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» RPM International CEO Discusses F1Q2011 Results - Earnings Call Transcript
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Despite a very challenging business environment, we are continuing to make forward progress. We are seeing steady growth in our industrial maintenance product lines due to solid and continuing increases in industrial maintenance and capital spending. And the fact that the related business units like our Carboline, Stonhard, Flowcrete, our Universal Sealants also had a more global footprint.We are also experiencing a flattening out of construction chemical products and sealants product lines versus the significant declines that we’ve experienced over the last 18 to 24 months. And seeing some modest pickup in business activity today versus the depressed levels of a year ago and we see that slowly continuing to improve as well. Our consumer product lines are flat to slightly down, in part due to comparisons to record results of sales and earnings in the first half of last year, but continuing to hold market share gains and on a relative basis performing well. Lastly, as you are all aware, industry and many industries are in a [clear fight] within the global supply chain regarding availability of costs of many base chemicals and metals and their impact on downstream raw materials, which in the second quarter negatively impacted our ability to leverage our sales growth to our bottom line. I’ll now turn the call over to Bob Matejka, RPM’s Senior Vice President and Chief Financial Officer to provide you some more details on the quarter. Bob? Bob Matejka Thanks, Frank, and good morning, everyone. Thanks for joining us on today’s call. I’ll review the results of our fiscal 2011 second quarter, touch upon a few balance sheet and cash flow measures and turn it back to Frank for closing comments before we take your questions. All income statement comments that I’m going to speak to are compare fiscal 2011 actual results to fiscal 2010 pro-forma results, which exclude the results of Specialty Products Holding Corp. or SPHC. As you recall, SPHC was deconsolidated from RPM International, Inc. effective May 31, 2010.
Getting to the second quarter results, consolidated net sales increased 5.3% quarter-over-quarter to $826.3 million and this is driven by volume increase of 2.4%, price of 1% and acquisition growth of about 2.8%. These increases were slightly offset by unfavorable foreign exchange of 0.9%.In the industrial segment, sales of $582.5 million, which account for approximately 70% of our total sales. The increased 8% over last year with volume up 4.1, price up about 1.2% and acquisition growth of 3.7%. Partially offsetting these increases was negative foreign exchange of 1%. The consumer segment, sales were $243.8 million. They were relatively flat year-over-year with slight increases in price and acquisition growth completely offset by foreign exchange and volume. Our consolidated gross profit increased to $339.5 million from $334.4 million last year on volume increases, but decreased 150 basis points to 41.1% of net sales, primarily due to unfavorable raw material costs. The industrial segment gross profit increased to $249.7 million from $237.6 million also on volume increases but declined 120 basis points to 42.9% net sales, primarily due to a combination of unfavorable raw material costs and product mix. The consumer segment’s gross profit of 36.8% declined 270 basis points and that was due to higher raw material costs. Our SG&A increased 1.1% to $250.1 million and it was due to variable costs associated with the higher sales volume. As a percent of sales, SG&A decreased to 30.3% of sales from 31.5% of sales. That’s a reduction of 120 basis points, mostly due to better overall leverage on higher sales and lower corporate and other costs. Read the rest of this transcript for free on seekingalpha.com