RPM's CEO Calls Narrowed Full-Year Outlook 'A Little Bit Of A Swag' As Raw Material Inflation Climbs To 9%-11%
Chair and CEO Frank Sullivan tied the trimmed fiscal 2027 outlook to inflation easing and a roofing recovery, with raw material costs now forecast higher.
RPM International Chair and CEO Frank Sullivan said on the company's fiscal first-quarter earnings call that its narrowed full-year outlook is partly guesswork: "it's a little bit of a swag." RPM now expects second-quarter raw material inflation of 9% to 11%, up from a prior estimate of 6% to 8%.
What management said on the call
A Deutsche Bank analyst asked Sullivan to break down the guidance cut. He answered that management has good visibility into the second quarter, but that the rest of the year assumes inflation trends down in spring while staying higher than expected "just a few months ago."
Sullivan called the outlook "really a bet on when we'll see a recovery in our construction products group and specifically tramco roofing." He added that freight surcharges and price increases are being introduced.
He also said the company saw little or no inflation for roughly six months through late spring and had not planned price increases. It had to adjust quickly when energy and freight costs jumped.
The new guidance numbers
Chief Financial Officer Rusty Gordon said third-quarter inflation is expected at 7% to 9%. He said the sustained rise in oil and other commodity prices over the past couple of months lifted expectations in other raw material categories. Polyurethane feedstock shortages were worse than expected and hurt sales. Extra supply was secured at a higher cost that, because of first-in, first-out accounting, will hit the income statement.
For fiscal 2027, RPM is narrowing sales growth to mid-single digits from 3% to 7%. Adjusted EBITDA growth is now expected at mid-single digits, versus a prior outlook of 5% to 10%.
For the second quarter, Gordon guided to low-to-mid single-digit growth in both consolidated sales and EBITDA. He said pricing increases across all segments will help but will still pressure gross margin for the year. Startup costs at new facilities and tougher second-half comparisons are also expected, and he said the construction products segment should return to positive organic growth toward year-end.
How the quarter held up
Sullivan said first-quarter sales, adjusted EBITDA and adjusted EPS were records. Adjusted diluted EPS rose 5.3% to $1.98, according to Controller and Chief Accounting Officer Michael Laroche. Gross margin fell 100 basis points (one percentage point) because raw material inflation outpaced pricing. Cost cuts in selling and administrative expense held the adjusted EBITDA margin level with a year earlier.
Construction products organic sales declined, with education and healthcare slowing and polyurethane shortages limiting finished product. Sullivan said emerging markets grew more than 20%; the southern hemisphere developing world was 8% of consolidated first-quarter sales, versus slightly less than 5% as recently as five years ago.
Vice President of Investor Relations Matt Schlarb said RPM returned $90.5 million to shareholders and cut total debt by $263 million. RPM bought Volteco, an Italy-based waterproofing supplier, at the start of October. Shares traded at $96.67, up 1.44%, in Tuesday trading (market data).
RPM holds an Investor Day on November 9 in Maple Shade, New Jersey, where management said it will detail its MAP 2030 goals.
Sources
- RPM International to Report Q1 Earnings: Here's What You Must Know — Yahoo Finance
- RPM Reports Record Fiscal 2027 First-Quarter Results – Company Announcement - FT.com — Financial Times
- RPM International: Fiscal Q1 Earnings Snapshot – WTOP News — wtop.com
- RPM International Sees FY2027 Q2 Sales, Adjus... — benzinga.com
- RPM to Announce Fiscal 2027 First-Quarter Results on October 6, 2026 – Company Announcement - FT.com — Financial Times
