Rpm International Inc. · NYSE:RPM
Rpm International — Investor Day (November 2018)
71 slides from Rpm International's investor day presentation, Nov 28, 2018
Slide 1: Investor Day November 28, 2018
Exhibit 99.1 Investor Day November 28, 2018 RPM International Inc. 11/28/18 1Exhibit 99.1 Investor Day November 28, 2018 RPM International Inc. 11/28/18 1
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. Actual results may differ materially from expectations and are subject to certain risks and uncertainties such as those described in R
Slide 3: Where We've Been
WHERE WE’VE BEEN 11/28/18 3WHERE WE’VE BEEN 11/28/18 3
Slide 4: Hire the best people you can find
“Hire the best people you can find. Create an atmosphere that will keep them. Then let them do their jobs.” Frank C. Sullivan, 1947 11/28/18 4“Hire the best people you can find. Create an atmosphere that will keep them. Then let them do their jobs.” Frank C. Sullivan, 1947 11/28/18 4
Slide 5: Best Home for Entrepreneurial Businesses
Best Home for Entrepreneurial Businesses $5.3 billion Consumer Segment Specialty Segment Industrial Segment $1.8 billion (33%) $753 million (14%) $2.8 billion (53%) Entrepreneurial Operating Philosophy Competitive Advantage of Leading Brands Balance Between Consumer and Industrial Markets Growth Str
Slide 6: Consistent Financial Performance
Consistent Financial Performance 13-Year Total Return $650 RPM: $633.07 $600 $550 $500 PEERS: $462.71 $450 $400 $350 S&P 500: $300 $284.39 $250 $200 $150 $100 $50 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Despite $1.4 billion of asbestos payments RPM OUTPERFORMED: S&P 500
Slide 7: Several Factors Adversely Affected FY15-FY17 Performance
Several Factors Adversely Affected FY15-FY17 Performance FX Headwinds $800 Million Two Deep and and Global Heavy in Asbestos Uncharacteristically Prolonged Industry Resolution Poor-Performing Challenging Recession Slowed Payments Acquisitions Raw Material Internal Growth (Over 3 ½ Years) (Kirker and
Slide 8: Recognition That Our Growth and Value Creation Model Had Become Challenged
Recognition That Our Historically Successful Growth and Value Creation Model Had Become Challenged Led to: Resulting in: ✓ Dialogue with ✓ Identification of multiple stakeholders strategic changes and partners necessary to position RPM to become a ✓ Active engagement $15 - $20 billion by our board a
Slide 9: Where We're Going
WHERE WE’RE GOING 11/28/18 9WHERE WE’RE GOING 11/28/18 9
Slide 10: MAP to Growth Strategy
MAP to Growth Strategy Maintain Entrepreneurial Organize to Execute Increase Operational Efficiency Growth Culture 11/28/18 10MAP to Growth Strategy Maintain Entrepreneurial Organize to Execute Increase Operational Efficiency Growth Culture 11/28/18 10
Slide 11: Waves Plan Summary
Annualized Run Rate Waves Plan Summary to Benefit 2022: $106 MM EBIT $25 We have developed a detailed Implementation Roadmap Annualized Run Rate $65 to Benefit 2021: organized into logical waves $101 MM EBIT $16 $14 Annualized Run Rate $60 $290 to Benefit 2020: Waves Plan $83 MM EBIT $27 MAP 2020 $3
Slide 12: 2020 MAP to Growth Financial Goals
2020 MAP to Growth Financial Goals Dollars in Millions TOTAL ADJUSTED ADJUSTED ADJUSTED ADJUSTED REVENUE GROSS PROFIT SG&A EBIT EBITDA CAGR: 5.6% CAGR: 8.6% CAGR: 3.7% CAGR: 21.1% CAGR: 19.0% $2,843 $1,843 $1,000 $1,158 $6,259 45.4% margin 29.4% margin 16.0% margin 18.5% margin +$625 +$937 +$188 +37
Slide 13: Improvements in Cash Flow
Improvements in Cash Flow $950.0 ($75.0) $850.0 $36.6 Sources of $290.0 improvement $750.0 in cash flow $650.0 from operations $872.0 FY19-21 $550.0 Dollars in Millions $230.0 $450.0 $390.4 $350.0 FY18 Cash Flow WC Improve MAP Savings Tax on MAP Other FY21 Cash Flow from Operations Savings from Oper
Slide 14: Disciplined Capital Allocation
Disciplined Capital Allocation $2,500 $2,000 ($1,000) $1,500 FY19-FY21 Sources/(Uses) $2,199 $1,000 ($605) of Cash $500 Dollars in Millions ($582) $0 ($317) ($420) ($109) $200 -$500 3-Year Share M&A Dividends Capex Convertible Other Change Cash Flow Repurchases Shares in Debt 11/28/18 14Disciplined
Slide 15: 2020 MAP to Growth
2020 MAP to Growth PURPOSE VISION To position RPM for sustained, profitable growth To transform RPM into a more connected and creating superior value for its customers, efficient company focused on operational excellence entrepreneurs, associates and shareholders. and continuous improvement, while m
Slide 16: Operational Improvement Roadmap
Click to edit Master title style Operational Improvement Roadmap Click to edit Master subtitle style Stephen J. Knoop Head of Group Restructuring 11/28/18 16Click to edit Master title style Operational Improvement Roadmap Click to edit Master subtitle style Stephen J. Knoop Head of Group Restructuri
Slide 17: Where We Are: How Did We Get Here?
Where We Are How Did We Get Here? MID-JULY TO FY17 and 18 JUNE 2018 END OF AUGUST END OF AUGUST • Company-led • Agreement with • Rigorous and • RPM report/ restructurings in Elliott Management comprehensive conclusions/ connection with diagnostic review of recommendations • 2 new Directors strategic
Slide 18: Addressing Operational & Organizational Complexity
Addressing Operational & Organizational Complexity A critical part of the 2020 MAP to Growth program involves projects to simplify and streamline complexity and fragmentation in our business. Construction Consumer Performance Specialty RPM Total Products Products Coatings Products Plants 51 26 31 47
Slide 19: Better Strategic Alignment
Better Strategic Alignment $5.3 billion Specialty Construction Performance Products Products Coatings Consumer Better strategic alignment Group Group Group Group Organization-wide operational excellence and continuous improvement initiatives Center-led in manufacturing & operations, procurement, inf
Slide 20: Organizing to Execute
Organizing to Execute • Continue driving de-layering and simplification of management and businesses associated with group realignment • Center-led in functional areas of: ✓Manufacturing and operations ✓Procurement and supply chain ✓Information technology ✓Accounting/finance SHARED SERVICE 4 CENTERS
Slide 21: Organizing to Execute: Aligning Resources
Organizing to Execute Aligning Resources Personnel Enhancements • Steve Knoop, Head of Group Restructuring • Gordy Hyde, VP Operations – focused on building a center-led manufacturing Group elevation organization and competencies of coordinated • Tim Kinser, VP Operations – focused on building a cen
Slide 22: Organizing to Execute
Organizing to Execute Dedicated teams in Communication for each Savings Tracker, and critical manufacturing, procurement, workstream has been cross-functional / cross-BU IT and finance are up and cascading throughout the coordination – to help ensure running; kickoff session in organization via the
Slide 23: 2020 MAP to Growth
2020 MAP to Growth PURPOSE VISION To position RPM for sustained, profitable growth To transform RPM into a more connected and creating superior value for its customers, efficient company focused on operational excellence entrepreneurs, associates and shareholders. and continuous improvement, while m
Slide 24: Manufacturing Strategy Overview
Click to edit Master title style Manufacturing Strategy Overview Click to edit Master subtitle style Gordon M. Hyde Vice President - Operations 11/28/18 24Click to edit Master title style Manufacturing Strategy Overview Click to edit Master subtitle style Gordon M. Hyde Vice President - Operations 1
Slide 25: Manufacturing Present State
Manufacturing Present State Present structure is decentralized • Six groups - Organized and incentivized to focus on individual business units • Capacity • Capital allocation • Manufacturing strategies • Recognized inefficiencies and need for margin improvement - Implementing the planned closure of
Slide 26: Manufacturing Has Prioritized Customer Service Over Efficiency
Our Manufacturing Has Prioritized Obsessive Customer Service Over Efficiency – We Can Do Both Opportunities to improve: ✓ Yields with better package fill control and material composition of finished goods KEY FINDINGS ✓ OEE (Overall Equipment Effectiveness) via engineered Rapid Assessment – availabi
Slide 27: New Manufacturing Strategy
New Manufacturing Strategy Center-Led ✓ Optimize facility asset base • Fewer and more efficient plants • Where appropriate, serving multiple companies across RPM operations and across groups ✓ Asset allocation in the same context as plant optimization • Human capital • Investment capital 11/28/18 27
Slide 28: Manufacturing Strategy Implementation
Manufacturing Strategy Implementation Gordon Hyde Manufacturing Executive Committee RPM VP Operations VP Operations, VP EH&S Group VP Operations Group VP Operations VP Operations VP Operations Procurement RPM PCG CPG Rust-Oleum DAP RPM Executive Committee Committee Activities • Develops, leads and i
Slide 29: RPM Manufacturing System (MS-168)
RPM Manufacturing System (MS-168) 11/28/18 29RPM Manufacturing System (MS-168) 11/28/18 29
Slide 30: RPM Manufacturing System (MS-168)
RPM Manufacturing System (MS-168) Manufacturing System Excellence (MS-168) Validation Metrics • Safety • On the floor knowledge • Safety performance • Quality • Quality performance incoming / floor • Yield and Product • 3 leading causes of OEE loss • Productivity • 3 leading causes of process loss (
Slide 31: MS-168: What It Is and Isn't
MS-168 What it is: What it isn’t: • Focused on waste elimination, • Cookie cutter, check the efficiency, and margin box program enhancement • Program focused on • Fact based and data driven elegant tools continuous improvement • Program divorced from • Established standards on which business perform
Slide 32: Manufacturing – MAP 2020
Manufacturing – MAP 2020 Three tactics for Implementation 1. Zero Based Yield (ZBY) and OEE (Overall Equipment Effectiveness) 11/28/18 32Manufacturing – MAP 2020 Three tactics for Implementation 1. Zero Based Yield (ZBY) and OEE (Overall Equipment Effectiveness) 11/28/18 32
Slide 33: Manufacturing – MAP 2020
Manufacturing – MAP 2020 Three tactics for Implementation 1. Zero Based Yield (ZBY) and OEE (Overall Equipment Effectiveness) ✓ RPM Manufacturing System (MS-168) 11/28/18 33Manufacturing – MAP 2020 Three tactics for Implementation 1. Zero Based Yield (ZBY) and OEE (Overall Equipment Effectiveness) ✓
Slide 34: Manufacturing – MAP 2020
Manufacturing – MAP 2020 Three tactics for Implementation 1. Zero Based Yield (ZBY) and OEE (Overall Equipment Effectiveness) ✓ RPM Manufacturing System (MS-168) 2. Asset Optimization 11/28/18 34Manufacturing – MAP 2020 Three tactics for Implementation 1. Zero Based Yield (ZBY) and OEE (Overall Equi
Slide 35: Asset Optimization
Asset Optimization RPM - FACILITY CLOSURE LIST OPTIMIZE ASSETS Under Review In Process Total 2020/2021 Number of Plants WAVE 1 2 Consumer • Implement in-flight projects 3 CPG 3 PCG • Study and stress test plants 4 SPG under consideration 12 19 31 Total RPM • Analyze and develop RPM Europe and UK man
Slide 36: Manufacturing – MAP 2020
Manufacturing – MAP 2020 Three tactics for Implementation 1. Zero Based Yield (ZBY) and OEE (Overall Equipment Effectiveness) ✓ RPM Manufacturing System (MS-168) 2. Asset Optimization 3. Inventory Reduction 11/28/18 36Manufacturing – MAP 2020 Three tactics for Implementation 1. Zero Based Yield (ZBY
Slide 37: Accumulated Margin Improvement: Manufacturing
Accumulated Margin Improvement: Manufacturing $9 $7 $15 Manufacturing $12 $75 MAP 2020 Annualized Savings $24 Dollars in Millions $8 WAVE 1 WAVE 2 WAVE 3 TOTAL Sept 2018 – May 2019 June 2019 – May 2020 June 2020 – Dec 2020 OEE AND ZBY Introduced into Introduced into Complete remaining IMPLEMENTATION
Slide 38: Procurement Strategy Overview
Click to edit Master title style Procurement Strategy Overview Click to edit Master subtitle style Timothy R. Kinser Vice President - Operations 11/28/18 38Click to edit Master title style Procurement Strategy Overview Click to edit Master subtitle style Timothy R. Kinser Vice President - Operations
Slide 39: Current Procurement Structure
Current Procurement Structure Decentralized with Collaboration • No formal, centralized procurement or reporting functionality Operating Group Purchasing • Volume consolidation and negotiation • RPM agreements • Price leveling • Regional sourcing teams • No mandatory participation 11/28/18 39Current
Slide 40: Center-Led Procurement Structure
Center-Led Procurement Structure Center-Led A central group to coordinate procurement, leverage spending, set policy, maintain master material lists and share leading practices. Global Procurement Operating Group Purchasing 11/28/18 40Center-Led Procurement Structure Center-Led A central group to co
Slide 41: General Timeline
General Timeline September – October 2018 November 2018 • Identify Strategic Sourcing Managers • Transition Strategic Sourcing Managers to new role • Analyze price variances • Procurement Team Meeting • Assess project priorities • Specifications review 11/28/18 41General Timeline September – October
Slide 42: Center-Led Procurement Structure
Center-Led Procurement Structure VP Operations Tim Kinser Director Global Procurement Strategic Sourcing Strategic Sourcing Strategic Sourcing Strategic Sourcing Managers Manager Manager Manager Chemicals Packaging Logistics Indirect CHEMICALS PACKAGING LOGISTICS INDIRECT Operating Consumer Consumer
Slide 43: Procurement Executive Committee
Procurement Executive Committee Tim Kinser RPM (Chair) Rust-Oleum DAP RPM SPG PCG CPG Value Engineering Sub-Committee – Chair Insourcing Sub-Committee – Chair Sub-Committees RPM Procurement Executive Committee • Cross Operating Group committee within focus area • Provide input and guidance to Strate
Slide 44: Margin Improvement Opportunity: $1.5 Billion of Addressable Spend
Margin Improvement Opportunity: +$1.5 billion of Addressable Spend Initiative Categories Key Levers These areas represent over CHEMICALS Structured sourcing process, value engineering, specification standardization, $1.5 billion of addressable PACKAGING in-sourcing spend, presenting significant oppo
Slide 45: Accumulated Savings: Procurement
Accumulated Savings: Procurement $65 Procurement $145 MAP 2020 $60 Annualized Savings Dollars in Millions $20 WAVE 1 WAVE 2 WAVE 3 TOTAL Sept 2018 – May 2019 June 2019 – May 2020 June 2020 – Dec 2020 In-flight and high Value engineering / Value engineering / PROCUREMENT priority projects insourcing;
Slide 46: G&A Strategy Overview
Click to edit Master title style G&A Strategy Overview Click to edit Master subtitle style Stephen J. Knoop Head of Group Restructuring 11/28/18 46Click to edit Master title style G&A Strategy Overview Click to edit Master subtitle style Stephen J. Knoop Head of Group Restructuring 11/28/18 46
Slide 47: Efficiencies Gained from Segment Strategy Implementation
Efficiencies Gained from Segment Strategy Implementation ✓ Segment strategy implementation leads to organizational and structural efficiencies ✓ Administrative efficiencies coming from center-led initiatives in: • IT • Finance • Legal 11/28/18 47Efficiencies Gained from Segment Strategy Implementati
Slide 48: Information Technology Overview
Click to edit Master title style Information Technology Overview Click to edit Master subtitle style Lonny R. DiRusso Vice President and Chief Information Officer 11/28/18 48Click to edit Master title style Information Technology Overview Click to edit Master subtitle style Lonny R. DiRusso Vice Pre
Slide 49: IT Strategy
IT Strategy Corporate-Driven Center-Led IT IT SEGMENT-LEVEL IT CENTERS OF 4 4 SUPPORT TEAMS EXCELLENCE AREAS CORPORATE-LEVEL IT EXECUTIVE OVERSIGHT 1 1 IT STRATEGY COMMITTEE (ITEOC) 11/28/18 49IT Strategy Corporate-Driven Center-Led IT IT SEGMENT-LEVEL IT CENTERS OF 4 4 SUPPORT TEAMS EXCELLENCE AREA
Slide 50: IT Executive Organization Structure
Corporate-Driven Center-Led IT IT Executive Organization Structure IT EXECUTIVE OVERSIGHT COMMITTEE & SEGMENT-LEVEL IT EXECUTIVES CONSTRUCTION PERFORMANCE CONSUMER SPECIALTY RPM PRODUCTS COATINGS PRODUCTS PRODUCTS CORPORATE SEGMENT SEGMENT SEGMENT SEGMENT IT EXECUTIVE OVERSIGHT COMMITTEE CHAIR IT CE
Slide 51: Segment-Level IT Platforms – Strategy
Corporate-Driven Center-Led IT Segment-Level IT Platforms – Strategy Expedite the integration of our Our existing organization from 45 ERP platforms ONTO 4 segment-level platforms running on 75 separate instances IT support / IT infrastructure✓ Centralize Standard processes Segment/entity migration
Slide 52: Entity Locations
Corporate-Driven Center-Led IT Entity Locations • 107 Entities • 45 Platforms • 75 Instances 11/28/18 52Corporate-Driven Center-Led IT Entity Locations • 107 Entities • 45 Platforms • 75 Instances 11/28/18 52
Slide 53: Segment Level – IT Integration Execution
Corporate-Driven Center-Led IT Segment Level – IT Integration Execution APPROACH BENEFITS • Leverage experienced internal resources to • Drive efficiency and productivity through common manage each migration utilizing the expertise of business processes outside, global partners • Improve visibility
Slide 54: Centers of Excellence – Execution
Corporate-Driven Center-Led IT Centers of Excellence – Execution The Centers All COEs will use The Centers of Excellence Immediate Focus MS Teams to of Excellence Team Charters Areas are targeted – collaborate and Teams are formed are developed administer progress IT IT IT Digital Operations Securit
Slide 55: 2020 MAP to Growth SG&A
Click to edit Master title style 2020 MAP to Growth SG&A Click to edit Master subtitle style Russell L. Gordon Vice President and Chief Financial Officer 11/28/18 55Click to edit Master title style 2020 MAP to Growth SG&A Click to edit Master subtitle style Russell L. Gordon Vice President and Chief
Slide 56: MAP to Growth Strategy
MAP to Growth Strategy Maintain Entrepreneurial Organize to Execute Increase Operational Efficiency Growth Culture 11/28/18 56MAP to Growth Strategy Maintain Entrepreneurial Organize to Execute Increase Operational Efficiency Growth Culture 11/28/18 56
Slide 57: Accounting Locations
Accounting Locations 104 total locations 633 headcount 11/28/18 57Accounting Locations 104 total locations 633 headcount 11/28/18 57
Slide 58: Finance and Administration Organizational Approach
Finance and Administration Organizational Approach Become TACTICS: Center-Led Organization working with our • RPM CFO-led council working with 4 operating groups to Group CFOs to benchmark against reduce complexity, become other organizations and seek an Current state: more efficient, and improve op
Slide 59: Center-Led Legal and Compliance
Center-Led Legal and Compliance ✓ Transitioned to center-led legal • Center-led litigation management • Center-led legal management in Europe • Consolidated from 5 Group General Counsels to 3 • Implementing shared services model across groups • Maintained local group resources as appropriate ✓ Trans
Slide 60: Legal Tools/Processes to Ensure Success
Legal Tools/Processes to Ensure Success ✓ Leveraging consistencies across the Groups and providing legal services with fewer or same resources using: Litigation Contract Artificial Management Management Intelligence System System ✓ Cost-savings with consolidation of outside counsel resources 11/28/1
Slide 61: Accumulated Savings: SG&A
Accumulated Savings: SG&A $20 $5 $7 SG&A $7 $70 MAP 2020 Annualized Savings $31 Dollars in Millions WAVE 1 WAVE 2 WAVE 3 TOTAL Sept 2018 – May 2019 June 2019 – May 2020 June 2020 – Dec 2020 OPERATING COMPANY Group RIFs; Finance and HR Efficiencies driven by ERP spend control for functional optimizat
Slide 62: Summary
Summary ✓ As company has grown, we have reached the scale to improve efficiency ✓ Can eliminate redundancies without impacting customer experience ✓ “No stone unturned” in our review ✓ Plans and people in place to execute ✓ Will create better platforms to: • Extend our business via acquisition • Lev
Slide 63: Cash Generation & Capital Allocation
Click to edit Master title style Cash Generation & Capital Allocation Click to edit Master subtitle style Russell L. Gordon Vice President and Chief Financial Officer 11/28/18 63Click to edit Master title style Cash Generation & Capital Allocation Click to edit Master subtitle style Russell L. Gordo
Slide 64: Accumulating Cash: Working Capital Improvement
Accumulating Cash: Working Capital Improvement $68 Working $94 $230 Capital Improvement Dollars in Millions $68 WAVE 1 WAVE 2 WAVE 3 TOTAL Sept 2018 – May 2019 June 2019 – May 2020 June 2020 – Dec 2020 Manufacturing and Manufacturing and Manufacturing and WORKING CAPITAL process changes process chan
Slide 65: Disciplined Capital Allocation
Disciplined Capital Allocation FY19-21 Capital Allocation • “Protect the House” – maintain CAPEX DIVIDENDS $420 investment-grade profile $582 • Internal investment for growth M&A SPENDING • Acquisitions $605 SHARE • Growing dividend REPURCHASE $1,000 • Share repurchase Dollars in Millions 11/28/18 6
Slide 66: Improvements in Cash Flow
Improvements in Cash Flow $950.0 ($75.0) $850.0 $36.6 Sources of $290.0 improvement $750.0 in cash flow $650.0 from operations $872.0 FY19-21 $550.0 Dollars in Millions $230.0 $450.0 $390.4 $350.0 FY18 Cash Flow WC Improve MAP Savings Tax on MAP Other FY21 Cash Flow from Operations Savings from Oper
Slide 67: Cash Flow from Operations
Cash Flow from Operations $2,500 $2,000 ($1,000) $1,500 FY19-FY21 Sources/(Uses) $2,199 $1,000 ($605) of Cash $500 Dollars in Millions ($582) $0 ($317) ($420) ($109) $200 -$500 3-Year Share M&A Dividends Capex Convertible Other Change Cash Flow Repurchases Shares in Debt 11/28/18 67Cash Flow from Op
Slide 68: 2020 MAP to Growth Summary
Click to edit Master title style 2020 MAP to Growth Summary Click to edit Master subtitle style Frank C. Sullivan Chairman and CEO and Stephen J. Knoop Head of Group Restructuring 11/28/18 68Click to edit Master title style 2020 MAP to Growth Summary Click to edit Master subtitle style Frank C. Sull
Slide 69: Waves Plan Summary
Annualized Run Rate Waves Plan Summary to Benefit 2022: $106 MM EBIT $25 We have developed a detailed Implementation Roadmap Annualized Run Rate $65 to Benefit 2021: organized into logical waves $101 MM EBIT $16 $14 Annualized Run Rate $60 $290 to Benefit 2020: Waves Plan $83 MM EBIT $27 MAP 2020 $3
Slide 70: 2020 MAP to Growth Financial Goals
2020 MAP to Growth Financial Goals Actual Projected Improvement CAGR FY18 FY21* +$937 5.6% Total Revenue $5,322 $6,259 KEY ASSUMPTIONS +$625 Adjusted Gross Profit $2,218 $2,843 8.6% +370 bps % margin 41.7% 45.4% • Continuing modest economic growth +$188 Adjusted SG&A $1,655 $1,843 • Improving raw ma
Slide 71: Goals, Vision, Purpose and Strategic Priorities
GOALS By May 31, 2021, RPM is targeting: VISION • $6.250 billion in annual revenue To transform RPM into a more connected PURPOSE • $1 billion of EBIT on an and efficient company focused on To position RPM for sustained, profitable annualized run rate VALUES operational excellence and continuous gro