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RPM’s Q1 profit plunges due to higher costs

RPM International (RPM) reported its first quarter results before the bell. Adjusted earnings came in at $0.76 per share which missed analysts’ estimates, while sales improved 8.5% over last year beating street’s consensus. Shares of the specialty chemical maker dipped about 3% during the morning hours of trading.

On a GAAP basis, profit plunged 40% to $0.52 per share due to a surge in raw material prices. RPM also had an impact from the increase in promotion and legal costs from consumer segment. In order to improve margins, the company is pursuing restructuring activities which includes downsizing the workforce and closing four plants in line with its 2020 plan.

Higher raw material prices continue to hurt RPM. The company has decided to lift the prices in tandem with the raw material price increase to protect its margins. CEO Frank Sullivan is expected to brief investors on the company’s upcoming plans next month during the investor day.

Industrial, consumer, and specialty divisions saw growth in sales with industrial bringing in more than half of RPM’s top line. Adjusted EBIT for the industrial segment rose 2% while consumer and specialty reported lower EBIT over last year, primarily due to the restructuring charges.

Investors will be keenly looking forward to the investor day in late November about how RPM is going to tackle the increasing raw material prices amidst tough macro factors and weak demand. The company’s stock has gained 20% both in 2018 and in the past 12 months.

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