RPM International Inc. (RPM) reported fiscal first-quarter results on Monday. The company posted earnings of $73 million, or 57 cents per share, compared to $69.5 million, or 53 cents in the year-ago quarter.

The result also came in ahead of the Zacks Consensus Estimate by 29.6%, or 13 cents. The better-than-expected performance was mainly driven by higher volumes in the company’s consumer segment coupled with aggressive cost reduction initiatives by management.

RPM manufactures and markets specialty paints, protective coatings and roofing systems, sealants and adhesives, for use in both industrial and consumer applications. The company operates 92 manufacturing facilities in 22 countries and sells products in about 150 countries and territories.

The Medina, OH-based company said sales contracted 7.1% year over year to $916.0 million. The decline was primarily caused by a 4.8% decrease in unit volumes and adverse foreign currency translations due to strengthening of the U.S. dollar.

In terms of segments, the Industrial division’s sales slipped 14% year over year to $599.7 million due to an 11% reduction in volumes coupled with unfavorable foreign currency translations. The segment’s performance was adversely affected by a slump in commercial construction activity along with cutbacks in capital spending by organizations.

The Consumer segment’s sales grew nearly 10% year over year to $316.2 million, driven by a 10.5% growth in volumes and a 2% increase in price. The growth primarily stemmed from RPM’s do-it-yourself product line, which benefited from improved home sales and consumer spending on maintenance and redecoration.

RPM’s gross margin expanded 200 basis points (bps) year over year to 43%, primarily due to lower raw material costs, price increases and improved mix toward higher margin product lines. Operating income recorded a growth of 8.8% year over year to $120.6 million, while operating margin improved 190 bps to 13.2%. The growth was chiefly driven by a 6.7% reduction in selling, general & administrative expenses to $273.2 million on account of the company’s stringent cost management efforts.

The company ended the quarter with cash and equivalents of $255.8 million, compared to $201.4 million in the year-ago period, helped by a $74 million reduction in inventories to $435.2 million. Total debt at the end of the quarter was $906.7 million, a decrease of $65.7 million from the year-ago period.  

Moving forward, management expects sales for the fiscal year ending May 2010 to remain approximately flat, compared to the year-ago level of $3.37 billion. RPM also anticipates fiscal 2010 adjusted earnings per share towards the higher end of its earlier guidance, which is a growth of 5% to 25% over $1.05 earned in fiscal 2009 (about $1.10 to $1.31 per share.)

The Zacks Consensus Estimate, derived from 7 covering analysts, is currently pegged at $1.22 per share, which has moved up a penny over the past month.
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