RPM International’s Consumer segment
RPM International’s (RPM) second-biggest revenue contributor is its Consumer segment. According to the company’s fiscal 2016 annual report, the segment contributed 34.1%, or ~$1.6 billion, to RPM’s total revenue. From 2011 to 2016, the Consumer segment has grown at a CAGR (compound annual growth rate) of ~7.9%.
The Consumer segment recorded EBIT (earnings before interest and taxes) of $268 million, implying a CAGR of 12.9%. The segment’s revenue is driven by new product introductions and acquisitions.
Products and business model
The Consumer segment, as the name suggests, caters to market professionals and DIY (do-it-yourself) groups engaged in activities like home improvement and personal leisure activities. This segment has three operating sub-segments, including Rust-Oleum Group, DAP Group, and SPG Group.
The products under this segment include specialty, hobby and professional paints, enamels, caulks, adhesives, and so on. These products are primarily sold in North America but have a slowly increasing presence in Europe. They are sold directly to mass merchandisers, home improvement centers, hardware store, paint stores, and crafts shop. This segments’ products are also sold through Home Depot (HD).
The top brands under this segment include the following:
- Rust-Oleum occupies the number one position in the US and Canada in the rust preventive and decorative segment. RPM acquired Rust-Oleum in 1994. In 2015, its sales crossed $1 billion. It was founded in 1921.
- DAP is an established premier brand name in the North American DIY market. DAP’s product line-up includes caulks, sealants, adhesives, and patch and repair products. RPM acquired DAP in 1999.
Notably, investors can indirectly hold RPM International by investing in the iShares S&P Mid-Cap 400 Growth ETF (IJK), which had a weight of ~0.5% of its portfolio in RPM International on September 28, 2016.
In the next part, we’ll look at RPM’s Specialty segment.