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RPM INTERNATIONAL INC/DE/ (RPM)·Q2 2025 Earnings Summary

Executive Summary

  • Record Q2 FY2025 results: net sales $1.85B (+3.0% YoY), diluted EPS $1.42 (+25.7% YoY), adjusted diluted EPS $1.39 (+13.9% YoY), adjusted EBIT $255.1M (+7.7% YoY). All four segments posted positive volume growth; adjusted EBIT margin set a Q2 record at 13.8% .
  • Strength concentrated in Construction Products (turnkey roofing systems/services) and Performance Coatings (flooring/protective coatings), with Specialty Products aided by disaster restoration; Consumer grew sales on share gains despite a $4.4M bad-debt charge from a customer bankruptcy and pockets of raw material/labor inflation .
  • Guidance: Q3 outlook cautious on harsh winter; sales flat YoY and adjusted EBIT up/down low single digits; FY2025 sales low single-digit growth maintained, adjusted EBIT range narrowed to +6%–10% (from mid-single to low-double digits) .
  • Capital and cash: Q2 operating cash flow $279.4M; first-half CFO $527.5M; total debt reduced to $2.03B (−$226.5M YoY); liquidity $1.50B; dividend declared at $0.51/share; TMP Convert acquisition expands decking/landscaping offerings in Europe .

What Went Well and What Went Wrong

  • What Went Well

    • “Record consolidated sales” and “record consolidated second-quarter adjusted EBIT for the 12th consecutive quarter” driven by MAP 2025 SG&A streamlining and volume growth across all segments .
    • Construction Products Group: record sales from turnkey roofing systems/services; strong Europe profitability via MAP 2025; adjusted EBIT up 9% YoY .
    • Adjusted EBIT margin reached a Q2 record 13.8%; adjusted EPS rose 13.9% YoY aided by lower interest expense from $226.5M debt paydown over 12 months .

  • What Went Wrong

    • Consumer Group EBIT declined YoY on GAAP due to a $4.4M bad-debt bankruptcy charge and raw material/labor inflation; adjusted EBIT was essentially flat (+0.3% YoY) .
    • Mix headwinds (services) pressured gross profit margin; management cited lower gross margin in CPG due to services mix despite solid EBIT margin contribution .
    • Harsh winter and elevated mortgage rates cited as Q3 headwinds, likely resulting in flat sales and low single-digit up/down adjusted EBIT; FX also expected to be a headwind .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Net Sales ($USD Millions)$2,008.2 $1,968.8 $1,845.3
Net Income Attributable ($USD Millions)$180.6 $227.7 $183.2
Diluted EPS ($USD)$1.40 $1.77 $1.42
EBIT ($USD Millions)$258.0 $303.9 $227.6
Adjusted EBIT ($USD Millions)$285.6 $328.3 $255.1
Adjusted Diluted EPS ($USD)$1.56 $1.84 $1.39
Margin MetricQ4 2024Q1 2025Q2 2025
Adjusted EBIT Margin %14.2% (computed from $285.6 / $2,008.2) 16.7% (computed from $328.3 / $1,968.8) 13.8% (record)

Segment breakdown

SegmentNet Sales ($USD Millions) Q4 2024Net Sales ($USD Millions) Q1 2025Net Sales ($USD Millions) Q2 2025Adjusted EBIT ($USD Millions) Q4 2024Adjusted EBIT ($USD Millions) Q1 2025Adjusted EBIT ($USD Millions) Q2 2025
Construction Products Group (CPG)$762.2 $794.0 $690.1 $138.5 $159.9 $108.6
Performance Coatings Group (PCG)$365.6 $371.8 $380.1 $48.5 $64.6 $65.0
Specialty Products Group (SPG)$178.0 $174.6 $184.9 $10.6 $18.1 $19.6
Consumer Group$702.5 $628.5 $590.2 $118.2 $116.2 $96.6

KPIs and balance sheet/cash

KPIQ1 2025Q2 2025
Operating Cash Flow ($USD Millions)$248.1 $279.4
Operating Working Capital / Sales (%) (TTM)22.7% 22.0%
Balance MetricQ4 2024Q1 2025Q2 2025
Total Debt ($USD Billions)$2.13 $2.05 $2.03
Total Liquidity ($USD Billions)$1.36 $1.44 $1.50

Notes:

  • Consumer Group had a $4.4M bad-debt expense tied to a retail customer bankruptcy .
  • Organic sales +3.7%, divestitures net −0.1%, FX −0.6% in Q2 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Sales GrowthFY2025Low-single-digit increase Low-single-digit increase Maintained
Adjusted EBIT GrowthFY2025Mid-single to low-double digits +6% to +10% Narrowed
Consolidated SalesQ3 FY2025N/AFlat YoY vs record prior-year Q3 New
Adjusted EBITQ3 FY2025N/AUp or down low single digits YoY New
CPG SalesQ3 FY2025N/ALow-single-digit increase YoY New
PCG SalesQ3 FY2025N/AFlat to up slightly YoY New
SPG SalesQ3 FY2025N/ALow-single-digit decrease YoY New
Consumer SalesQ3 FY2025N/ALow-single-digit decrease YoY New
DividendQ2 FY2025Prior quarterly was increased Oct 2024 $0.51/share payable Jan 31, 2025 Declared

Drivers cited: harsher winter vs prior year; elevated mortgage rates; FX headwinds; continued MAP 2025 structural SG&A reductions .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
MAP 2025 savings/SG&AQ4: ~$185M annualized Wave 3 targeted; SG&A streamlining actions; underabsorption masking benefits Record adj. EBIT for 12th straight quarter; SG&A % of sales declined; pipeline likely to reach $500M run-rate by FY26 Improving structurally
Weather impactQ4/Q1: seasonality, timing of projects “Real winter” pressure on Q3; expect return to growth in Q4 spring season Near-term negative, seasonal
Residential end marketsQ4/Q1: weak DIY; stabilization hoped later FY25 Signs of stabilization; share gains, new products; but mortgage rates still elevated Stabilizing
Pricing/raw materialsQ4: modest price, raw deflation mid-single-digit in Q4 Price ~flat; anticipate 1.5%–2% inflation; targeted increases planned Slight inflation
Services mix (CPG)Q4: turnkey systems/services drive growth; mix helps EBIT Services drove lower gross margin though solid EBIT; mix headwind Mixed (margin headwind)
Europe performanceQ4/Q1: profitability improved despite sales declines/divestitures Strong PCG growth/profitability via collaboration; MAP 2025 benefits Improving
Working capital efficiencyQ4: WC% down 350 bps YoY; record annual CFO WC% 22.0% (−100 bps YoY); Q2 CFO $279.4M (second-highest quarter) Strong
M&A vs buybacksQ4: balance sheet stronger; more M&A expected TMP Convert acquired; CEO open to deploying balance sheet; dividend and repurchases ongoing Active
ERP/Accounting consolidationQ4: ERP instances reduced; SG&A centralization ERP down to mid-teens; accounting locations down to ~40–50; shared services expanded Progressing
Tariffs/FX/macroQ4/Q1: FX headwinds; tinplate tariffs sticky costs FX headwind expected; contingency plans for tariffs/port risk Persistent headwind

Management Commentary

  • “Record consolidated second-quarter adjusted EBIT for the 12th consecutive quarter, record adjusted EBIT margin, and continued strength in operating cash flow” driven by MAP 2025 and SG&A streamlining .
  • “Turnkey roofing systems and services… benefited from its restoration project focus, direct sales model, and high level of customer service” (CPG) .
  • “Adjusted EBIT includes the negative impact of a $4.4 million bad debt expense from a Consumer Group customer bankruptcy” .
  • Outlook tone: “So far in the third quarter… winter weather… meaningfully harsher than the prior year… anticipate sales and adjusted EBIT will be similar to the prior year in what is our seasonally slowest quarter” .

Q&A Highlights

  • Q3 guidance rationale: management emphasized seasonality and “real winter” interrupting strong Q2 unit volume trends; expect return to growth in Q4 .
  • Residential stabilization: signs of bottoming in Consumer/SPG; improved DIY takeaway in Q2 aided by weather/new products; inventory destocking largely behind .
  • Volume-to-profit leverage: leverage muted by Consumer bad-debt charge and services mix; management targets double-digit EBIT growth in Q4 with ~3% unit volume growth .
  • Pricing/inputs: price ~flat; anticipate 1.5%–2% raw material inflation; targeted price actions planned; limited China exposure .
  • Mix/gross margin: CPG services (WTI) have lower gross margin but solid EBIT margin; mix weighed on consolidated gross profit .
  • Capital allocation: balance sheet strongest in decades; open to M&A and buybacks; TMP Convert expands European pedestals/decking .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 FY2025 EPS/revenue was unavailable at the time of research due to API limits; as a result, we cannot quantify beats/misses vs consensus for this quarter. Values would ordinarily be pulled from S&P Global.

Key Takeaways for Investors

  • Q2 print was solid: broad-based unit volume growth, record adjusted EBIT margin (13.8%), and robust cash generation; MAP 2025 continues to drive structural margin and SG&A efficiency .
  • Near-term caution: Q3 guidance reflects weather-driven seasonality and elevated mortgage rates; expect flat sales and adjusted EBIT up/down low single digits; watch FX .
  • Mix matters: expanding services contribution in CPG supports EBIT but pressures gross margin; monitor margin mix as turnkey services scale .
  • Consumer recovery signs: share gains, new product introductions, and stabilization in DIY takeaway; one-off $4.4M bad debt obscured underlying improvement; spring seasonality should help Q4 .
  • Balance sheet optionality: debt down to $2.03B and liquidity at $1.50B create scope for bolt-ons and buybacks; dividend continuity ($0.51/share) supports total return .
  • FY2025 guide tightening: sales growth maintained at low single digits; adjusted EBIT narrowed to +6%–10%—delivery hinges on volumes in H2 and MAP 2025 realization .
  • Watch catalysts: Q3 weather normalization, Q4 spring volume inflection, pricing actions vs 1.5%–2% raw inflation, and execution on European profitability and decking/landscaping expansion (TMP Convert) .