. The impact of MAP initiatives on fiscal 2026 is expected to be about $100 million.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.