US Paint Shares Sink as RPM Cuts Profit Forecast

Houston (USA): Shares of RPM International dropped sharply on Thursday amid news that the company's earnings for its upcoming quarter may decline year on year. CEO Frank Sullivan warned that adjusted earnings before interest and tax (EBIT) could be $75m-85m, down from $ 80.6m the previous year, which would signify a drop in five straight quarters of business activity. This influenced shares of competing companies making paints, coatings, adhesives, and sealants to slide due to the warning.

RPM has warned of difficult economic conditions with downturns in Europe and the construction industry weakening demand. Rising interest rates have impacted construction activity, existing home sales and the overall economy, while supply chain improvements are resulting in lower demand for certain goods - such as those of RPM’s businesses. Consequently, customers are adjusting their inventory policies, slowing down purchases and leading to a decrease in demand which is expected to continue into RPM’s fiscal third quarter.

RPM recently reported during an earnings conference call that some of their OEM customers have extended factory shutdowns beyond typical holiday periods. This is leading to adjustments in inventory and production rates, with RPM expecting it could take six to nine months for inventory levels to return to where they want them. Inflation is adding a further challenge by driving up costs for materials like metal packaging and alkyd resins – both rising by 59% and 30%, respectively, during the second quarter compared to last year. The strengthening dollar has also resulted in unfavorable exchange rates.

RPM anticipates that for the third quarter of its fiscal year, overall sales will rise within the range of a low-single-digit to mid-single-digit percent. The Construction Products Group (CPG) is expecting a decrease in sales in the low-single-digit to mid-single-digit percentage range, with offerings such as construction sealants and adhesives, coatings and chemicals, roofing systems, concrete admixture, and repair products, building envelope products, insulated cladding, and flooring systems.

Meanwhile, the Performance Coatings Group (PCG) is expecting an increase in sales within the range of high-single digit to low double digit percentage rate due to its product offerings of fireproofing coatings, corrosion control coatings and other infrastructure repair materials. The Specialty Products Group (SPG) is expected to stay relatively even with their current sales levels seeing as though they specialize in industrial cleaners, restoration services equipment, colourants nail enamels and exterior finishes as well as food coatings. Finally, The Consumer Group should experience a mid-single digit increase due to its production of various caulks, sealants, and sealers amongst other products.

Supplies such as window treatments, resilient flooring, and insulation require a variety of chemicals crafted with isocyanates, polyols, vinyl chloride monomer, and more. Furniture, carpeting and appliances also leverage these chemistries to ensure quality products for property owners. Altogether, the new construction market can generate upwards of $12,000 worth of chemistry per start.