Rpm International Inc. · NYSE:RPM
Rpm International — Morgan Stanley Virtual 2020 Global Chemicals, Agriculture, and Packaging Conference
47 slides from Rpm International's conference presentation, Nov 10, 2020
Slide 1: Morgan Stanley Virtual 2020 Global Chemicals, Agriculture, and Packaging Conference
Russell L. Gordon – VP & CFO Morgan Stanley Virtual 2020 Global Scott. D. Copeland – VP-Financial Planning & Analysis Kathie Rogers - Manager of Investor Relations Chemicals, Agriculture, and Packaging November 10, 2020 Conference
Slide 2: Forward-Looking Statements & Regulation G
Forward-Looking Statements & Regulation G This presentation contains “Forward-Looking Statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements relate to our plans, expectations, estimates and beliefs of future events or our future financial performance and inv
Slide 3: RPM At A Glance
RPM At A Glance A world leader in specialty coatings, sealants, building materials and related services. Q U I C K FA C T S MANUFACTURING FACILITIES IN 26 COUNTRIES DIVIDEND RECORD 47 FOUNDED: 1947 HEADQUARTERS: Medina, OH NYSE STOCK LISTING: consecutive years (Symbol: RPM) of dividend increases FIS
Slide 4: Global Sales by Region
Global Sales by Region $ in millions CONSOLIDATED 2020 – $5,507 OUTSIDE NA EUROPE 2020 – $1,362 2020 – $936 – 17% NORTH AMERICA 2020 – $4,145 – 75% AFRICA/MIDDLE EAST ASIA/PACIFIC 2020 – $64 – 1% 2020 – $152 – 3% SOUTH AMERICA 2020 – $210 – 4% Morgan Stanley Virtual 2020 Global Chemicals, Agricultur
Slide 5: Operating Groups Drive Growth & Efficiency
Operating Groups Drive Growth & Efficiency Through Four Reportable Segments CONSTRUCTION PERFORMANCE PRODUCTS GROUP COATINGS GROUP FY20 Sales: $1.9 billion - 34% FY20 Sales: $1.1 billion - 20% CONSUMER FY20 SALES: SPECIALTY GROUP PRODUCTS GROUP $5.5 BILLION FY20 Sales: $1.9 billion - 35% FY20 Sales:
Slide 6: Strategic Balance: Repair & Maintenance vs. New Construction
Strategic Balance: Repair & Maintenance vs. New Construction* CONSTRUCTION PERFORMANCE PRODUCTS GROUP COATINGS GROUP 40% 60% ~30% 50% 50% CONSUMER GROUP ~70% SPECIALTY PRODUCTS GROUP 15% 50% 40% 85% New Repair & Specialty 10% Construction Maintenance OEM *Current estimates, which are subject to chan
Slide 7: Construction Products Group
Construction Products Group $1.9 billon Fiscal 2020 Sales GLOBAL BRANDS REGIONAL BRANDS Morgan Stanley Virtual 2020 Global Chemicals, Agriculture, and Packaging Conference - 11/10/2020 7
Slide 8: Construction Products Group Target Markets
Construction Products Group Target Markets 6 sides of the Building • Bridge • Tunnel + Floor (seamless) • Rail • Water + Fire protection • Transit • Power + Concrete • Highway BUILDING ENVELOPE INFRASTRUCTURE Air | Moisture | Thermal Concrete | Concrete Protection Morgan Stanley Virtual 2020 Global
Slide 9: Performance Coatings Group
Performance Coatings Group $1.1 billon Fiscal 2020 Sales COATINGS FLOOR SYSTEMS INFRASTRUCTURE FRP GRATING PROTECTIVE COATINGS SANITARY FLOORS FOOD & BEVERAGE RESURFACING & REPAIRING BRIDGES FIBERGLASS REINFORCED PLASTIC GRATINGS FIREPROOFING SYSTEMS FLOORS FOR COMMERCIAL SPACES BUILDING MAINTENANCE
Slide 10: Performance Coatings Group Target Markets
Performance Coatings Group Target Markets Manufacturing Metals & Mining Pulp & Paper Technology Bridge & Highway Water Wastewater Transportation Marine Commercial Spaces Food & Beverage Pharmaceutical Healthcare Offshore Oil & Gas Petrochemical Power Renewable Energy Morgan Stanley Virtual 2020 Glob
Slide 11: Consumer Group
Consumer Group $1.9 billon Fiscal 2020 Sales #1 Supplier in the #1 Caulk & Fastest Growing #1 Primer Brand #1 Brand of Wall Small Project Sealant Supplier Supplier of Wood in Customer Repair and Paint Category in North America Finishes in North Satisfaction Spackle in North Worldwide America among A
Slide 12: Consumer Group Target Markets
Consumer Group Target Markets • User Targets: DIY/Makers, Professionals, Industrial • Understanding targets’ needs and unmet needs drives innovation machine • Over 30,000 user insights have been gained in the past 24 months alone DIY DIY MAKERS PROFESSIONALS INDUSTRIAL Morgan Stanley Virtual 2020 Gl
Slide 13: Specialty Products Group
Specialty Products Group $0.6 billon Fiscal 2020 Sales #1 Supplier of World Leading #1 in North Global Market Daylight Manufacturer of America for Leader in Water- Fluorescent Professional Professional Based, Antifouling Colorants Restoration and Touch-up and Paints for the Worldwide Cleaning Soluti
Slide 14: Specialty Products Group Target Markets
Specialty Products Group Target Markets Food, Pharma, Packaging, Safety Agriculture, Cosmetics Equipment, Forestry, Lumber Apparel Furniture and Appliance, Auto, Marine, Fuel, Restoration & Cabinetry Marine, Furniture Cleaning Construction Protection, Equipment & Cosmetics Chemicals Morgan Stanley V
Slide 15: MAP to Growth
MAP to Growth PURPOSE VISION To position RPM for sustained, profitable growth To transform RPM into a more connected creating superior value for its customers, and efficient company focused on entrepreneurs, associates and shareholders. operational excellence and continuous improvement, while mainta
Slide 16: MAP to Growth Drives Bottom-Line Success
MAP to Growth Drives Bottom-Line Success MANUFACTURING PROCUREMENT G&A • Consolidated manufacturing and • Center led procurement has narrowed • Realigned to four operating segments, distribution facilities; closed 23 out of and strengthen our supplier relationships. each with a new President. the 31
Slide 17: RPM 27% Ahead of Initial Targets
RPM 27% Ahead of Initial Targets $290 MM WAVES PLAN MAP 2020 $132 MM EBIT $106 Annualized $18 Run Rate $101 MM EBIT $69 $ in millions $290 $102 MM $45 $83 MM EBIT EBIT $41 MANUFACTURING $36 PROCUREMENT $25 G&A INITIAL INITIAL INITIAL TARGET TARGET TARGET TARGET WAVE 1 WAVE 2 WAVE 3 Sept 2018 – May 2
Slide 18: RPM Quarterly Performance
RPM Quarterly Performance FY2019 through FY2021 Q4 Q1 Q2 Q3 Q4 Q1 Growth 2019 2020 2020 2020 2020 2021 Sales 2.8% 0.9% 2.8% 2.9% -8.9% 9.1% Adjusted EBIT* 22.4% 25.3% 22.0% 30.4% -11.5% 39.8% Adjusted EPS* 21.6% 25.0% 31.0% 76.9% -8.9% 51.6% * Adjusted EBIT growth and adjusted EPS growth are non-GAA
Slide 19: Fiscal 2021 First-Quarter Reported Results
Fiscal 2021 First-Quarter Reported Results SEGMENT RESULTS C ON STR UC TI ON PRODUCTS G ROUP Aug 31 Aug 31 Three months ended 2020 2019 % ($ in millions, except per share amounts) Sales $548 $536 +2.2% EBIT1 $100 $85 +18.6% C O N S O L I D AT E D PERFOR MAN C E COATING S GROUP Aug 31 Aug 31 Aug 31 A
Slide 20: Fiscal 2021 First-Quarter Adjusted Results
Fiscal 2021 First-Quarter Adjusted Results SEGMENT RESULTS C ON STR UC TI ON PRODUCTS G ROUP Aug 31 Aug 31 Three months ended 2020 2019 % Sales $548 $536 +2.2% ($ in millions, except per share amounts) EBIT1 $102 $87 +17.7% C O N S O L I D AT E D EBIT Margin1 18.7% 16.2% +250 bps Aug 31 Aug 31 PERFO
Slide 21: Fiscal 2020 Full-Year Reported Results
Fiscal 2020 Full-Year Reported Results Achieved Record EBIT & Diluted EPS SEGMENT RESULTS C ON STR UC TI ON PRODUCTS G ROUP May 31 May 31 12 months ended 2020 2019 % Sales $1,880 $1,900 (1.0)% ($ in millions, except per share amounts) EBIT1 $218 $187 +16.4% PERFOR MAN C E COATING S GROUP C O N S O L
Slide 22: Fiscal 2020 Full-Year Adjusted Results
Fiscal 2020 Full-Year Adjusted Results Achieved Record EBIT & Diluted EPS SEGMENT RESULTS C ON STR UC TI ON PRODUCTS G ROUP May 31 May 31 12 months ended 2020 2019 % Sales $1,880 $1,900 (1.0)% ($ in millions, except per share amounts) EBIT1 $232 $201 +15.3% C O N S O L I D AT E D EBIT Margin1 12.3%
Slide 23: Record Cash Flow Generated in FY21
Record Cash Flow Generated in FY21 ($ in millions) SUMMARIZED CASH FLOW AND FREE CASH FLOW METRICS 3 mo Ended 3 mo Ended First Quarter Aug 31 Aug 31 FY20 vs FY19 2020 2019 Source / (Use) Net Income $181 $106 $ 75 Stock-based Compensation $ 10 $ 7 $ 3 Depreciation & Amortization $ 35 $ 36 ($ 1) Worki
Slide 24: RPM is Positioned to Grow in New Markets and Product Channels
RPM is Positioned to Grow in New Markets and Product Channels $ in billions Pleasure Marine Cleaners, Powder Coatings, $1.1 Coatings, $0.50 $6 Caulks, Sealants & Cleaning/Restoration, Adhesives, $5 $0.25 Fluorescent Colorants, Wood Wood Care, $3 $0.150 Coatings, $10 Primers, $3 Food Coatings, $5 Sma
Slide 25: Construction Products Group Innovative New Products
Construction Products Group Innovative New Products Insulated Concrete Forms Eucon Baracade WPT Outsulation Securock Construct stronger, highly A water-repellent admixture ExoAir 430 energy efficient concrete used to improve the durability A collaborative solution structures capable of and surface i
Slide 26: Performance Coatings Group Innovative New Products
Performance Coatings Group Innovative New Products Pyrocrete 341 Soilok Stoncrete EFX A cementitious fireproofing This grout can stabilize soil, A troweled, epoxy mortar that provides hydrocarbon shut off water intrusion and system that has the look and fire, jet fire and cryogenic contain hazardous
Slide 27: Consumer Group Innovative New Products
Consumer Group Innovative New Products BEFORE AFTER HOME Floor Coating SmartCoat Eclipse Wall Repair Patches A durable, two-step coating Advanced paint and primer in Quickly and effectively fix the that transforms the look of one, a next-generation, most common drywall outdated floors in just one in
Slide 28: Specialty Products Group Innovative New Products
Specialty Products Group Innovative New Products TRU-CORE for VerdeCoat Underwater Antifouling Engineered Woods A new “green” barrier coating Protection Kit Fully penetrates wood from specially formulated for Running Gear Guardian the inside out with anti- packaging using ingredients provides superi
Slide 29: Acquisition Program Targets Niche Businesses with Leading Brands
Acquisition Program Targets Niche Businesses Broadened focus beyond with Leading Brands coatings and sealants to adjacent product categories, such as sanding, cleaning and others. Successful, niche businesses with ★ Achieve revenue synergies leading brands ★ New channels Above average gross prof
Slide 30: Intercompany Connections Drive Value Creation
Intercompany Connections Drive Value Creation Rust-Oleum and Tremco Leveraging Rust-Oleum’s retail relationships to expand the reach of Tremco’s product to contractors large and small Tremco and Fibergrate Connect to bring new rooftop safety solutions to market Wood Finishes and Rust-Oleum Wood Fini
Slide 31: 5-Year and 10-Year Cumulative Total Return
5-Year and 10-Year Cumulative Total Return Among RPM, the S&P 500 and a Customized Peer Group RPM’S TOTAL RETURN HAS OUTPERFORMED theS&P 500 by 44% and its Peers by 19% over the past 10 years This graph compares the cumulative five-year and ten-year total return provided stockholders on RPM Internat
Slide 32: RPM vs. Peers and Indices
RPM vs. Peers and Indices Two-Year Stock Price Performance (5/31/18 – 5/31/20) 80% 60% 56.59% 51.07% 40% 27.52% 25.17% 20% 12.53% 3.96% 4.45% 0.74% 0% -2.75% -20% -27.02% -25.72% -40% -36.37% -41.25% -60% FOE GCP FUL AXTA.K S&P 500 PPG Dow Jones AKZA-AE S&P 500 MAS NASDAQ RPM SHW (Chemicals) Morgan
Slide 33: Delivering Value to Shareholders
Delivering Value to Shareholders Only 41 publicly traded U.S. companies have an equal or better record* $2.6+ billion $1.50 Paid $1.25 $1.00 47 Consecutive Years of Dividend $0.75 Increases $0.50 $0.25 $0.00 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 '17 '19
Slide 34: RPM is Building a Better World
RPM is Building a Better World From homes and to infrastructure, workplaces, and precious …RPM’s products are trusted by consumers and professionals worldwide to beautify landmarks… structures, protect them from harsh environments, prolong their lifecycles and enhance their sustainability. Morgan St
Slide 35: Appendix
APPENDIX Reconciliations of Non-GAAP Measures to GAAP Measures
Slide 36: Consolidated Statements of Income
Consolidated Statements of Income ($ in thousands, except per share data) Fiscal Year Ended May 31, 2020 % 2019 % % Change Net Sales $ 5,506,994 $ 5,564,551 (1.0) Cost of Sales 3,414,139 62.0 3,476,231 62.5 Gross Profit 2,092,855 38.0 2,088,320 37.5 SG&A 1,548,653 28.1 1,596,043 28.7 Restructuring E
Slide 37: Consolidated Statements of Income
Consolidated Statements of Income ($ in thousands, except per share data) (Unaudited) Three Months Ended August 31, 2020 % 2019 % % Change Net Sales $ 1,606,670 $ 1,472,764 9.1 Cost of Sales 953,015 59.3 898,010 61.0 Gross Profit 653,655 40.7 574,754 39.0 SG&A 395,953 24.6 400,566 27.2 Restructuring
Slide 38: Non-GAAP Financial Measures
Non-GAAP Financial Measures The following are the non-GAAP financial measures used in this presentation: • EBIT is defined as earnings (loss) before interest and taxes. Management uses EBIT, as defined, as a measure of operating performance, since interest expense, net, essentially relates to corpor
Slide 39: Free Cash Flow Generation (Non-GAAP Measure)
Free Cash Flow Generation (Non-GAAP Measure) ($ in thousands) Fiscal Year Ended May 31, 2020 2019 2018 2017 2016 Cash Flows from Operating Activities: Net income $ 305,082 $ 267,687 $ 339,257 $ 184,671 $ 357,458 Depreciation and amortization 156,842 141,742 128,499 116,773 111,039 Working capital an
Slide 40: Adjustments Detail
Adjustments Detail (a) Charges recorded in Cost of Goods Sold that reflect SKU rationalization at our Consumer segment, as well as inventory write-offs in connection with restructuring activities at our Consumer, Construction Products and Performance Coatings segments, offset somewhat by subsequent
Slide 41: EBIT (Non-GAAP Measure): RPM Consolidated
EBIT** (Non-GAAP Measure): RPM Consolidated (As Reported) ($ in thousands, except per share and percent data) Three Months Ended August 31, (Unaudited) 2020 2019 Net Income $ 180,785 $ 106,496 Provision for Income Taxes 60,584 36,353 Income Before Income Taxes 241,369 142,849 Interest Expense* 21,74
Slide 42: Reconciliation of Reported to Adjusted EPS
Reconciliation of "Reported" to "Adjusted" EPS (Unaudited) Three Months Ended August 31, 2020 2019 Reconciliation of Reported Earnings per Diluted Share to Adjusted Earnings per Diluted Share (All amounts presented after-tax): Reported Earnings per Diluted Share $ 1.39 $ 0.82 Inventory-related charg
Slide 43: EBIT (Non-GAAP Measure): Construction Products Segment
EBIT** (Non-GAAP Measure): Construction Products Segment (As Reported) ($ in thousands, except per share and percent data) Three Months Ended August 31, (Unaudited) 2020 2019 Income Before Income Taxes $ 98,349 $ 82,680 Add: Interest Expense, Net* 2,110 2,027 EBIT** (non-GAAP measure) 100,459 84,707
Slide 44: EBIT (Non-GAAP Measure): Performance Coatings Segment
EBIT** (Non-GAAP Measure): Performance Coatings Segment (As Reported) ($ in thousands, except per share and percent data) (Unaudited) Three Months Ended August 31, 2020 2019 Income Before Income Taxes $ 28,514 $ 28,057 Add: Interest Expense, Net* 31 129 EBIT** (non-GAAP measure) 28,545 28,186 Invent
Slide 45: EBIT (Non-GAAP Measure): Consumer Segment
EBIT** (Non-GAAP Measure): Consumer Segment (As Reported) ($ in thousands, except per share and percent data) Three Months Ended August 31, (Unaudited) 2020 2019 Income Before Income Taxes $ 132,722 $ 59,158 Add: Interest Expense, Net* 62 105 EBIT** (non-GAAP measure) 132,784 59,263 Inventory-relate
Slide 46: EBIT (Non-GAAP Measure): Specialty Segment
EBIT** (Non-GAAP Measure): Specialty Segment (As Reported) ($ in thousands, except per share and percent data) (Unaudited) Three Months Ended August 31, 2020 2019 Income Before Income Taxes $ 20,449 $ 23,327 Add: Interest Expense (Income), Net* 82 (26) EBIT** (non-GAAP measure) 20,531 23,301 Restruc
Slide 47: EBIT & EBITDA (Non-GAAP Measures)
EBIT* & EBITDA (Non-GAAP Measures) *EBIT is defined as earnings before interest and taxes, while EBITDA is defined as earnings before interest, taxes, depreciation and amortization. We evaluate the profit performance of our segments based on income before income taxes, but also look to EBIT as a per