RPM International Inc.

Q2 2022 Earnings Conference Call


spk_0: conference call for the fiscal two thousand and twenty two second quarter today's call is being recorded this call is also been web cat and can be accessed live or replayed on the rpm website at www dot r am i and free dot com comments made on this call may include forward looking statements based on current expectations that involve risk and uncertainty which could cause actual results to be materially different for more information on the risk and uncertainties please review rpm reports filed with it as the fee during this all references may be made for non gap financial measures to assist you in understanding these non gaap term rpm have posted reconciliation to the most directly comparable gap financial measures on the rpm website following today's presentation they'll will be a question and answer session at which time if you wish to ask a question you need to press star then one on your telephone please note that only financial analyst will be permitted to ask questions at this time i would like to turn the call over to rpm chairman and ceo mr frank sullivan for opening remarks please go ahead sir
spk_1: a duty to morning year
spk_2: welcome to the rpm international investor call for fiscal twenty twenty two second quarter joining the call today is roughly gordon or vice president to cheaply to officer michael roche like president controller and cheap accounting officer i'll be sharing brian commentary and are consolidated performances quarter michael provide details on or segment results a lot of your conclude our formal comments with our outlook for the fiscal twenty twenty two third quarter a common for on an inanimate as adjusted basis and all comparisons are to the second quarter of fiscal twenty twenty one less otherwise indicated please note we provided a supplemental slide presentation to support supporter comments on this call these can be assessed in the presentations and webcast section of the rpm website www dot rpm dot com after a coma remark be pleased to take your questions after with comments related that third slide presentation material for the fiscal twenty twenty two second quarter consolidated sales increased and point three percent to one point six four billion dollars driven by continued robust demand for page coatings she wants another building materials
spk_1: the top line performance with slightly out of the outlook we provided last quarter oxide quarter sales growth could have that even stronger if not for continuing supply chain challenges that limited access to certain raw materials and cost us roughly two hundred million dollars lost or deferred sales in the quarter
spk_2: organic sales rose was eight point six percent foreign currency translation provided a tail end of the point four percent and acquisitions contributed one point three percent i just vps was seventy nine cents decreasing twenty six percent compared to strong adjustability dps growth of nearly forty percent in the prior year period consolidated just been eating for the quarter was hundred and fifty seven point three million dollars decrease of twenty one percent which was in line with our outlook and with a result of continued material wage and for inflation is well supply chain disruptions that were exacerbated by hurricane i'd i'd be getting the second quarter it occur east conversion costs because of that supply disruption we lost the equivalent of nearly three hundred production days across rpm facilities globally during the second quarter which was similar to our last production days in the first quarter we partially offset etiologies challenges with price increases which average in the high single day get across rpm it continued operational promotes from map to growth program which provide ninety million dollars in incremental costs savings it's also worth noting that we make the difficult comparison to the prior year would consolidator to just that he been increased nearly thirty percent largely due to higher sales volumes driven by it gordon we're demand for our own improvement products in our consumer room during the pandemic to recover lost margin from the place inflation we're implementing an additional round a price increases this quarter across our business segments as appropriate in many instances this will be the third round of price increases in a twelve month period the i slide provide high level results by segment much like last quarter or performance we'd like the benefit of our balance business portfolio were softness in one segment is generally offset by strength and others
spk_1: during the second quarter of fiscal twenty twenty two three of our for appling segments construction products group performance colleagues group especially products group generated strong double digit sales growth
spk_2: combined sales and the three segments increase more than eighty percent with roughly ten percent being you to buy a new growth year over year why construction products and performance courage regenerating strong adjusted even growth especially products and consumer group fatal extreme supply chain constrained to put pressure on their earnings in particular the specially products group restoration equipment business was affected by worldwide semiconductor chip shortages delayed sales to a growing backlog and unfavorably drop product next the consumer group continued to experience inflationary pressures as well as shortages of iraq materials driven largely by last year's production out of
spk_1: it a key resin supplier that negatively impacted conversion costs
spk_2: in addition the consumer group eight the difficult comparison to the prior year period when sales increased more than twenty one percent and adjusted even was up sixty six percent
spk_1: each growth rate to the prior year period were largely due to the extraordinary the i like me and during the pandemic
spk_2: all indicators suggest that the underlying me and for a consumer products remain strong and as continuing to grow in our third quarter before we moved to the details on or segment results i like to touch and to larger transit rpm is well positioned to capitalize on first the heat of us government is kept a number of bills over the last two years that will direct billions and potentially trillions of dollars towards construction in infrastructure and markets based on are strong position with these markets with well recognized highly regarded brands such strength within systems and commercial see once card like wrote in control coding you could concrete and mixtures in new directions lady concrete forums all of which have been gaining market share in this fiscal year we are well positioned for continuing meeting for growth in north america and globally two years ago we introduced the tagline building a better world in a number of our communications it certainly represent our products and services which literally contribute to making structures better through beatification protection restoration and sustainability but it's also meant to be as brave as we strive to make the world better place for those we serve including our customers entrepreneurs associates shareholders and the communities in which we operate
spk_1: as we all continue to manage to the global pandemic we remain focused on coming together make the world a better place where everyone there are many examples where rpm is doing so
spk_2: some of the eight rpm is building a better world include the development of sustainable products such as our alfred guard liquid applied roofing products which are gaining market share and allow roost to be restored and eliminate the need for tear off the placement
spk_1: and significant contributions to waste sites
spk_2: in addition are trample writhing businesses been named a bio preferred program pioneered by us yea because of our early adoption a sustainable products solutions within our movie nation in the industry count development which includes the right education and training initiative that it's part of our wt i business and was developed response to the shortage of qualified new first includes an element called elevate this involves a training of incarcerated will individuals and roofing said that they have skills and job opportunities upon the early release at which time they're guaranteed a job at our tranquil with in business and stated billy practices across our operations such as initiative to reduce water usage they're saving millions of gallons a year to take low bristol human other businesses
spk_1: you can learn more about how how rpm is building a better world on our website an interview yet he reports w w w dot rpm aig that com forward slash dsg
spk_2: we have a great story to tell and we will be organized to tell a better in the coming quarters in years we remain focused on long term growth and despite covered related challenges especially in supply chains continue to invest in initiatives or drive our business forward in the coming years this includes operational improvements development of innovative new products accusations and manufacturing capacity expansions the case in point the hundred and seventy thousand square foot plant we purchased in september which is located on a hundred and twenty acres in texas this will serve in the manufacturing center of excellence for multiple rpm businesses in just two months is already improving the resilience he of our supply chain of bill rates during the second quarter we began production of how cute residents which are important raw material for a number of our products particularly in our consumer group in the coming reuters the plant expansion expand production of a number of our high growth product lines announcer the call of them like to discuss our segment financial results in more detail thanks break in the morning everyone thirty the next live or construction products group generated all time record sales or six hundred and fourteen point two million dollars shelter twenty two percent for the core the highest rate among our force against nineteen point nine percent was organic foreign currency translation provided a zero point three percent fail and that positions contributed one point eight percent gp gs market leading topline grow in positive next for primarily driven by innovation and it's high performance building solutions market share games and strong demand in north america or it's construction mean it's products the businesses the generated the highest growth included those providing insulated concrete forms briefing systems concrete admixture in her hair products and commercial fiance sales of our garage yes had been particularly robust because they offer an alternative the lumber which is in short supply and experiencing skyrocketing costs and because good or as i see us provide structural insulation and labour benefits proponents an international markets was mixed with your a fairly flat while emerging markets showed signs of recovery the segments adjusted either increase sixteen point five percent to a record level you to buy a girl operational improvements and selling price increases which help offset material inflation
spk_3: moving to the next slide positive trends from the first quarter carried over into the second for a performance coatings your sales grew sixteen point nine percent to a record level reflect the organic growth of twelve twenty percent a foreign currency translation tailwind of zero point eight percent in a three point nine percent contribution
spk_2: and from acquisitions nearly all a pc these major business units contribute to the positive growth largely due to the catch up of his projects previously differ by industrial customers particularly as it restrictions relaxed and contractor access to construction sites improved sales girl was also facilitated by price increases in for product next during by new decision support tools that help improve salesforce efficiencies and product mix leading the way where the segments largest businesses providing polymer flooring systems and corrosion control coatings serving drawing and markets including electric vehicles semiconductors in pharmaceuticals sales also remain strong and it's recently acquired by so enraged flooring business and in emerging markets adjusted either increased forty one point three percent your record level as a result of pricing volume growth operational improvements and thought of next advancing to the next life especially products group reported of sales increase of ten percent to a record level as it's businesses capitalize on a strong demand and the outdoor recreation furniture in our yeah markets they sir the segments for us and picking business also generate a good topline growth organic sales increased nine percent recent acquisitions added zero point four percent before entering the translation increase sales by zero point six percent adjusted even decreased twenty nine point four percent due to hire raw material and conversion fast from supply disruptions as well as unfavorable product next particularly in our disaster restoration equipment business would have been hindered by the semiconductor chip shortage as right had mentioned in addition the second experienced higher expenses revolve resulting from investment investment in and future growth initiatives was higher legal expenses these factors were partially offset by operational improvements and the next slide you'll see that the severe raw material shortages that consumer group experience during the physical twenty twenty two first quarter persisted during the second quarter the resulting production outages negatively impacted segment sales by approximately one hundred million dollars
spk_3: second sales decreased three point three percent with organic sales down three point five percent and foreign currency translation about zero point two percent despite raw material shortages the saying it's fiscal twenty twenty two second quarter sales were still seventeen point four percent above the pre pandemic levels
spk_2: of the second quarter of fiscal two thousand and twenty demand for it's products remain high and inventories are many of it's channels are low we expect to recover be sales when raw material and supply condition stabilized as for a mansion in his opening comments the consumer group also face the challenge in comparison to the prior year period when sales increased twenty one point four percent and adjusted either increase sixty five ninety eight percent you do extraordinarily high demand for it's home improvement products during the first phase of the pandemic earnings decline during the fiscal twenty twenty two second quarter from inflation or materials three and later as well as the unfavorable impact of supply shortages on productivity these factors are partially offset by price increases and operational improvements the same it continues to add capacity to meet demand and build resiliency and supply chain does a good secure the raw materials that requires in order to meet customer demand it is using contract manufacturing higher costs until i can bring new manufacturing capacity am i it is also qualifying new sources for raw materials including our new manufacturing plant in texas
spk_4: now for nichol of interest the the discuss or allah thanks mike looking ahead to our school twenty twenty two third quarter we expected that strong demand for our planes coding feel and and other building materials will continue supply chain challenges and raw material shortages have persisted in december further compounded by disruptions from the i'm a crime variant on rpm operations and out of our supplier beneath these factors are expected to put pressure on our top line and productivity despite of the challenges we expect generate double digit consolidated sales growth in the fiscal twenty twenty two third quarter earth as last year's record third quarter sale which increased eight point one percent we anticipate hi double digit tales grow along with margin accretion in our construction products group and performance counties group svg sales are expected to be at the low double digit as compared to last year's third quarter the consumer group places are tough comparison to the prior year period when it sales increased nineteen point eight percent and as a result it failed her and hesitated to increase by low single digits consolidated adjusted event for the third quarter of fiscal twenty twenty two is expected to decrease five to fifteen percent versus the same period last year when adjusted even with that twenty nine point seven percent we anticipate that earnings will be affected by ongoing raw material for a and the wage inflation
spk_0: as well as the impact of raw materials shortages on sales volume plus the renewed cold disruption from the surging on a crime variant these challenges will disproportionately impact our consumer segment
spk_4: we continue to work cash had the challenges by implementing price increases improving operational efficiency is and bringing on additional manufacturing capacity finally i'd like to know that we remain laser focused on executing our strategies for sustained growth we remain vigilant about protecting the health of our employees their family than the communities in which we operate winter right and covered cases worldwide we remain focused on processes and procedures to maintain faith and productive working environments for associates we continue to be agile and our management of the business allowing us to navigate supply chain issued an meet customer needs we expect that margins will recover towards preparing gay and like levels one supply challenges of eight lastly we are investing in employee training and other initiatives that will drag long term growth including operational improvements innovation acquisitions capacity expansions and information technology these actions will often the only condition rpm to deliver a long term growth and increased value for our stakeholders
spk_0: coworker a formal comment we will now be poised to take your questions thank you serve as a reminder if you would like to ask a question you may do so by pressing star than a number one on your telephone
spk_5: your first question comes on the line of frank niche of foreign research right you going out of reagan up new year to you
spk_2: stay out a if you are comments are going twice you are indicated that that prices up by in a high single digits year in a fiscal second quarter anyone else to another round of of price increases what are your expectations for uprising the back here for the fiscal year end and where do we stand in terms of the raw material things you can get some calories that you know what you are facing the fiscal second quarter what your outlook a general our side for the first go third quarter sure the second quarter
spk_1: challenged basis price was upset percent with price tarnished house
spk_2: in fiscal twenty to respect priced alleged impact three around curios are up pretty significantly in terms of where we are year over year were about thirty percent in total
spk_1: were up forty to fifty percent or top twenty raw materials
spk_2: we're up a couple categories year over year like taxi residents out it's or hundred percent and as some of the color you're seeing i can tell you in general the supply chain situation is still very stressed but as we sit here today seems to be improving the stocks are improving of i will not seen that yet translated into the intermediate and specialties which we buy availability of raw materials is improving and most in most areas but i will tell you the whole supply chain is still very susceptible the unexpected shocks third doesn't seem pretty much protein or resiliency in this improving environment the last time i'll make an app is free and uniquely growing problems for a class of been riding across all categories as as we counted in the past
spk_5: particularly for truck transportation and most probably related coffee infections or quarantines literally of a availability afraid to move goods has become a challenge for his part about you three
spk_1: gotcha gotcha in it now day and feeding off of that supply chain a she did she did you mention it obviously part of the reason why you decided to i increase your inventory here in the fiscal second quarter to train
spk_2: get ahead of they are that where you can enter get a better question as you look at your customers you'd assume that your you are probably doing things are you know yang are you stopping at the mention up and time again the robot the managers being out there which is obviously very positive but the wife's name might that be a little bit a double counting is in answer customers are also seeking to raise or into a level the level the yemeni a good like that have any replay is is playing out sure why can i can assure you are inventory levels are lower than they normally would be in and provide tons of spring
spk_1: our fill rates are not at the ninety eight ninety nine percent levels that have been the norm for decades there is a meaningful backlog in consumer ah the supply chains they're very tight could sign
spk_2: in most of our product categories the the hundreds of millions of dollars
spk_6: per quarter that were missing in revenue is in part due to supply chain disruptions in our ability production wise just to get products out
spk_0: and and so i don't i don't think there's much cushion frank the
spk_7: image tory of our customer base and we're working hard to get some cushion back in there and i suspect her customers would appreciate getting back to normal levels but we've had to for revenues across multiple businesses and product lines because of the supply chain
spk_2: she disruptions very helpful
spk_1: thank you
spk_2: your next question comes from a line of john mcnulty have been more capital markets
spk_8: yeah thanks to get my question frank morning
spk_2: so when i look at the the various businesses you know when roger i'm an inflationary pressures construction manager pretty well the last couple corps performances welsh consumer seems to be taking it on the chin a lot harder and i soon that's largely tied to the i'll get out in should arm that you that you referenced earlier i get can you help us to understand
spk_1: how long before you feel like things are back to a steady state and terms of our could supply whether it's from the capacity you're bring on yourself or from other suppliers that you may be able to us to be able to procure it from on can give us all but a collar on that church i your comments broadly
spk_2: you know we anticipated cute three continuing really strong growth in our interest products repeat performance coatings group including a return to it's a meaningful market improvement so you'll see nice leverage to the bottom line years we've been huge cost price makes does he and continue to take market share your see improvement in are especially segment i think as we sit here today unless the cold it i'm a crime disruptions continue to get worse we anticipate closed quarters not over there will be the first quarter and three worry you'll have all four of our seconds positive from a revenue perspective on the consumer group is the principal challenge and que three will be will be on actually positive in terms and even across all or other businesses and down it's really related to a couple things it is related to how can residence or primary supplier
spk_1: you know and an outage negatively impacted us we've been scrambling block in terms of getting product and in our also outsourcing production that been an eighteen month issues that we're working to resolve and it will start making headway the spring we are packaging intensive not only within rpm
spk_2: within the consumer page and history with europeans consumer group we are small project paints we are small project passion repair we are clarkson and sealants so packaging has been both a disproportionately bigger challenge in terms of cost and also in terms of been able what he i think the last straw to drop errors in anticipation of a other significant increase be spraying template costs which will impact metal packaging across all industry last comic make is that we've had significant coven disruptions within our consumer group and giving just some statistics broadly speaking this is what the world seeing first from a corporate campus of one hundred people were twenty cases over the eighteen month period of march twenty twenty through november on our corporate campus we get fourteen cases last two weeks and also noted and breakthrough and most of those as far as we can tell at home in our consumer segment we had one hundred and eight cases in our operations alone that manufacturing and distribution sites over the last six months we've and ninety seven cases in december and so those are also disproportionally happening because we're pretty intensive and distribution
spk_1: manufacturing and consumer
spk_2: rates in another issue
spk_4: so
spk_7: sorry that long let me of challenges our we're going to be part of in terms of sales growth year over year consumer for the first time in three quarters
spk_2: and you're going to see significant be better resin flow as we continue to ramp up the texas
spk_1: facility that we acquired in september that's going
spk_2: well or better than we anticipated got another that's the how for collar arm and a good maybe a question on the longer term i i know in the past you've cited you know a margin targeted of sixteen percent in the long term and i think that you know that was that was still kind of the goal even though map to grow it that maybe gotten put on a the you know how back a little bit for maybe the timing was off i get when you think about
spk_0: you know the the huge pricing that you're pushing through and volumes that you're seeing now but also the higher costs i give how should we think about that as still kind of a longer term target there's a bogey change at all did either a little bit lower just given everything so inflationary is it a little bit higher because the price goes up and and maybe eventually though the raw stabilize like
spk_2: how should we be thinking about that
spk_9: great question and we still very much have in mind sixty percent he that margin to get there were going to have to drive gross margins on a consolidated basis towards forty two percent and we have a lot of work to do they're having said that we anticipate this spring that you will see a return to record margins and or construction products group in our performance coatings group you'll see good progress in are especially products group in the area again that his handlers most significant margin deterioration roughly half of which has been a cost price makes a huge and the other half of which has been just be incredible disruption to production through put his in the consumer group and dead
spk_2: part of our business is getting lot of attention got it they forty much for the color and you
spk_10: your next question comes from a line of grandchild punjabi of baird
spk_1: oregon sugar mourning mourning for i got the new to you as well
spk_9: thank you for are under construction by screw you know just in terms of the regional break and they said it in your facilities i pointed toward you are being relatively flat and in up there was rent the north america
spk_2: can you give us a bit more color in terms of what is it was born on europe i just deferred sort of
spk_4: activity and and house you that evolving as the urinals value shirt so couple things going on in europe number one of the last two years we have been intensely focused on march and permit there are even to the extent of shedding some lower margin this is deliberately yeah so there's been a focus on profitability because the profit levels in our european construction products group or not up to where we are to north america were for that matter in latin america i'm in any other issue is i think that the reaction to this new surge in in every case to be surges ah have grown a virus and cause more mark
spk_11: and customer facing disruptions which is inhibited some of the growth and vs or senior north america i think our experience mirrors the headlines which is us economy has been growing through the kroner virus circumstances encounter twenty one quite well and that's not true in europe
spk_4: got it and the i'm hundred million in la salle specific the consumer preview que they called it if either if i read that correctly that that would imply quite an increase of you know got to be an increase of forty percent relative to the duke u fiscal year twenty baseline the just give us bit more color on the bridge between the two period and by biting is a piece or that obviously volume insure games but you know as high as we think about the sustainability of that that improvement that seems like a very large number sure in out or net over a rusty at the he can give you the balance between broadly think was more like two hundred million and
spk_12: the bigger chunk of his consumer rusty when he had to colored to that
spk_2: sure yeah
spk_4: phantom and you know in the second quarter know consumer sales are down eighteen million that like we said they failed could have been a hundred million or maybe more higher had not been perfectly chain disruption
spk_2: you know in terms of price increases they you know are going through the third round and price increases hearing que three but they have had to significant price increases in the fall and spring that's contributing to that the market is still good job or just losing out on opportunity camp pereira like to need the extraordinary demand that out there we think that will come back to was it through the revenue line as we increase capacity as supply chain disruption settle down
spk_13: you know kolata reasons why the business long term looks fantastic
spk_14: they are well positioned they have great market share and markedly and brand or been temporarily you know they paid the most acute situation due to the alcatraz and
spk_0: the supplier outage last spring and that's why they're suffering more on the last sale
spk_1: ah i will add to that get or anticipation that the read and availability issue will be back to normal sometime this spring and the the plant we
spk_15: acquired september
spk_4: supply probably thirty percent of our previously purchased out how alpharetta production so at going up the hell for us as we it up and we would dissipate
spk_2: fourth quarter looks good across all former seconds and so much my accuracy
spk_1: thank you your next question comes from the line of steve burn of bank of america
spk_16: where it's even morning frank
spk_2: bob hope you can help us better understand and the differential performance between our consumer product on new construction and in a in that performs coding is you had higher organic growth in getting construction products which you're you're a big performance shoes was so much stronger in in performance coding is is where we they're just more more of the price you wrestling keep having a person can a price up was it was much higher than that in in a performance coding jones or something big was just a maybe love a while lol material or costs dragon that segment of this better understand an hour wait how we can look at die going forward with your shirt on show the
spk_1: performance coatings group black some on the map to growth
spk_2: a strong performance in other parts rpm because of some cyclical challenges particularly the oil and gas industry so part of the stronger performance job performance coatings group is easier comparison to prior year periods and their underlying execution in in growth which is good as anywhere else it was just beauty by top line challenges with the top line grow again you're ch
spk_1: extra boost as be to growth benefits
spk_2: in the performance coding group or beat start your starting to be realized is our revenues are grown you can particularly in relationship to recovery and some of the more cyclical oil and gas industrial capital spending markets the performance for each group serves as the first part construction products is really paid
spk_15: showing strength and strike while we blocks a little march and their and last couple of quarters and you'll see that turn around and cute three ah we are generating really strong performance on what we're prior period record results
spk_4: we are well positioned and product categories in general and it certain instances the disruptions are actually helping us with it at in the
spk_2: or filled out which we expected me to capacity summer or whether it's the roof restoration coatings ah the other thing i'll say about bluestone he and and flooring in our tranquil ripping division it's a both cases where you deeply as apply apply house it's a lot labor issues or a challenge everywhere including infrastructure markets ah our ability with a dedicated crews to provide installations were perhaps others can is also helped us
spk_17: a country that and wanted gasp a little bit about good player
spk_2: the you tube quarterback in september and more the last quarter was referred to as a tranquil purchase and so is the lp the all could residents the produced this will that only be true that only flow through
spk_15: construction products your will consumer benefit from that in and what other gregor rob chemistry you're you're like me down to personal foul conformity down the road
spk_0: so that that's a great question and will keep that mind and have a better answer for you are in our april conference call throttling on it is a part of our construction products group because we are making ah various intermediate chemicals for numerous art and companies it's also in our construction product
spk_15: true because just as you know
spk_2: from european perspective there are no rpm owned and operated plants are plants are owned and operated by our subsidiaries it's a we had to choose a subsidiary that was it a good position the about from from the operations leadership respected and the ability to coordinate throughout our pm and our performance i'm sorry architecture production was right over their business and usually the biggest chunk of focus is producing out the residents for our consumer group
spk_4: that we expect strong
spk_18: read and supply and other unique intermediate chemical supplies for other rpm companies and all other a better answer in more detail for you
spk_4: a good they can break your next question comes from the line of vincent andrews of morgan stanley thank you and and good morning everyone we just talk have a do that as in a little bit it up about sixty million dollars your decade and a a called out in the relief that gathers higher i kind of computation if you're but other bucket get that it clear that increase in and she will be analyzing that year to date increase the that for the entire fiscal year but the you want to handle that was some detail sure i'd be happy to get one of the name and sources of increase year over year is
spk_19: commission
spk_2: you know we are increasing sales rapidly in some of our higher commission construction an industrial product line areas vincenzo commission visa a big chunk of that he and he is back i wouldn't say the anywhere close to that maybe it quote a half way to had to what it used to be a key any we know basically was zero down last year we've also added some modest as teenage from acquisition yeah we have the or k increases and some broken initiative that were pursuing and specially products and a lotta construction projects group as well so those are the main sources for that okay and interest in in in the non teaching or segments call outs you know about some of them every that was deferred during the heart of the can vanish no coming back now she's he's a great i just want to make sure that big with the you doubt you know that that the go forward or properly or these new base levels of revenue growth that should go off abortion midi picky about having good nickel comparisons in a year for now because you know just his glass years or any our revenue was understated because revenues been deferred is it is your your avenue little overstated because you you need some of that offer how should we think about that continue
spk_1: ah sure ah
spk_2: after difficult comparisons so i don't know how likely we are showing
spk_20: ten percent huge volume growth
spk_2: twenty percent revenue growth is growing but search for the next couple of quarters you'll see added a non consumer segments which you referenced the same type of strength and we've seen it with better leverage the bottom line in general we are in construction products it's new product categories i think there's more growth come out of europe once we get the market profiler we wanted i think the categories like new durham route restoration coatings some of the potential there because it's been quite heatedly impacted by capacity which were addressing and should have fully addressed in both cases by the end of the summer
spk_15: answer they're really good spring their ah and i anticipate
spk_0: anything but positive sales in earnings growth as we get into a fiscal twenty three that starts in june
spk_2: the big
spk_4: the big recovery in terms of your over your performance not surprisingly will come out of our consumer group because we anticipate finally addressing somebody supply disruptions v and cover disruptions by spraying to our fourth quarter and as we get into next year hopefully you'll be seeing
spk_2: a better flow through improve supply chains internet case
spk_1: pretty significantly disrupted performance results and quarters and fiscal twenty two and consumer
spk_2: can make sense thanks very much your next question comes from a line of kevin mccarthy of medical research like as the morning and happy new year to on frank your specialty products segmented been tracking quite well under new management the margins came in a little bit less than we would have expected this quarter a in your commentary he said he a number different issues in terms of investments conversion cause damage chips legal such a
spk_1: can you give us a feel for
spk_2: you know how many of those issues my purses been in the third quarter beyond vs you know other ones that could be fleeting and more broadly in a went when do you think he might start to compare positively on on the segment barging and specialty i think that we have a good charlotte surf first legacy performance que three and we have a good shot she had she not only sales growth but not keeping your over here looking positive
spk_15: the biggest challenge there's rusty and mightily to is in are like a brand business that is a business day is a leader in a restoration equipment the give it an occasion equipment
spk_1: your filtering equipment you're moving again in high performance fans and from ten years ago where this was all me and your equipment
spk_2: this is ah stuff for industrial commercial settings it can be run off your i phone they had significantly more sophistication in terms of boards and chips and we can't get him and you know that's a business it didn't run on a big that like and now it's a forty or fifty million dollar backlog we haven't lost market share and we hope to see that being resolved
spk_21: performance a cute three will look better or worse based on that one business units ability to get of i actually earlier question in this is the most extreme example that it's to and other parts of rpm about inventory
spk_2: we typically gone operate with much whip work in process and we got on a with air like and brands business because we have block all steel and all the components to put together all of this equipment and we literally have a fair amount of inventory sitting waiting for chips which once installed kind of like to challenges the automotive industry should lead to significant improvements in revenues
spk_22: i see that that's good to know that as secondly for can eat you've talked in the past about ah central map to point all program when your latest thoughts on on any again and and potential shaving says continue to flush that out
spk_0: sure a year ago we had hoped to be in visit to provide some details now
spk_23: i think it now appears that
spk_5: that's more likely to be this summer so we'll get through this fiscal year
spk_2: i think you know we anticipate a return to more normalcy across our businesses queue for with answered with in a will have a better place of business and more normal flow through and hopefully the on the crime search here is kind of the beginning of the end for coven would be nice to you to the world so we have been continually work and and as a candidate earlier to janet noughties question we are intensely focused on achieving a sixty percent even martin all of our businesses know what we were making great progress there were back on track in two or three businesses already which is construction products and performance coatings and which need to get through the supply disruptions in supply chain challenges and then we will be providing i hope is summer in some detail what a map to grow two point oh looks like great so much you your next question comes on a line of tie specter of you the as
spk_24: it has been wearing has my
spk_23: it's of the follow up on the law failed and specifically consumer if want to get your view their it you need a continued supported demand environment to get the sales back or in getting those failed back and just an inventory function of customers restocking i think it's a combination of both when you look at the charge that we supply on we've been relatively happy
spk_2: good comparison would you go back to our fiscal twenty results or says where current fiscal twenty two so we feel like there's an expanded user base because of the pandemic situations quite candidly are you need to do is go to the shelves arctic customers does not only in our categories other categories but you're looking at fill rates for one week to the next that are fifty to seventy percent dude industry and case rpm were fill right ninety nine percent it has been a massive chunk of disruption in a letter it's having stuff ready and no trucks to pick up ah whether it's be able to produce for three days but having to pay your workforce obviously full time scales people ah and down it's been on and and we were making actually good progress and we were
spk_1: it dissipated a gutter que three than were forecasting now and i can i just provide some the details on the crime iris cases and operations or consumer group and it's just another unanticipated said that we will overcome
spk_2: okay thanks helpful on the if i get of that and performance coatings i have to think their first me talk about mignon spending coming back can you comment on your backlog in that business or it in a multiple times higher than perhaps you ran into pass which gives you the ability there and then in your fly you talked about the taking support toward improving sales for sufficiency the next a dust and explain what like that he added and how that's helping
spk_1: sure on so first on that last comment and and we had cabinet over the last year so out of our map to grow program and it was really not originally ah pardon
spk_2: we had hired a consulting firm to help a number of our businesses look at their class price make situation and it's it's literally it's not a go raise your prices assessment it's a better our analysis of next ah
spk_24: it helped us make decisions like i referenced europe
spk_0: our product lines that when you look at from long term basis
spk_2: to make decisions as to whether or not they're worth
spk_15: our investment or time in our capacity and are also trying to get us to the point where we can utilize a better understanding your next to proactively and offensively and saturday and set of eyes are salesforce in the marketplace
spk_2: retro respective analysis of performance it's a were doing a lot of work there and some of that is looking at commission structures and relationship to product margin profiles and things like that i it's a recipient commented in my comment earlier than the billions and trillions of dollars that have been allocated the united states alone towards get the structure will benefit arcus russia products group in performance going to group we are well positioned
spk_1: in terms of of public and private infrastructure spending
spk_2: what's going into hospitals what's going in the schools are markets that we served by the onshore engine technology we continue to be the leader for instance in floors were all the major tech companies with static dissipating forces and example so the and shoring a lot of that is leading to up picks in arkansas so i think the next couple of years in those to business segments look very bright
spk_1: okay thank you
spk_2: your next question comes from a line of chanting for caucus j p morgan
spk_1: when you got a hike and morning thanks very much
spk_2: and when you think about the boring compensation targets for management it's very difficult to understand on whether management is meeting the target is a little bit behind his head given that there are so many raw material factors and disruption factors can can you give the sahara
spk_1: and an understanding what what the board wants from management and if you're ahead or behind their targets they're based targets
spk_2: ah sure that i guess the specifics i would ah direct you to or proxy where i think we do a pretty good job of outlining in retrospect
spk_1: for a particular a year
spk_25: what the targets were what are a team that level where to those targets we i'm actually very good discipline in a relationship the compensation we have never repriced options we did not make specific compensation changes or adjustments
spk_2: in relationship that call the situations on and so i can we have good discipline their and details outlined in a proxy or the board has used discretion last year and the here in some areas in relationship to making sure that we are focused on march can share games in advancing our businesses
spk_1: and and also at least through fiscal twenty one our progress on a relative basis to our peers and our prayer your performance in relationship to the map to growth program
spk_2: which was very effective but obviously disrupted by covered it now supply teen issues compensation this year
spk_4: it will be a tough a tough issue because like everybody knows everybody's working twice as hard or everybody's dealing with a book environment the likes of which nobody's really seen and up the impact in compensation relative to performance
spk_2: we won't look particularly great because in a number of our businesses or bottom line targets are beating when original expectations were among may not be fair but that's life and again i would refer to the details for past camp to our proxy and you'll see the same high pitched stay on the proxy we put out an august twenty two king and and secondly from more volumes in the quarter up on a consolidated basis of blow single digit
spk_4: if you are on life though instead of five bow would you are
spk_0: cost good for that been very different
spk_2: well at the differ on that question to rusty i don't know delightful five difference
spk_7: here again he can provide maybe the details of a unifying my can tell you in performance coatings and products
spk_15: get by him was high single digits or even and percent range and some of our especially products groups we had good unifying growth except for lunch and brands
spk_2: i'm in obviously we get negative unifying groping consumer been roughly comparable provide better a holler and perhaps as an answer for the life of i will question can have been a while hunt i cracked open my accounting bought but in a rising costs environment like how would you wanna really give you the hire more her and cause as compared to find have a mike is there anything you want to add to the
spk_8: now i mean that the we haven't done that the map thought it better at our do their gotcha
spk_2: had that volume about consolidate volume for the core knowledge that be set up a little better now no that the was single that you're quite frank mention okay thank you so much like him your next question comes to my line of a new this one a town of rbc capital markets the morning by greg accepting my question that my last is well and happy new twelve at all the of i guess my question is are under the the guide and so it's a look the next quarter and yeah you do expect the you know range for he in that five fifteen percent range and down i guess when you when you think about the cadence to the year and you know this is typically your weakest quarter it's has given winter seasonality said acts
spk_1: fact that range to kind of improve our also in light of improving raw material availability as he moved to the year and and said another way to expect kind of this this quarter be that the worst as far as supply chain and rabbit disruptions in ontario about body
spk_2: i'm i think it general that's right way to think about it a rest flow brackets and were businesses improving the texas plant we will provide more detail on april a broadly on that texas plan ramp up and out and resins is helping significantly
spk_15: and so
spk_4: i think you're going to see improvement in each of our segments i'm just eat specially products will be particularly
spk_15: related to recovery and or legend brands business or not and so you'll see as to get a big part of the swing their arm and then throughput on on consumer i think the biggest
spk_2: very a village to hear that we're not certain about his the and crime significant disruption in december ah actually change what we've got a month or so ago would be more positive results in consumer to another quarter of a decline to eat in our consumer section you will see for the first time and three quarters positive year over year sales growth in consumer and if trends continue and there's no sharks that we don't anticipate
spk_26: you're going to see a significant improvement across all for segments as we get into the spring
spk_0: thanks for the a and and i'm like a just i go back to the demand question so you know as he noted demand a purist relatively robust across many of your verticals
spk_27: where would you say demand is the weakest i guess and and is that were you know would you take that you still haven't seen a recovery because of covered and or is it is it says something else
spk_28: and then i guess furthermore you implement these price increases is there amongst your customer base is there a willingness to kind of pass on these price increases to their customers and is that what is keeping the man so we're a bastard each detainee risk of of this demand kind of slowing down because of that your price increases crowd
spk_15: hang out and you know that demands thanks sure am
spk_29: if we can and earlier i think there are are geographically or weakest area performance is in europe
spk_25: we would help see european economies are pick up at more long lines of us i'm in product categories of don't see a lot of weakness right now i do think it will be interesting if we get into calendar twenty two a throughout this calendar year
spk_2: the balance between consumer demand and and getting a supply chain in inventory levels back to normal which from the really not close to right now and so scene where that settles out in terms of to me and consumers the area where i think we have the least disability just because once we can get the supply chain disruptions in place we should have really strong performance for a period of time if for no reason to get him into a levels and our customers the and in our own shop back to normal levels great thank you your next question comes on a line of my son of wells fargo
spk_1: when michael
spk_2: hey guys happy new year
spk_1: the fear in it sounds like the failed momentum will continue to the fourth quarter just curious now i know it's in our early given our another headwind but if you think about the potential scenarios for even growth are decline in a fourth quarter what do you think they are given now the raw material had when when i'm a crime
spk_2: go for it could be for the fourth me
spk_1: britain if you have positive sales go up again
spk_2: shirt on we're consumer i'm sorry work and structured products group just going where our performance kurdish groups going with see that's right continuing in the second half
spk_30: of fiscal twenty two to that strong outline in for the second half to take it or really good leveraged the bottom line
spk_2: we anticipate that it's literally month month
spk_25: recovery and are especially products group and talked about legend brands
spk_4: our expectations for recovery consumer nicely in june four
spk_2: you know we have been providing guidance one word time because the visibility of what's happening in the impact of disruptions in light of stress supply chains just mean it really difficult to forecast forward with much accuracy but if if the current friends have a stabilizing raw material supply base cost wise improving base chemicals which are moving in the right direction ha and if obama crowd is canada last gasp of kobe which which should be a blessing and we should have at the fourth quarter and an edge
spk_1: that is easy to calculate if we can get some of the supply chain issues minus in and we can see raw material environment it's know you don't even have to be declining it's needs to stabilize
spk_2: got it and then kept on that you mentioned i think in the five hours or in the opening comments that you're looking to expand your supplier base can he can thought about color on that what what you're doing and and how you doin that to a the improve ability longer term
spk_31: sure regional
spk_32: i think that not withstanding the disruptions and supply kids are salvage paddle the communications with us in our major suppliers
spk_0: and and really good to this or code and understanding how to deal to force measures which are down two thirds worthy we're we're in the mid teens and for six years now across a couple hundred particular glories we were in the fifties plus across five or six on a particular aggressive that's improved shares been good good communication there are
spk_2: there there have been one or two instances where suppliers in effect in
spk_4: in in circumstances that camp
spk_15: broken contracts and and very
spk_2: trans actually began down and so we have opportunities to particular with a more consolidated procurement activity
spk_1: to make changes were appropriate and then the corsicana texas plant are also improves our our internal production we don't tend to be a killing of any raw material
spk_2: the area that will probably have the biggest capacity isn't an option residents and sometime this spring we should be up and running to the tune of thirty percent or internal needs so those are the areas that we think about when we wrap supply gotta thank you
spk_1: and you might
spk_2: her next question comes on the line of my carousel know seaport research the morning like
spk_4: hi good morning happy new year
spk_2: i'm too young to i ask a question about the pure air acquisition not either did this back in august it seems like it's kind of the byproduct of the right time as people are starting to return the office building returned to other our institution that wanted to be more competent around their indoor air quality
spk_33: you said in a press release of that was running at a ten million dollar annual sales rate when you acquired it was wondering if you could talk about where the backlog is for that pure air deal ah and and maybe are pure a business i should say i were you think you can take sales over the next couple of years
spk_2: dr at a great question i appreciate your paid attention to that in our i'm an activity has been successful in the small and medium size range on yeah
spk_3: the real home runs or where we can buy a unique visitors or product line and through our distribution or sales force or market presence expanded and i think pure ears going to be a great example of that on to a hundred fifty million dollar business it required this year
spk_34: i would anticipate that in fiscal twenty three will do north fifty million bucks
spk_0: and if we can expand that in the coming years to what we believe it's possible that could be a hundred million dollars a product and services it's part of our community i business and so blade we can find more and more
spk_15: ten or fifteen million dollar product lines that we think eighteen or twenty four months later forty or fifty and with an upside of a hundred million were we would be excited get a real winner for us
spk_2: and that's one example of cannot get you and those who have followed rpm i'll talk about somebody here in canada call for a long time of see this evolve from a very decentralized holding company to what is support groups today in our construction products group was a collection of very essential like different businesses and is now been much more integrated we're leveraging our sales forces in that's allowing us to take advantage of of product lines and pure air and really expanded aggressively
spk_4: i hadn't just a quick one on the a special the group i believe you mention the some legal expenses can you give some color on and what that entails then what's that the magnitude of those expenses were of the quarter i sure wish that we really related to ah one of our our oh yeah i'm ah service providers around furniture coatings and furniture warranties and a disagreement has been ongoing for a long long time with a west coast distributor and guy that was resolved to ah with a jury verdict and i believe the cooler we took two billion dollar charges every rusty
spk_2: yeah right
spk_35: i think so much
spk_15: again
spk_2: your next question comes from the line have kevin whole server of north coast research or encountered it the more a very heavy gear army and i'll could on the i'm disappointed if you
spk_4: so two hundred billion dollar got going in the quarter i think it was saying had went in that the first quarter forgive me if i did for did you quantify how much you're expecting in the the because the third quarter ah and you know what baked into that the sale guns that you provided yet i don't know that we'd connell quantified and we rusty
spk_7: yeah a pretty big range i mean and if you like a december kevin were running at the same page
spk_0: no of the past two quarters because of the disruption from on the koran and the rest of the quarter the a bit of a wild card simply because typically on the flow he the whole period for rpm now we can rebuild the pipeline in our fella
spk_36: in our store shelves there have been mp during the the supply chain math and to the then were able to do that we might be able to catch up on the previously the heard fell you know from the past three quarters we know he said two hundred million and two to two hundred million in key one hundred million back in the fourth quarter of have twenty one so that would be that hope but so far are december than panning out so i'm not getting huge numbers kevin for that reason that highly uncertain
spk_2: know whether that the train will ship yeah yeah make them and i just a quick clarification on the guy you you can mention i doubled wrote expectation that of construction product and and up performs coatings in the third quarter could you maybe give what that means did that me like hygiene of the committee get the still a bit more color on what do you mean by hi double digit growth out of those sub segments that's the want to address the the outlook for the quarter cure yeah when we say i double digit yeah we we men
spk_36: hiking for the money for the kevin
spk_15: okay yeah that probably got your that's without and or i thank you very much
spk_36: and you
spk_2: your last question comes from the line of rosemarie my belly of the dialing in company good morning everyone and happy new year
spk_1: i was just wondering if shirt ppg announcement gay that they are expanding their relationship with some people would affect your your business with some people are they are a lovely he came to proclaimed and you are not to you not in that particular side of the business
spk_2: yeah i imagine that released this morning and rosemary actually look at it and but we do not compete directly and home people with ppg their principally an architectural pay ah
spk_37: and they're not
spk_36: actively involved in any direct way the small project painter class and soon surpass repair product categories that weird leaders and so we will look at that but
spk_0: as of today there principally a architecture or paid supplier
spk_1: second tier third tier of to have to the their products okay and then a fire each night i may follow up on that onstage whole claim to i seem to recall that in the past you have mentioned
spk_2: being eventually interested in that it would it be mostly in terms of buying an hour to architectural painter regional manufacturer just mostly focusing on one particular niche no it's it's really organically grown in in relationships a customer keep worries so we've gone from age five hundred store test smaller with walmart and that has expanded fifteen hundred stores is principally pretty colors only a colored product for exterior and interior he end up we would hope to have to be able to see them grow significantly the spring been nice trajectory there and then we have had some ecommerce online architectural create programs that are in your very initial phases with menards in with on people thank you all
spk_0: organic okay great thanks

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