Wednesday, RPM International Inc. (RPM), a manufacturer of specialty paints and protective coatings, reported a wider-than-expected loss for the fiscal third quarter ended February 28, hurt by lower sales, one-time restructuring costs and write-downs.
For the quarter, RPM incurred a net loss of $30.9 million or $0.24 per share, compared to net income of $12.2 million or $0.10 per share in the year-ago period. On average, 8 analysts tracked by Thomson Reuters expected the company to lose $0.05 per share.
RPM blamed the loss on lower sales, one-time costs of about $14.5 million taken to reduce the fixed cost base of many of its businesses in response to the global recession, and the write-down of $4.0 million in marketable securities at its captive insurance company.
The company's quarterly net sales declined 13.2% to $635.4 million from $731.8 million reported a year ago. Excluding a foreign exchange loss of 6.7%, partially offset by net acquisition growth of 3.0%, organic sales declined 13.1%. Wall Street analysts had a consensus revenue estimate of $707.43 million.
According to the company, the worldwide recession and traditional seasonal slowness contributed to lower sales.
The company operates in two segments, Industrial and Consumer. The industrial segment recorded sales for the quarter of $467.6 million, a decline of 13% from the year-ago period. RPM noted that the impact of the global economic slowdown, particularly the negative impact of the financial markets on North American commercial construction activity, is being felt in its industrial businesses.
However, modest growth is being experienced by its more internationally focused industrial businesses, including corrosion control coatings, polymer flooring and global roofing, according to RPM.
RPM's consumer segment posted quarterly sales of $228.7 million compared to $264.2 million in the same period a year ago. Inventory reductions by the company's major retail customers and ongoing impact of depressed sales of both existing and new homes in North America negatively impacted RPM's consumer segment's sales.
During the quarter, RPM paid $19.8 million in pre-tax asbestos-related indemnity and defense costs, compared to $18.7 million paid in the third quarter a year ago.
For the recent nine-month period, RPM's net income declined to $80.3 million or $0.63 per share from $135.3 million or $1.06 per share in the year-ago period.
Sales for the recent nine months dropped 2.2% to $2.51 billion from $2.57 billion in the comparable period a year earlier.
According to the company, its liquidity, capital position and cash flow remain strong. Total debt as of February 28, 2009 shrunk to $983.2 million from $1.13 billion a year ago and $1.07 billion at the end of the fiscal 2008. Total cash and cash equivalents were $205.2 million, and RPM had $299.2 million in credit available under its senior revolving and accounts receivable credit facilities, resulting in total liquidity of $504.4 million at the end of February 2009.
During the quarter, RPM completed two acquisitions. On February 9, RPM's subsidiary Tremco illbruck International GmbH acquired Karochemie AG, a supplier of sealants to the construction markets in Switzerland and Lichtenstein.
On February 13, 2009, Carboline Co., yet other subsidiary of RPM, acquired a 49% interest in its Chinese licensee, Carboline Dalian Paint Production Co., Ltd. The remaining 51% of the joint venture is owned by UniChemical Company, a long-standing partner of Carboline in another joint venture, Carboline Korea Ltd. The terms of the acquisitions were not disclosed.
All acquisitions are expected to be accretive to earnings within one year, according to RPM.
Looking ahead to fiscal 2010, RPM expects to realize ongoing benefits from lower fixed costs, generating improved earnings even with the probability of a lower base of business.
RPM closed Tuesday's trade at $13.58 on a volume of 803,200 shares.
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