RPM | Strategy and Financial Highlights Information from ICIS

(Edited from: “To our associates, customers and stockholders” annual report 2009 and Interview: US RPM to boost M&A activity in developing nations, ICIS news

RPM states that fiscal year 2009 was “like no other period” in its history. It says that it began the fiscal year with continued record high raw material costs, coupled with further escalation in record high fuel costs, before the worldwide recession took hold. By the middle of the fiscal year, business activity was dramatically declining in nearly every market that it serves.

“As we begin our 2010 fiscal year, we are encouraged by an improving outlook. Our consumer businesses have turned the corner in this difficult economy. With housing turnover, the sale of foreclosed homes and new home construction beginning to show improvement in various regions of the country, we are seeing an uptick in the sale of our maintenance and repair-oriented consumer products,” says chairman and chief executive officer, Frank Sullivan.

“With a modest recovery in consumer segment sales, we should realise consistent earnings growth from our consumer businesses as a result of the aggressive expense reductions taken during the past fiscal year,” continues Sullivan.

While it believes that its industrial businesses will continue to face economic challenges as a result of weak commercial construction and industrial capital spending activity, its prior-year actions to reduce the breakeven points at these businesses will allow its industrial operations to improve performance compared to the final six months of fiscal 2009.

“We expect a recovery in our industrial markets sometime in the spring of 2010. Depending on the timing of the industrial market turnaround, we expect earnings per share for RPM to grow in the range of 5% to 25% on a consolidated basis in fiscal 2010, from the adjusted $1.05 per diluted share earned in fiscal 2009,” says Sullivan.

RPM will continue to focus on a strategy of growth and acquisitions in fiscal 2010, mainly in developing countries. It seeks three types of businesses for acquisition growth: entrepreneurial, synergistic and strategic.

Entrepreneurial targets are typically family-run with strong management teams and industry-leading brands. Synergistic acquisitions are of bolt-on product lines that can be assimilated into RPM’s existing operations. Strategic platforms are significant in size and geographic reach. All are expected to be earnings accretive and cash flow positive within one year as well as to bring leading brands and technologies.

“We’re mostly looking at deals in the $10m-$50m range (€7m-€35m),” says Sullivan.

Looking ahead, RPM anticipates a return to profitability by the second half of 2010 based largely on improving demand from the home-buying segment.

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Financial highlights: RPM, year ended 31 May

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RPM Company Structure

RPM International with its subsidiaries specialises in specialty coatings, sealants and specialty chemicals serving both the industrial and consumer markets. RPM International was founded as a holding company by Frank Sullivan in 1947.
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