RPM International Inc. (NYSE:RPM) reported its fiscal year 2024 results, showcasing a strong financial performance despite facing some challenges in certain business segments. The company's annual net income reached $585.8 million, while its annual revenue stood at $7.34 billion. Additionally, RPM generated impressive annual operating cash flow of $1.12 billion and annual free cash flow of $908.3 million.

Financials

In the fourth quarter of fiscal 2024, RPM's consolidated organic sales increased 0.4%, with pricing slightly higher and volumes overall flat. Foreign exchange was a 0.7% headwind to revenue, and divestitures net of acquisitions decreased sales by 0.1%, resulting in a modest decline in sales for the quarter. EBIT margins expanded 90 basis points, driven by the company's MAP 2025 initiatives, improved fixed-cost leverage at the Construction Products Group, and favorable mix at the Consumer segment.

Adjusted EPS for the fourth quarter increased 14.7% to a record $1.56, driven by the adjusted EBIT growth and lower interest expense as strong cash flow allowed RPM to repay debt during the quarter. For the full fiscal year 2024, the company reported adjusted EPS of $4.94, up 14.9% from the prior year.

Business Overview

RPM's Construction Products Group (CPG) led growth during the quarter, with broad-based strength in most of its businesses, particularly in roofing and its differentiated turnkey offerings. The Consumer segment also executed well, achieving market share gains, upgraded product mix, and realizing MAP 2025 benefits to generate record adjusted EBIT despite a sales decline due to continued DIY softness.

After multiple years of record results, RPM's Performance Coatings Group (PCG) declined in the fourth quarter as it faced challenging comparisons to the prior year and experienced negative headwinds from the timing of project completions. In the Specialty Products Group (SPG), some end markets showed signs of bottoming out, but the company continues to face challenges in this segment.

Geographically, North America, Africa, and the Middle East grew, while sales declined in other regions. European sales declined 4% due to foreign exchange headwinds and divestitures in the Performance Coatings Group, but profitability improved meaningfully as targeted MAP 2025 initiatives in the region gained momentum. Excluding foreign exchange, sales in Latin America grew mid-single digits as RPM continued to benefit from products serving infrastructure projects.

Outlook

Looking ahead, RPM provided guidance for fiscal year 2025. The company expects sales growth to be in the low single-digit range and adjusted EBIT to increase in the mid-single-digit to low-double-digit range. This outlook reflects the continued benefits of the company's MAP 2025 initiatives, including manufacturing and commercial excellence improvements, as well as actions taken to streamline the SG&A structure.

In the first quarter of fiscal 2025, RPM anticipates consolidated sales to be approximately flat compared to the record prior year period, with many market trends from the fourth quarter continuing. By segment, the Construction Products Group is expected to generate low single-digit revenue growth, while Performance Coatings Group sales are expected to be flat due to challenging comparisons. The Specialty Products Group is expected to see sales decline in the low single-digit range, and the Consumer Group sales are anticipated to be down low single digits.

Consolidated first-quarter adjusted EBIT is expected to increase in the mid-single-digit percentage range compared to the record prior year period, driven by the continued benefits of the MAP 2025 initiatives. As part of this program, RPM is in the process of consolidating or has recently consolidated 12 facilities, demonstrating the company's momentum in generating efficiencies.

Recent Developments

RPM's strong cash flow generation and debt reduction throughout fiscal 2024 have also positioned the company to benefit from lower interest expense in fiscal 2025. The company returned $287 million to shareholders through dividends and share repurchases during the past fiscal year, and it expects its Board to raise the dividend for the 51st consecutive year when they meet in October.

Liquidity

The company's balance sheet remains in excellent shape, with total liquidity of $1.36 billion as of the end of fiscal 2024, including $237.4 million in cash and cash equivalents. Long-term debt (excluding current maturities) stood at $1.99 billion, down from $2.51 billion a year earlier.

Conclusion

RPM's diversified portfolio of specialty chemicals and coatings businesses has demonstrated resilience in the face of various market challenges. The company's focus on innovation, operational excellence through the MAP 2025 program, and strategic capital allocation have positioned it well to navigate the current economic environment and capitalize on future growth opportunities.

Overall, RPM's fiscal 2024 results and outlook for fiscal 2025 suggest the company is executing effectively on its strategic initiatives, leveraging its strong market positions, and maintaining a solid financial foundation to drive long-term shareholder value.