RPM International Inc. Q2 FY2026 earnings call

• Results Overview: RPM achieved record sales in Q2 but momentum slowed due to longer construction lead times, DIY softness, and government shutdown. Segments had positive growth but margins declined due to higher expenses. - SG&A Optimization: Accelerating SG&A optimization actions to align with market demand, aiming for $100M annual benefit, with $5M realized in Q3, $20M in Q4, and $75M in FY2027. - Growth Investments: Focused on high-performance buildings (expanding technical sales force, acquisitions like HCJ and Kalzip), business intelligence (leveraging data for marketing), and innovation (e.g., AlphaGuard PUMA). - Financials: Consolidated sales up 3.5%, adjusted EBIT declined, adjusted EPS declined due to higher SG&A and interest expense. Geographic results: Europe fastest-growing, North America grew ~2%, emerging markets led by Africa and Middle East.

Construction Products Group: Sales grew to a record led by high-performance building solutions, but project lead times lengthened due to the government shutdown, disaster restoration sales were weak, and adjusted EBIT declined. Performance Coatings Group: Achieved record sales with broad-based growth, including Stonhard flooring and fiber grade benefiting from industrial spending and data center build-outs, adjusted EBIT was flat. Consumer Group: Sales grew due to M&A and pricing, but volumes declined from soft DIY demand, product rationalization hurt sales, adjusted EBIT declined.

• Third Quarter: Expected consolidated sales growth mid-single digits, adjusted EBIT mid- to high single digits,受益于增长投资和SG&A优化，但受医疗通胀和M&A交易费用影响. - Fourth Quarter: Sales expected mid-single-digit growth,受益于建筑项目管道、收购和SG&A优化，调整后EBIT低至高单位数增长，受销量增长影响.

• Market Volatility: Slowing momentum, DIY softness, longer construction lead times, government shutdown impact on construction activity. - Cost Pressures: Higher SG&A expenses from growth initiatives, M&A costs, health care, and plant/warehouse consolidations leading to margin decline. - Tariffs and Raw Materials: Tariff-driven raw material inflation in some categories, impacting cost structure.

Q: Ghansham Panjabi asked about organic sales breakdown and segment performance deterioration.

A: Frank Sullivan said September had margin improvement and growth in Construction and Performance Coatings, but October and November saw deterioration across all segments.

Q: Matthew DeYoe asked about SG&A initiative and EBIT accretion from acquisitions.

A: Frank Sullivan said $100M is $70M personnel RIFs and $30M discretionary expense cuts, and acquisitions take 18-24 months to become accretive.

Q: Arun Viswanathan asked about transitory costs and savings run rate.

A: Rusty Gordon said transitory costs were from plant shutdowns and distribution inefficiencies, and full savings will start flowing in Q1 2027 at $25M per quarter.

Q: John McNulty asked about 4Q outlook and raw material outlook.

A: Frank Sullivan said 4Q depends on volume, easier comps in Consumer, and raw materials have tariff-driven inflation but geopolitical tailwinds.

Q: Patrick Cunningham asked about Consumer Group weakness and price realization.

A: Frank Sullivan said most Consumer weakness is underlying market softness, price was less than 1% in Q2 and similar in Q3.

Q: Michael Harrison asked about software implementation impact and Performance Coatings growth.

A: Rusty Gordon said software implementation was temporary, and Performance Coatings' Stonhard and fiber grade are strong.

Q: Frank Mitsch asked about December results.

A: Frank Sullivan said December sales were up 12.1% but volatility makes forecasting difficult.

Q: John Ezekiel Roberts asked about competition and M&A in Kalzip.

A: Frank Sullivan said Kalzip is strategic for expanding metal roofing, and Performance Coatings has strong market share in certain areas.

Q: Kevin McCarthy asked about M&A rationale and pricing.

A: Frank Sullivan said Kalzip is strategic for expanding market, and pricing was less than 1% in Q2 with some elasticity in Consumer.

Q: Michael Sison asked about organic vs acquisition growth.

A: Frank Sullivan said focused growth investments drive organic growth, but volatility makes forecasting exacts.

Q: Joshua Spector asked about transitory costs and SG&A savings.

A: Russell Gordon said transitory costs included health care and conversion costs, and SG&A savings details in April.

Q: David Begleiter asked about MAP 3.0 savings and cost breakdown.

A: Frank Sullivan said MAP 3.0 will have $100M impact, mostly in SG&A, with details in summer.

Q: Vincent Andrews asked about government shutdown impact and segment sales to government.

A: Frank Sullivan said limited direct government sales, impact on education and infrastructure.

Q: Jeffrey Zekauskas asked about SG&A growth and acquisition accretion.

A: Frank Sullivan said SG&A growth from M&A and consolidations, acquisitions hurt margins in FY26 but expected accretive in future.

Q: Aleksey Yefremov asked about backlogs and facilities consolidations.

A: Frank Sullivan said backlogs stable in Performance Coatings, growing in Construction Products, and facilities details in summer.