Executive Summary / Key Takeaways

• Strategic Pivot to Growth: RPM International Inc. has successfully transitioned from its "MAP 2025" efficiency program to a deliberate "pivot to growth" strategy, marked by increased investments in sales, marketing, and a robust M&A pipeline, yielding higher organic growth than the broader market.
• Record Q1 Fiscal 2026 Performance: The company achieved record consolidated sales of $2.11 billion and adjusted EBIT of $314 million in Q1 fiscal 2026, driven by strong organic growth in its Construction Products Group (CPG) and Performance Coatings Group (PCG), complemented by strategic acquisitions.
• Technological and Operational Differentiation: RPM leverages turnkey solutions, proprietary formulations, and a unique "supply and apply" model in construction, offering a competitive advantage in labor-constrained markets and specialized applications like data centers and HVAC restoration.
• Financial Strength and Disciplined Capital Allocation: With a strong balance sheet, record cash flows, and a Net Leverage Ratio of 1.87 to 1, RPM is well-positioned for disciplined debt-funded acquisitions and continued shareholder returns, including a 51-year history of dividend increases.
• Outlook Amidst Headwinds: Despite persistent macroeconomic uncertainty, raw material inflation, and temporary inefficiencies from plant consolidations, RPM anticipates full-year fiscal 2026 sales at the high end of its low-to-mid single-digit growth range and adjusted EBIT growth towards the lower end of high single-digit to low double-digit projections.

A Legacy Forged in Efficiency: The MAP Initiatives

RPM International Inc., founded in 1947, has consistently evolved its business model to become a global leader in specialty chemicals for construction, industrial, specialty, and consumer markets. The company's recent transformation is deeply rooted in its "MAP to Growth" and subsequent "MAP 2025" initiatives, multi-year programs designed to enhance operational efficiency and streamline business processes. The initial MAP program exceeded expectations, delivering approximately $325 million in savings and efficiencies. MAP 2025, formally concluded on May 31, 2025, is projected to generate around $500 million in benefits, significantly expanding gross margins, improving working capital, and strengthening cash flow. These efficiency gains have been instrumental in fortifying RPM's financial position, enabling it to pursue strategic growth opportunities.

Technological Edge and Innovation as a Moat

RPM's competitive advantage is significantly bolstered by its differentiated technologies and innovative solutions, particularly within its industrial and construction segments. The company's core technological strength lies in its ability to provide comprehensive, high-performance systems rather than just individual components. This includes turnkey offerings in roofing and flooring, where RPM both supplies and applies the product, a critical differentiator in a labor-constrained construction market.

For instance, in its Construction Products Group (CPG), RPM has developed advanced construction sealants, adhesives, and roofing systems that offer superior durability and weatherproofing. The PureAir business, an HVAC refurbishment technology, allows for the rehabilitation of major commercial HVAC units at 25% to 30% of the cost of new installations, dramatically improving air quality and operating efficiency, and extending useful life by five to ten years. This technology directly competes against new unit replacements, many of which are Chinese-made, providing a compelling value proposition. Similarly, Nudura insulated concrete forms (ICF) improve energy efficiency and weather resiliency in building envelopes.

In the Performance Coatings Group (PCG), RPM's Fibergrate business, specializing in fiberglass reinforced plastic (FRP) grating, has seen strong growth, particularly benefiting from the data center construction market due to the non-conductive nature of its products compared to steel. The company's R&D efforts are also evident in new product introductions like the Mean Green refillable household cleaner, a patent-pending product with two chambers (concentrate and water) that mixes when sprayed, offering the equivalent of four standard bottles of cleaner in one, reducing waste and providing superior value. This innovation was recognized with the "best concentrate in the cleaners category" at the 2025 House Clean Awards.

These technological differentiators translate into a strong competitive moat for RPM. By offering specialized, high-performance, and often integrated solutions, the company commands stronger customer loyalty and pricing power, leading to robust growth and improved margins in targeted construction and industrial segments. The strategic intent behind these R&D initiatives is to enhance product performance, reduce costs for end-users, and expand into new, high-growth categories, thereby solidifying RPM's market positioning and long-term growth trajectory.

Strategic Realignment for Accelerated Growth

Effective June 1, 2025, RPM realigned its operating structure from four segments to three: Construction Products Group (CPG), Performance Coatings Group (PCG), and Consumer. This strategic reorganization integrated businesses previously part of the Specialty Products Group (SPG) into the new segments, aiming for additional operational and administrative efficiencies and enhanced collaboration. For example, the Industrial Coatings Group (ICG) joined PCG, benefiting from improved collaboration on high-performance coatings development with the Carboline division and leveraging a broader distribution network. The Color business, including DayGlo fluorescent pigments, moved to the Consumer Group, streamlining overhead and utilizing the Consumer segment's marketing expertise to raise brand profile. This structural change is a cornerstone of RPM's "pivot to growth" strategy, enabling better resource allocation and synergy realization.

Segmental Performance: A Deep Dive into Q1 Fiscal 2026

RPM's first quarter of fiscal 2026, ended August 31, 2025, showcased the initial successes of its growth strategy, with all segments achieving record quarterly sales and increased adjusted EBIT.

The Construction Products Group (CPG) reported net sales of $881.4 million, a 6.5% total growth, with organic growth of 5.4%. This strong performance was driven by systems and turnkey roofing solutions for high-performance buildings and infrastructure projects, despite softness in European markets and the disaster restoration business. CPG's adjusted EBIT reached $163.9 million, a record for the segment, benefiting from higher sales and MAP 2025 initiatives, even with temporary inefficiencies from plant consolidations and growth investments.

The Performance Coatings Group (PCG) delivered record net sales of $538.5 million, marking a 9.9% total growth and 6.7% organic growth. This was fueled by broad-based strength in turnkey flooring solutions, protective coatings, and specialty OEM coatings, with acquisitions contributing 2.5% to growth. PCG's adjusted EBIT hit a record $82.1 million, driven by higher sales and MAP 2025 benefits, partially offset by growth investments and an unfavorable mix. Management highlighted PCG's unit volume growth of 8% as "pretty remarkable in any environment".

The Consumer Group achieved record net sales of $693.8 million, a 6.6% total growth, largely due to a 9.1% acquisition impact from The Pink Stuff and Ready Seal. However, the segment experienced a 2.9% organic sales decline, attributed to softness in DIY markets and product rationalization. Despite these challenges, the Consumer Group's adjusted EBIT increased to $109.0 million, benefiting from accretive margins of acquired businesses and MAP 2025 initiatives, partially offset by cost inflation, reduced fixed-cost utilization, and increased marketing expenses. Management believes the Consumer Group is outperforming the broader industry in a challenging environment.

Financial Fortitude and Capital Allocation

RPM's financial health is robust, reflecting the cumulative benefits of its MAP initiatives. For the three months ended August 31, 2025, the company reported consolidated net income attributable to RPM International Inc. stockholders of $227.6 million on $2.11 billion in net sales. Operating cash flow in Q1 fiscal 2026 was $237.5 million. The company's liquidity remains strong at $933.4 million as of August 31, 2025, and it maintains a healthy Net Leverage Ratio of 1.87 to 1.

This financial strength underpins RPM's disciplined capital allocation strategy. The company has consistently returned value to shareholders, increasing its dividend for 51 consecutive years and repurchasing common stock. In Q1 fiscal 2026, RPM repurchased 146,191 shares for approximately $17.5 million. Management emphasizes that the strong balance sheet is a strategic asset, built to be utilized "smartly and strategically" for value-accretive acquisitions. Recent acquisitions like The Pink Stuff and Ready Seal, totaling over $600 million in debt-funded acquisitions in the last five months, demonstrate this commitment, with deal valuations showing a meaningful reduction from prior peaks.

Competitive Positioning: Outperforming in Specialized Markets

RPM operates in a highly competitive specialty chemicals industry, facing direct competition from larger players like Sherwin-Williams (SHW), PPG Industries (PPG), and Axalta Coating Systems (AXTA). RPM's competitive strategy centers on its niche market specialization and differentiated product offerings.

Compared to Sherwin-Williams, which excels in broad retail distribution and consumer painting solutions, RPM's focus on specialized, durable products for industrial and construction needs provides a qualitative edge in technical applications. RPM's turnkey solutions and proprietary formulations, such as those for roofing systems and sealants, lead to stronger customer loyalty and potentially higher pricing power in its targeted segments. While SHW may have a qualitative advantage in overall efficiency due to its larger scale, RPM's adaptability in specialized markets allows it to capture market share in areas where SHW's broader approach may be less effective.

Against PPG Industries, a leader in industrial and automotive coatings, RPM competes directly in high-performance flooring and protective coatings. RPM's emphasis on comprehensive solutions for building maintenance and asset life extension offers a qualitative advantage in durability and application-specific performance. While PPG may lead in broader R&D investment for advanced material science, RPM's focused expertise in restoration and protection products appeals to customers seeking long-term reliability. RPM's operational resilience, driven by diversification, may also provide a stronger financial exposure compared to competitors with more concentrated portfolios.

In comparison to Axalta Coating Systems, which specializes in automotive and industrial coatings, RPM's broad portfolio for industrial and consumer needs offers greater versatility, particularly in construction-related segments. RPM's ability to provide multi-use products differentiates it, though AXTA may excel in sector-specific innovation for high-performance automotive finishes. RPM's strategic investments in expanding its sales force and support staff, particularly in CPG and PCG, are aimed at outperforming competitors in a challenging market. The Industrial Coatings Group (ICG), now part of PCG, is actively competing and winning larger accounts, such as John Deere (DE), by leveraging improved collaboration and technical service levels.

Overall, RPM's market positioning is that of a key player in niche, value-added segments. Its "supply and apply" model, specialized product lines, and strategic acquisitions allow it to outperform in specific areas, even as it acknowledges that larger rivals may possess greater scale and broader R&D capabilities.

Outlook and Strategic Investments for Fiscal 2026

RPM's outlook for fiscal 2026 reflects a cautious yet confident stance, balancing persistent macroeconomic headwinds with the anticipated benefits of its strategic initiatives. For the second quarter of fiscal 2026, the company expects consolidated sales and adjusted EBIT to both increase by mid-single digits, with the Consumer segment projected to grow moderately more due to acquisitions. For the full fiscal year 2026, RPM anticipates sales to be at the high end of its previously announced low-to-mid single-digit growth range, driven by prior growth investments and acquired businesses. Adjusted EBIT is expected to grow towards the lower end of the high single-digit to low double-digit range.

This guidance is underpinned by several key assumptions and strategic investments. RPM plans to continue recognizing restructuring costs throughout fiscal 2026, with approximately $13.9 million in future additional charges related to MAP 2025 projects. The company expects about $70 million in incremental MAP 2025 benefits across the full year. Raw material inflation is projected to be 1-2% in Q1 fiscal 2026, potentially rising to 2-3% in Q2, particularly in metal packaging and pigments. RPM is implementing pricing actions, expecting a 2% increase in Q2, to offset these inflationary pressures. Higher debt from recent acquisitions will lead to increased net interest expense, estimated between $105 million and $115 million for the year.

RPM is making deliberate growth investments, including $5.3 million in additional sales associates and support staff, $3.2 million in increased advertising (especially in the Consumer segment), and $2.1 million in higher acquisition-related costs in Q1 fiscal 2026. These investments are aimed at accelerating organic growth, particularly in areas like turnkey engineered solutions, cleaners, and international markets. The company is also working on a new three-year plan, internally referred to as "MAP 3.0," which is expected to be unveiled publicly in the spring or summer of next year. This plan will build on MAP 2025 learnings and further pivot the organization towards growth.

Risks and the Path Forward

While RPM's investment thesis is compelling, several risks and challenges warrant investor attention. The ongoing "tariff uncertainty" continues to unsettle the macroeconomic environment, with an estimated unmitigated impact of $90-95 million on RPM for fiscal 2026. The company is actively mitigating this through production shifts, vendor agreements, and pricing adjustments. Legal proceedings, such as a potential EPA civil penalty of $1.4 million against a Consumer segment subsidiary and an ongoing lawsuit with a former supplier with a possible outcome range of $0.5 million to $152.3 million, introduce financial uncertainty. Unexpected increases in healthcare costs, including a $6 million rise in the past six months for weight loss drugs, represent a new and potentially permanent headwind.

The Consumer segment faces continued "softness in DIY markets" and a "forty-year low for housing turnover," which has negatively impacted organic sales. While RPM is making self-help efforts through new product introductions and acquisitions, a broader market recovery is needed for sustained organic growth in this segment. Temporary inefficiencies from ongoing plant consolidations, part of the MAP 2025 program, will also continue to impact profitability throughout fiscal 2026. Despite these challenges, RPM's strong balance sheet, disciplined capital allocation, and strategic focus on high-growth niches position it to manage these risks and continue its trajectory of profitable growth.

Conclusion

RPM International Inc. stands at a pivotal juncture, having successfully leveraged its "MAP 2025" efficiency initiatives to forge a robust financial foundation and embark on a strategic "pivot to growth." The company's Q1 fiscal 2026 results underscore the effectiveness of this strategy, demonstrating record sales and adjusted EBIT driven by strong organic growth in its industrial segments and accretive acquisitions. RPM's differentiated technologies, particularly its turnkey solutions and specialized product formulations for high-performance construction and maintenance, provide a significant competitive moat in a fragmented market.

While macroeconomic uncertainties, raw material inflation, and ongoing restructuring efforts present headwinds, RPM's proactive investments in sales, marketing, and a disciplined M&A pipeline are designed to drive sustained growth. The company's strong balance sheet and commitment to shareholder returns further enhance its investment appeal. As RPM continues to integrate its new three-segment structure and unveils its next strategic plan, its ability to capitalize on technological leadership and outmaneuver competitors in specialized niches will be paramount to achieving its long-term profitability targets and delivering compelling value to discerning investors.