RPM International on Wednesday reported higher sales but lower net income for its first quarter of fiscal 2013.
The top executive at the Medina-based global maker of specialty coatings and sealants also said the company expects to earn more this year than previously estimated.
“We now expect net income and diluted earnings per share for fiscal 2013 to increase between 9 percent and 12 percent or $1.80 to $1.85 per share ... as a result of continued robust growth in North America, recent acquisitions and more favorable foreign currency comparisons during the back half of this fiscal year,” Frank Sullivan, RPM’s chairman and chief executive officer, said in a statement.
The company previously said it expected earnings to rise between 5 and 10 percent this year. RPM’s fiscal year starts on June 1.
Revenue forecasts were also adjusted upward. RPM sales are expected to grow 8 to 10 percent this year instead of 5 to 10 percent, the company reported.
Shares of RPM rose 39 cents Wednesday to $27.02.
The company’s annual shareholders meeting is scheduled for 2 p.m. today at the Holiday Inn, off state Route 82 and I-71 in Strongsville. The event usually attracts about 1,000 shareholders.
RPM said it earned $33.9 million, or 26 cents per share, after adjustments, on revenue of $1.05 billion for the quarter ending Aug. 31. A year ago, RPM earned $76.8 million, or 59 cents per share, on revenue of $985.9 million. Revenue was up 6.2 percent from a year ago.
Excluding one-time adjustments, RPM said it earned $84.8 million, or 64 cents per share in the quarter just ended. The earnings were in line with analyst expectations. Excluding adjustments, earnings were up 10.4 percent from a year ago, with earnings per share up 8.5 percent.
The company took a one-time, non-cash charge of $45.3 million in writing down investments in Kemrock Industries and Exports Limited in India. The write-down was based on deteriorating local economic conditions and their impact on Kemrock’s stock price and operating performance, RPM said. RPM owns 23 percent of Kemrock.
The company also incurred an $11 million charge in the roofing division at RPM’s Building Solutions Group. RPM said it exited unprofitable contracts outside of North America and focused on its core roofing business in the U.S. and Canada.
“First-quarter operating results were on plan, with both our industrial and consumer segments posting increases in sales,” Sullivan said.
Consumer segment sales were $343.4 million, up 7.7 percent from $318.9 million last year.
Industrial segment sales, including adjustments, were $703.3 million, up 5.4 percent from $667 million a year ago.
“We are seeing gradual improvement in North American commercial construction, which affects about 30 percent of our industrial segment and which is still considerably below its pre-recession peak,” Sullivan said. “Our European-based businesses are down in sales year-over-year due to general weakness in European markets, combined with unfavorable foreign exchange translation.”
RPM said it has been able to generate enough cash to support a growing cash dividend.
Since the beginning of fiscal 2012, RPM has bought companies that have added more than $410 million in annual sales to the corporation, Sullivan said.
Acquisitions have continued in the new fiscal year as well, he said.
“During the first four months of fiscal 2013, we acquired three companies with annual sales approximating $225 million,” Sullivan said. “We added a significant product line extension to our consumer offerings, established a strong foothold in one of the world’s largest geographic markets and entered an entirely new product category.”
Sullivan told analysts in a conference call that RPM is looking at buying smaller product lines. It also is looking at business acquisitions in Europe “because valuations have come down now in line with lower performance,” he said.
Most of the cash RPM can use to make acquisitions are in accounts outside of the United States, RPM executives said.
RPM this fiscal year bought:
• Georgia-based Synta Inc., which makes exterior wood deck and concrete restoration systems.
• New Jersey-based Kirker Enterprises Inc., a maker of nail care enamels, coatings components and related personal care products. Sullivan called the nail polish maker “a leader in a high performance niche.”
• Brazil-based Viapol Ltda., a manufacturer and marketer of building materials and construction products, including asphalt roofing materials, waterproofing systems and more.
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com.
