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RPM increases earnings outlook after strong quarterly showing

By Jim Mackinnon
Beacon Journal business writer

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RPM International Inc. is boosting its full-year earnings estimates 13 percent to 15 percent following strong second-quarter results.

The Medina maker of coatings, sealants and related products reported record second-quarter sales and net income Wednesday morning.

And because the holding company sees continued improvement in the U.S. residential housing market and ongoing benefits from recent acquisitions and new product introductions, it expects sales for its 2014 fiscal year to grow higher than previous forecasts.

“As a result, we are increasing our full-year [earnings per share] guidance to a range of $2.05 to $2.10, or 13 percent to 15 percent year-over-year growth, versus the range of $2 to $2.07 announced last quarter,” Frank Sullivan, chairman and chief executive officer, said in a statement. The new guidance includes the impact of a convertible bond issued on Dec. 9, he said.

RPM reported earning $63.6 million, or 48 cents per share, on revenue of $1.07 billion for the quarter. Net income was up 52.5 percent from $41.7 million, or 32 cents a share a year ago; revenue was up 5.3 percent from $1.02 billion a year ago. RPM took a $10.8 million charge a year ago in writing off its investment in Kemrock Industries & Exports Ltd. in India.

Shares of RPM rose $1.19, or 2.9 percent, to $42.66. Shares are up 2.8 percent since Jan. 1 and are up 44.7 percent, including dividends, from a year ago.

Industrial segment sales were up 2.6 percent from a year ago to $708.7 million. Consumer segment sales rose 11.2 percent from a year ago to $362.8 million.

“Our strong second quarter can be attributed to a continuation of the recovery in our gross margin, the second consecutive quarter of significant revenue growth from our European operations and continued success from our new product introductions,” said Russell Gordon, vice president and chief financial officer, in his opening statements in a conference call with industry analysts.

Sullivan said RPM anticipates full-year consumer segment sales growth to be 8 to 10 percent higher than a year ago, better than the previous guidance of 6 percent to 8 percent growth. Industrial segment sales are expected to grow 4 to 6 percent over a year ago.

Consumer segment sales are being driven by new high-profit products that include LeakSeal and NeverWet, Sullivan told analysts in the conference call.

Home construction is picking up in the United States but it is going to be a long time before housing start levels reach pre-Great Recession levels, Sullivan said. The U.S. recession occurred from 2007 to 2009.

For the first half of its fiscal year, RPM said sales rose 8.3 percent from a year ago to $2.24 billion. Net income for the first half of fiscal 2013 was $166.7 million, more than 50 percent higher than $75.6 million for the first half of fiscal 2012. The fiscal 2012 first half included Kemrock-related adjustments of $56.1 million plus a one-time $11 million charge to exit unprofitable roofing contracts outside North America.

Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com.


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