RPM builds asbestos fund, posts big quarterly loss

24 July 2006 15:10  [Source: ICIS news]

HOUSTON (ICIS news)--RPM International said on Monday that it had a loss before income taxes of $222m (€175m) for its fiscal fourth quarter ended 31 May due to a charge for establishing an asbestos liability reserve.

RPM put $335m in its asbestos fund during the quarter. The loss compared to a profit of $74m for the same period a year ago.

The company said sales were a record $909m in the fourth quarter, up 20% from $754m a year ago. Net loss was $142m compared with a net profit of $46m a year ago.

The Medina, Ohio-based firm owns companies that make specialty coating and sealants for industrial and consumer markets.

RPM said asbestos indemnity and legal costs were $12.9m for the quarter, bringing the 2006 fiscal-year total to $59.9m, a drop from the $67.4m paid in fiscal 2005. It said it has asbestos liability reserves of $421.3m that will be drawn down as expenditures are made for indemnity and defense costs in coming years.

Frank Sullivan, president and chief executive, said the company anticipates that its long-term asbestos liability reserve will make RPM more attractive to investors.

"The nature of RPM's diversified and well-balanced product portfolio is not overly reliant on a particular industry or segment of the economy, and most of our annual sales are tied to maintenance, repair, upgrade and improvement applications, which also gives us confidence for continuing growth despite today's climate of rising interest rates," he said.

JPMorgan maintained its neutral rating on RPM.

It has estimated RPM's long-term liabilities at $400m and said companies with asbestos related issues generally have a 12-15 year reserve on the balance sheet.

It said RPM's 20.5% sales growth reflects higher volume (7%) and price (3-4%) and acquisition benefits (9-10%).  It said the industrial division had sales growth of 13%, combined price and volume, and 15% growth from the Illbruck Sealants acquisition. In the consumer division, price and volume growth improved at a lower 11% pace.

By: Patrick Crow
+1 713 525 2653

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