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How RPM International Fared in Fiscal 1Q18

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Part 4
How RPM International Fared in Fiscal 1Q18 PART 4 OF 6

How RPM’s Consumer Segment Performed in Fiscal 1Q18

RPM’s Consumer segment

RPM International’s (RPM) Consumer segment has the second highest revenue contribution to RPM’s overall revenue. This segment had a revenue share of 31.8% in fiscal 1Q18 as compared to 31.9% in fiscal 1Q17. The segment reported revenue of $427.10 in fiscal 1Q18 as compared to $399.90 in fiscal 1Q17, implying revenue growth of 6.8% on a year-over-year basis.

How RPM&#8217;s Consumer Segment Performed in Fiscal 1Q18

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The segment’s revenue growth was primarily attributed to acquisition growth of 8.1% driven by Touch n’ Foam and SPS. On the other hand, organic revenue growth fell 1.2%, and the foreign currency transaction had an adverse impact of 0.1%.

Segment’s EBIT and margins

In fiscal 1Q18, RPM’s Consumer Segment reported EBIT (earnings before interest and taxes) of $72.6 million as compared to $70.1 million in fiscal 1Q17, which implies growth of 3.6% on a year-over-year basis. The increase in EBIT was primarily driven by the reduction in the segment’s selling, general, and administrative expenses as a percentage of sales. Also, the lower employee compensation and lower distribution expenses further helped EBIT.

However, the Consumer segment’s EBIT margin fell marginally by 50 basis points in fiscal 1Q18 to 17% as compared to 17.5% in fiscal 1Q17. The decline was primarily attributed to the higher cost of sales due to an increase in raw material prices.

Outlook

RPM expects mid-single-digit revenue growth in the Consumer segment amid an expected softness in the US paint category, but the residential housing market remains stable.

Investors looking to invest in RPM International indirectly can invest in the SPDR S&P Dividend ETF (SDY), which has invested 0.90% of its holdings in RPM. The other holdings of the fund include Caterpillar (CAT), Praxair (PX), and 3M (MMM), which have weights of 1.4%, 1.0%, and 0.90%, respectively, as of October 4, 2017.

In the next part, we’ll look into the performance of RPM International’s Speciality segment in fiscal 1Q18.

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