RPM expects no US recession, sees strength in reshoring, infrastructure
HOUSTON (ICIS)– RPM International does not expect the US will enter a recession during its fiscal 2024, and it expects to continue benefiting from reshoring and infrastructure, the US based coatings, sealants and adhesives producer said on Wednesday. “Red lights are turning into yellow lights and, in a few places, even green lights,” said Frank Sullivan, CEO. He made his comments during an earnings conference call. RPM’s fiscal 2024 began in June, and it expects sales for the year to rise by a mid-single digit percentage. It expects adjusted earnings before interest and tax (EBIT) to rise from a low- to mid-teen percentage. The outlook expects modest economic growth. “This outlook assumes that we will not enter a recession,” said Rusty Gordon, chief financial officer. The company said infrastructure and reshoring have been the strongest sectors in the construction industry, and it expects these will continue growing. For the fiscal year, RPM expects to continue gaining market share in concrete admixtures, Gordon said. Demand for roofing products should continue growing. The company expects residential construction will stabilise. RPM also expects continued demand from the oil and gas industry. The company does not expect a recovery in commercial construction, Sullivan said. That industry is especially reliant on regional banks, and those bore the brunt of the banking crisis earlier in the year. The company does not expect a pickup in construction for hospitality or offices anytime soon. RPM said the worst of the destocking took place in the second half of its fiscal 2023, which ran from December through May. It expects destocking will become less prevalent for its Specialty Products Group (SPG). This segment makes industrial cleaners, restoration services equipment, colourants, nail enamels, exterior finishes, food coatings and coatings for original equipment manufacturers (OEMs). Inflation for raw materials should slow down to the mid single digits, the company said. Pricing has proven more stubborn for packaging and titanium dioxide (TiO2). The slowdown in inflation should allow RPM to start recovering lost margins, Sullivan said. The company’s Consumer Group still has not returned to pre-pandemic margin levels. That segment makes coatings, caulks, sealants and sealers for consumers. GUIDANCE FOR FISCAL Q1 RPM expects adjusted EBIT to rise by the high single digits during its fiscal first quarter, which started in June. Sales should be up by the low single digits. The following table summaries the company’s Q1 guidance by segment. Q1 Year on Year Performance Construction Products Group Up low single digit % Performance Coatings Group Up mid single digit percent Specialty Products Group Down high single digit % Consumer Group Up low single digit % Source: RPM Thumbnail shows sealant, which is a product made by RPM. Image by ICIS.
