RPM(RPM) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - RPM International achieved record sales, adjusted EBIT margin, and adjusted EPS in Q2 2025, despite a $4.4 million earnings headwind from a customer bankruptcy charge [9][17] - Adjusted EBIT grew 7.7$1.39 compared to the prior year, primarily due to adjusted EBIT growth and lower interest expense from debt paydown [17][18] Business Line Data and Key Metrics Changes - The Construction Products Group generated solid growth, particularly in its turnkey roofing systems business, despite hurricane impacts [21][24] - The Performance Coatings Group achieved record sales, driven by flooring and protective coatings businesses, with strong growth in Europe and Africa [25] - The Specialty Products Group returned to sales growth, led by disaster restoration and food coatings businesses [26][27] - The Consumer Group also returned to sales growth, aided by favorable weather conditions and stabilization in market share [28][29] Market Data and Key Metrics Changes - North American sales were solid across all segments, while Europe faced challenging macroeconomic conditions [20] - Sales in Africa and the Middle East showed strong growth due to a focus on high-performance construction projects [20] - Latin America sales declined due to operational headwinds, and Asia Pacific sales decreased due to challenging comparisons to the prior year [20] Company Strategy and Development Direction - RPM International continues to implement its MAP 2025 initiatives, focusing on operational improvements and structural enhancements [10][32] - The company is confident in its ability to navigate mixed economic conditions and expects to see strong sales and earnings growth return in the spring [14][52] - The MAP 2025 program is expected to yield $500 million in savings, with ongoing initiatives to improve efficiency and collaboration across businesses [94][97] Management's Comments on Operating Environment and Future Outlook - Management noted that the current winter conditions are impacting sales, particularly in the consumer segment, but expects a return to growth in Q4 [14][37] - The outlook for the third quarter is flat sales growth, with expectations for low single-digit growth in specific segments [38][43] - Political and economic uncertainties, including interest rate changes, may affect future performance, but management remains optimistic about recovery [44][45] Other Important Information - RPM International has reduced debt by$226 million over the past year and increased its dividend for the fifty-first consecutive year [31] - The company maintains strong liquidity at $1.5 billion, allowing for strategic investments and potential acquisitions [31][108] Q&A Session Summary Question: Third-quarter guidance and EBIT growth expectations - Management explained that the flat sales and EBIT guidance is due to seasonal impacts and a return to normal winter conditions, which are expected to improve in spring [50][52] Question: Stabilization in residential markets - Management noted signs of stabilization in residential markets, with improved housing turnover and home sales contributing to confidence in future growth [56][58] Question: Bifurcation in consumer segment customers - Management acknowledged a trend where larger home centers are performing better than smaller customers, but expects a return to more traditional consumer takeaway [63][65] Question: Impact of hurricanes on Construction Products Group - Management confirmed that hurricanes had a negative impact on sales, but expects recovery in Q3 and Q4 as weather conditions improve [111][113] Question: MAP program savings and future initiatives - Management indicated that the full impact of MAP 2025 savings will be realized in fiscal 2026, with ongoing efforts to embed MAP learnings into the company culture [122][126]