uploads///Part  Industrial segment

Acquisition Revenue Drove RPM International’s Industrial Segment


Apr. 7 2017, Updated 1:35 p.m. ET

Industrial segment

The Industrial segment is the largest revenue contributor to RPM International’s (RPM) overall revenue. It had a revenue share of 51% in fiscal 3Q17. The segment reported revenue of $521.40 million in 3Q17—an increase of 5.8% on a YoY (year-over-year) basis. The increase in the segment’s revenue was primarily driven by acquisition-related sales. Acquisition-related sales rose 4.1% due to contributions from recent acquisitions, while organic growth rose 2.1%.

Organic growth was primarily driven by increased commercial construction in North America and improved performance in the United Kingdom. However, the segment’s revenue fell 0.8% due to unfavorable foreign currency translation.

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Segment’s EBIT

RPM International’s Industrial segment reported EBIT (earnings before interest and tax) of $14.6 million in fiscal 3Q17—compared to $1.95 million in fiscal 3Q16. Its 3Q16 EBIT was lower due to higher product warranty expenses and severance-related charges. Frank Sullivan, RPM’s chairman and CEO, said, “Our businesses serving the U.S. commercial construction market again experienced solid organic growth. Most businesses in Europe were up in the low- to mid-single-digit range in local currencies, and current-year acquisitions contributed nicely to the segment’s overall sales growth. We were very pleased with the strong EBIT leverage achieved on solid top-line sales.”

Segment outlook

The upward trend in commercial construction in North America is expected to continue along with steady progress in Europe. RPM completed six industrial acquisitions for fiscal 2017. Expected annual sales of $80 million will drive the segment in fiscal 4Q17 and beyond.

Investors can invest in RPM International indirectly by investing in the First Trust Materials AlphaDEX Fund ETF (FXZ). FXZ invested 1.9% of its portfolio in RPM. The fund’s top holdings include Owens Corning (OC), USG (USG), and Dow Chemical (DOW). They have weights of 3.7%, 3.6%, and 3.6%, respectively, as of April 6, 2017.

In the next part, we’ll look at how RPM’s Specialty segment and Consumer segment performed.


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