How Did RPM’s Specialty Segment Perform in 1Q17?



RPM International’s Specialty segment revenue in 1Q17

In fiscal 1Q17, RPM International’s Specialty segment reported revenue of $176.3 million, representing 14.1% of the company’s total revenue. The Specialty segment is the company’s lowest revenue generator. On a year-over-year (or YoY) basis, the segment’s revenue rose 3.8%. RPM International’s financial reporting period is from June 1 to May 31.

The segment grew organically by 2.6%, and the sales growth from acquisitions had a positive impact of 2.9%. On the other hand, the segment revenue was negatively impacted to the tune of 1.7% because of the foreign exchange translation.

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Segment EBIT

RPM International’s Specialty segment reported EBIT (or earnings before interest and taxes) of $30.4 million in fiscal 1Q17, representing an increase of 15.5% over fiscal 1Q16. The segment’s EBIT margin for 1Q17 stood at 17.2% as compared to 15.5% in 1Q16, which implies an increase of 170 basis points on a year-over-year basis.

Factors influencing the segment

The Specialty segment revenue saw a positive effect from acquisition growth. The segment, which sells coatings, restoration equipment and chemicals, specialty chemicals, and specialty coatings, saw several acquisitions. Also, the segment saw positive growth in Europe in local currency, but when converted to US dollars, the growth was negative. RPM maintained its sales growth guidance for this segment in fiscal 2017 to be in the mid-single-digit range.

Investors can invest in RPM International indirectly by investing in the First Trust Materials AlphaDEX Fund (FXZ), which invests 1.9% of its holding in RPM International as of October 5, 2016. The top holdings of the ETF include Westlake Chemicals (WLK), Dow Chemical (DOW), and Berry Plastic Group (BERY) with weights of 3.9%, 3.4%, and 3.5%, respectively, as of October 6, 2016.


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