Why RPM’s Consumer Earnings Margins Narrowed



RPM’s Consumer segment

RPM International’s (RPM) Consumer segment is the second-biggest contributor to RPM’s overall revenue. The segment had a revenue share of 33% in fiscal 3Q18, compared with 33.4% in fiscal 3Q17, marking a decline of 0.4 percentage points YoY (year-over-year). The segment’s revenue grew 6.4% to $363.4 million in fiscal 3Q18 from $341.4 million in fiscal 3Q17.

The segment’s revenue growth was primarily headed by acquisition growth, which totaled 4.2%. Foreign currency exchange boosted the segment’s revenue growth by 1.5%, and organic sales improved by 0.7%, driven by caulks and sealants.

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Earnings and margins

In fiscal 3Q18, RPM’s Consumer segment reported EBIT (earnings before interest and tax) of $29.3 million, compared with $29.9 million in fiscal 3Q17, implying a decline of 2.1% YoY. As a result, the segment’s margin narrowed 70 basis points. The decline in the segment’s EBIT and EBIT margin was due to an intangible impairment charge related to the Synta product line.


Acquisition-related growth is expected to continue to be this segment’s main driver. However, organic growth is a concern. RPM plans to advertise to boost sales. The segment may also benefit from foreign currency exchange.

Investors seeking indirect exposure to RPM International could consider the SPDR S&P Dividend ETF (SDY), which has invested 1.0% of its holdings in RPM. The fund’s other holdings include Caterpillar (CAT), Praxair (PX), and 3M (MMM), which had weights of 0.75%, 0.8%, and 0.80%, respectively, as of April 6, 2018. In the next part, we’ll look at RPM International’s Specialty segment’s performance in fiscal 3Q18.


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