RPM released its fiscal results for the second quarter of 2024. Record second-quarter net income was $145.5 million, record diluted EPS was $1.13, and record EBIT was $220.9 million.
“For eight consecutive quarters, we have generated record sales and adjusted EBIT, and we are making good progress toward achieving our MAP 2025 profitability goals by becoming a more efficient and collaborative organization. At our investor day last year, we discussed two other key components of MAP 2025 – improving cash flow conversion and investing to accelerate organic growth. We have made great progress with cash flow, as our $767.8 million cash from operating activities through the first six months of fiscal 2024 has already exceeded our previous 12-month fiscal year record. Our organic growth investments are yielding successes, particularly in high-performance buildings and turnkey flooring systems, where we are gaining share,” said Frank C. Sullivan, RPM chairman and CEO.
“Our Construction Products Group and Performance Coatings Group, the segments focused on coatings and high-performance buildings, led growth in the second quarter. They benefited from their focus on maintenance and repair, as well as their positioning to sell highly engineered solutions into growing end markets. Demand in DIY and specialty OEM markets remained weak; however, we overcame these challenges by successfully executing MAP 2025 initiatives to expand gross margins by 320 basis points and generate double-digit adjusted EBIT growth.”
Geographically, sales growth was strongest in markets outside of the United States. A new management team and focused sales strategy in Europe contributed to 8.9% growth, and Africa/Middle East and Asia/Pacific benefited from improved coordination under PCG management that resulted in 13.0% and 6.4% sales growth, respectively.
Construction Products Group:
CPG achieved record second-quarter sales with strength in concrete admixtures and repair products as a result of increased demand for engineered solutions serving infrastructure and reshoring-related projects, as well as market share gains. Businesses serving high-performance building construction and renovation also performed well. Demand in markets outside the U.S. was strong and was driven by infrastructure-related demand in Latin America and a more focused sales strategy in Europe.
Performance Coating Group:
PCG generated record second-quarter sales driven by growth in engineered turnkey flooring systems serving reshoring capital projects and market share gains. Strong growth in Asia/Pacific and Africa/Middle East, which were all recently aligned under PCG, also contributed to the record sales.
Specialty Products Group:
SPG’s second-quarter sales decline was driven by weak demand in specialty OEM end markets, particularly those with exposure to residential housing. Sales were also negatively impacted by the divestiture of the non-core furniture warranty business in the third quarter of fiscal 2023 and challenging comparisons in the prior-year period when the disaster restoration business had strong results in response to Hurricane Ian. Higher selling prices partially offset this sales decline.
The Consumer Group’s second-quarter sales decline was driven by reduced DIY takeaway at retail stores as housing turnover hit multi-year lows and consumers focused their spending on other areas, as well as certain retailers destocking inventories. These pressures were partially offset by market share gains, strength in international markets, and higher pricing to catch up with inflation. The Consumer Group faced challenging comparisons to the prior year period when sales grew 15.3%.
Cash Flow and Financial Position:
During the first six months of fiscal 2024, cash provided by operating activities was $767.8 million compared to $190.9 million during the prior-year period and included an all-time second-quarter record of $408.6 million. The increase was driven by increased profitability and improved working capital management, including MAP 2025 initiatives.
The company returned $138.3 million to stockholders through cash dividends and share repurchases and achieved its 50th consecutive year of dividend increases.
“We expect business conditions in the third quarter to generally be similar to the second quarter, with strength in our CPG and PCG segments, international markets, and market share gains offsetting continued weakness in DIY and specialty OEM demand. Adjusted EBIT growth is expected to accelerate, driven by less challenging prior-year comparisons and MAP 2025 benefits, which should more than offset lower volumes in certain businesses and investments we are making to accelerate future growth and efficiencies,” added Sullivan. “For the remainder of the year, we are leveraging our focus on repair and maintenance; our strong position serving demand for infrastructure, high performance buildings and reshoring projects; and MAP 2025 to deliver another year of record sales and adjusted EBIT.”
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