RPM's sales grew 3 percent to $1.19 billion, but profits were swallowed by impairment charges related to its Kirker nail enamel business.
CLEVELAND, Ohio -- RPM International Inc. announced three acquisitions this week -- as well as performance problems from Kirker Enterprises, a nail enamel and coatings company it bought four years ago, that hammered profits in its second quarter of fiscal 2017
For the quarter that ended Nov. 30, RPM's sales grew 3 percent to $1.19 billion, compared to $1.16 billion for the same period last year.
But the company ended the quarter with a net loss of $70.9 million. Profits were swallowed by a $129.2 million (or 97 cents per share) impairment charge related to its Kirker nail enamel business, as well as a $12.3 million charge (9 cents per share) from its decision to exit the Flowcrete polymer flooring business in the Middle East.
RPM Chairman and CEO Frank Sullivan told analysts that the company had bought Kirker in 2012 expecting it to generate about $100 million in revenues its first year, but that actual revenues were less than half that.
"The deterioration in that business really accelerated recently, and it was as a result of about a 15 percent to 20 percent decline in the overall market," he said.
Kirker tried to stem the losses by changing its customers and supply chain, but that didn't work, "so they lost further market share and some key customers." But Sullivan thinks the losses have pretty much bottomed out for the fiscal year, and that RPM's other consumer businesses "will make up for the shortfall of Kirker in the second half of the year."
In "our core consumer businesses of caulks and sealants, patch and repair products, small project paint, primers, the DAP and Zinsser and Rust-Oleum brands, we were up more than 6 percent on an organic basis in comparison to the recent results of our peers. We're real happy with that," Sullivan said.
RPM, a Medina County-based holding company whose subsidiaries manufacture and market high-performance coatings, sealants, building materials and specialty chemicals, saw its shares slip 4 percent to close at $52.60 on Thursday, down more than $2 a share from Wednesday's close of $54.84.
In other announcements, RPM said its recent acquisitions have combined annual net sales of $102 million, and are expected to contribute to profits within the year:
-- On Tuesday, RPM said it had bought the foam division of Clayton Corp., best known for its Touch 'N Foam consumer polyurethane foam, for an undisclosed amount.
Touch 'N Foam spray polyurethane foam for do-it-yourselfers, and Touch 'N Seal, its professional industrial sibling, are used to eliminate air leaks and drafts, seal gaps and cracks, and insulate homes and buildings against the elements. The products are sold primarily in North America.
Clayton's foam division, based in Fenton, Missouri, near St. Louis, has annual net sales of about $60 million.
-- On Wednesday, RPM announced it had acquired Prochem, a manufacturer of commercial floor-cleaning equipment and professional-grade cleaning chemicals (detergents, shampoos and deodorizers) for cleaning and restoring carpet, upholstery and hard floors.
Prochem, based in Chandler, Arizona, was acquired from the Karcher North America Co., and has annual net sales of about $22 million. Its products are sold primarily to professional cleaning contractors in North America.
-- RPM also bought 80 percent of Arnette Polymers LLC, a manufacturer of specialty resins, hardeners, curing agents and other intermediates used in epoxy and polyurethane materials.
Arnette, based in Richmond, Missouri, has annual net sales of nearly $20 million. It will become part of RPM's Performance Coatings Group and continue to be run by company founders Jim and Micky Arnette and the current management team.