HOUSTON (ICIS)--RPM International expects to spend the next two quarters implementing price increases to catch up with inflation, executives with the US-based sealants, adhesives and coatings producer said on Wednesday.
Inflation was already appearing at the end of 2020 and the beginning of 2021, said Frank Sullivan, CEO. He made his comments during a conference call discussing the company's earnings for its fiscal third quarter, which ended on 28 February.
Polar storm Uri put further pressure on prices by shutting down several chemical plants along the US Gulf Coast.
For some of RPM's raw materials such as epoxy resins and acrylic resins, prices have more than doubled from levels a year ago, Sullivan said.
RPM expects these storm-related price spikes to relent, but prices will still remain substantially higher from year-ago levels, Sullivan said.
"That, from our perspective, is a structural change in most of our raw materials, from acrylic resins to epoxy resins to all types of polymers and polyols. It has just been an extraordinary period of time in terms of spikes, but, really, in terms of inflation," Sullivan said.
This goes beyond RPM's petrochemical feedstock to cover packaging, transportation and even labour costs, he said. RPM has had to replace some of its seasonal part-time positions at its distribution centres with more expensive full-time ones because workers could earn more money collecting unemployment benefits.
"So inflation, in total, is going to be mid- to high-single-digits throughout the year. That's structural. That does not include some of the extraordinary spikes that resulted from the storm," he said.
Inflation is prevalent throughout the profit-and-loss (P&L) statements of RPM and the petrochemical industry, Sullivan said.
He raised concerns about the massive amounts of stimulus that the US has already pumped into the economy in 2020 and 2021 in response to the coronavirus pandemic. The infrastructure bill could add even more stimulus.
"You start to marry that with the inflation that our industry and manufacturing in general is seeing across the packaging and freight costs and metals and everything else," Sullivan said.
"The bigger concern we have to have broadly is are we in for a return of some level of inflation?" he asked. "What does that do to interest rates? I'm not an economist, but we don't see anything that suggests that we're going backwards in raw materials structurally."
For now, RPM expects that its price increases should be able to offset the effects of inflation by the end of the company's fiscal first quarter, which runs through August, said Rusty Gordon, CFO.
RPM has introduced price increases as high as 14% for some of its product lines, in response to the spike in epoxy resin, Sullivan said. Those increases are sticking.
Thumbnail image shows US dollars. Image by Al Greenwood