RPM International (NYSE:RPM) reported fiscal second-quarter 2026 results that management described as record sales for the quarter, but with slowing momentum as the period progressed and profitability pressured by higher expenses and temporary operational inefficiencies. Executives attributed the deceleration to longer construction project lead times, soft do-it-yourself (DIY) demand, and impacts tied to a government shutdown that slowed activity in certain construction sectors connected to public funding and weighed on consumer confidence.
Quarter performance: record sales, but margins declined
Chief Executive Officer Frank Sullivan said the quarter started strongly, with September delivering solid results that were “better on the top line and bottom line” than the company’s fiscal first quarter. However, he said trends worsened in late October and through November, as construction timelines lengthened and DIY demand softened, contributing to sales declines in those months.
Despite the sales increase, Laroche said adjusted EBIT declined because top-line growth and benefits from the company’s MAP 2025 initiatives were more than offset by higher SG&A costs related to growth initiatives, M&A deal costs, healthcare expenses, and temporary inefficiencies from consolidating plants and warehouse facilities. Adjusted EPS declined as well, driven by lower adjusted EBIT and higher interest expense from elevated debt levels used to finance acquisitions.
Optimization actions: $100 million annual benefit targeted
Management announced actions intended to better align SG&A with current market demand. Sullivan said the effort accelerates work the company had been preparing as part of a new “MAP 3.0” program.
Sullivan said RPM estimates the optimization actions will deliver an annual benefit of approximately $100 million once fully implemented. The company expects to realize $5 million of benefit in the fiscal third quarter and an incremental $20 million in the fourth quarter, with the remaining $75 million expected in fiscal 2027.
In Q&A, Sullivan said the $100 million is comprised of roughly $70 million in personnel-related cuts globally and about $30 million in discretionary expense reductions. He also indicated some of the gross expense reductions will be higher than the announced net number, because the company plans to reallocate some spending into growth opportunities.
Rusty Gordon, vice president and chief financial officer, said the company expects “the full amount” of savings to start flowing through in the first quarter of fiscal 2027, describing the actions as a roughly $25 million per quarter run rate. He said most activity should be completed and communicated internally by the end of the fiscal third quarter.
Sullivan said implementation cost estimates will be provided on the next earnings call in April.
Segment results: growth across groups, but profit pressure in CPG and Consumer
Laroche said all segments generated positive sales growth for the quarter, though higher expenses and inefficiencies weighed on margins.
- Construction Products Group (CPG): Sales grew to a record, led by high-performance building solutions. Laroche said project lead times lengthened as the quarter progressed, driven by the extended government shutdown. He also cited weaker disaster restoration sales due to lower storm activity. Adjusted EBIT declined as SG&A growth investments, consolidation-related inefficiencies, and lower fixed-cost absorption outweighed MAP 2025 benefits.
- Performance Coatings Group (PCG): The segment posted record sales with broad-based growth, supported by acquisitions. Adjusted EBIT was approximately flat, with higher sales and MAP 2025 benefits offset by growth investments and unfavorable mix.
- Consumer Group: Sales grew, driven by acquisitions and pricing actions to recover inflation, but volumes declined due to soft DIY demand, especially in November. Laroche said some sales were delayed by software system implementations and the transition to a shared distribution center in Europe, while product rationalization also weighed on results. Adjusted EBIT declined due to lower volumes, consolidation-related inefficiencies, startup costs at the European distribution center, and weaker demand in the color group.
On Consumer Group systems impacts, Gordon told analysts the disruption from new software and the new European warehouse was temporary and has been resolved.
Laroche also discussed an accounting item related to The Pink Stuff acquisition. He said the company reversed a $12.7 million earnout liability based on updated forecasts that are now more aligned with base-case assumptions and suggest aggressive earnout targets are unlikely to be met. The $12.7 million gain was excluded from adjusted EBIT. Sullivan later said the acquisition remains on track for the base case, but the earnout was tied to double-digit unit volume growth, which the company is not achieving in the current environment and does not expect to hit in calendar 2026.
Cash flow, capital allocation, and Kalzip agreement
Vice President of Investor Relations and Sustainability Matt Schlarb said cash flow from operations increased $66.3 million year-over-year in the second quarter due to improved working capital efficiency, marking the company’s second-highest second-quarter operating cash flow in its history. Schlarb said RPM used the cash generation to pay down $127 million of debt in the first half, while also returning $169 million to shareholders through dividends and share repurchases and spending $162 million on acquisitions.
Schlarb also noted RPM increased its dividend in October for the 52nd consecutive year. Liquidity remained $1.1 billion, which management said provides flexibility for capital allocation.
Regarding M&A, Schlarb discussed an agreement to acquire Kalzip, a German-based provider of metal roofing and facades. He said the deal is intended to strengthen RPM’s building envelope systems offering in high-performance buildings. Management cited a purchase price of 150 million euros, with the transaction expected to close in the fiscal fourth quarter of 2026. Sullivan said Kalzip’s patented technology and presence in high-profile projects could expand RPM’s capabilities, including potential opportunities to bring technology into the U.S. market over time.
Outlook: sluggish markets, but expected growth and improving profitability
Gordon said market conditions in the fiscal third quarter are expected to remain sluggish, with soft DIY demand and continued longer construction project lead times. He said construction pipelines remain solid, but the timing of conversion to actual activity remains unclear. Even so, RPM expects to outgrow its underlying markets due to targeted growth investments, along with incremental benefit from the SG&A optimization actions—though Gordon said those benefits in the third quarter will be offset by continued healthcare inflation and M&A deal expenses.
For the fiscal third quarter, management expects consolidated sales to increase in the mid-single digits and adjusted EBIT to grow in the mid- to high-single digits. For the fiscal fourth quarter, RPM expects mid-single-digit sales growth and adjusted EBIT growth ranging from low to high single digits, with volume growth described as the key variable.
In Q&A, Sullivan added that December sales were up 12.1%, with unit volume up 7%, highlighting volatility and uncertainty about whether the strength reflected recovery from shutdown-related delays or improving underlying demand.
About RPM International (NYSE:RPM)
RPM International Inc is a global holding company whose subsidiaries specialize in the manufacture and marketing of high-performance coatings, sealants, building materials, and specialty chemicals. Through its two principal operating segments—Performance Coatings and Industrial Coatings—RPM serves a diverse range of end markets, including construction, consumer products, industrial maintenance, and specialty applications.
The company’s Performance Coatings segment offers a broad portfolio of architectural coatings, waterproofing systems, and specialty building products used by contractors, builders, and homeowners.
