RPM International Inc.

This is our first report on specialty chemicals player, RPM International. The company delivered outstanding results in the last quarter, with consolidated net sales of $1.93 billion, up 17.1% from the $1.65 billion recorded in the previous fiscal year. It surpassed Wall Street expectations in terms of revenues as well as earnings. Roofing Systems had rapid expansion and profited from rising public sector spending, its turnkey service approach, and a focus on upgrades. As the company increased its market share, concrete mix and repair products also experienced substantial growth throughout the quarter. Geographically, Asia Pacific markets performed strongly, whereas sales and profitability in Europe and Canada, where CPG is more concentrated than RPM, decreased dramatically. While Canada was adversely affected by strikes and a scarcity of concrete that hampered the completion of construction projects and produced inefficiencies, Europe dealt with significant inflation and macroeconomic difficulties. The Corsicana factory also rolled up via CPG and had a negative financial impact in the first quarter as the facility ramps up output in preparation for full capacity. In addition, the top line of the Disaster Restoration Equipment division increased as the team cleared backlogs brought on by previous shortages of semiconductor chips. We initiate coverage on the stock of RPM International with an ‘Underperform’ rating.