RPM Shares Fall After Q2 Profit Miss, Unveils $100M Savings Plan
Specialty chemicals maker grapples with margin pressure and slowing consumer demand, but announces a strategic acquisition to bolster its construction division.
Shares of RPM International Inc. (NYSE: RPM) fell more than 2% in trading Wednesday after the specialty chemicals and coatings manufacturer posted second-quarter earnings that missed Wall Street expectations, citing margin pressures and a challenging consumer market.
The Medina, Ohio-based company reported Q2 fiscal 2026 revenue of $1.91 billion, a 3.5% increase year-over-year that set a record for the period. However, profitability declined, with adjusted diluted earnings per share falling 13.7% to $1.20, short of analyst consensus.
In response to the results, the company announced a new cost-cutting initiative and a strategic acquisition, signaling a proactive approach to navigating the headwinds.
Headwinds from Consumer and Consolidation Costs
CEO Frank C. Sullivan pointed to a difficult operating environment in the quarter. "Sales came in at the lower end of our expectations," he said in a statement. "The prolonged government shutdown contributed to the trend of longer lead times on construction projects and further pressured already negative consumer sentiment." Sullivan noted that these factors led to a sales growth slowdown and a decline in earnings.
The company's three divisions showed mixed results. The Consumer Group was the primary source of weakness, with organic sales declining 4.7% due to soft demand in do-it-yourself (DIY) markets. The Construction Products Group achieved record sales of $737.4 million, up 2.4%, driven by its roofing solutions. However, its profitability fell 10.9% due to investments in sales, general, and administrative (SG&A) expenses and what the company described as "temporary inefficiencies from plant consolidations."
The Performance Coatings Group also saw sales rise 4.4%, but its adjusted earnings were nearly flat, hampered by an unfavorable product mix.
A Two-Pronged Strategic Response
In a decisive move to address the margin pressure, RPM announced a new SG&A-focused optimization plan. "Given the slower demand environment, we have moved quickly to put in place SG&A-focused optimization actions that will save approximately $100 million annually once fully implemented," Sullivan stated. The plan will continue while the company makes targeted investments in its highest-growth opportunities.
Simultaneously, RPM announced that its Tremco Construction Products Group had agreed to acquire Kalzip GmbH, a German-based leader in building envelope technologies. Kalzip, with annual net sales of approximately €75 million, specializes in aluminum roofing and façade systems.
Sullivan framed the deal as a key strategic play. "This acquisition aligns with our strategy to build leadership positions in selling systems to high-growth, high-specification construction markets," he noted, highlighting its potential to expand Tremco’s presence in Europe and Asia.
Forward Outlook
Despite the second-quarter challenges, RPM offered a cautiously optimistic outlook. For the third quarter of fiscal 2026, the company forecasts mid-single-digit sales growth and a mid- to high-single-digit increase in adjusted EBIT. This guidance suggests management believes its cost-saving measures and strategic adjustments will begin to bear fruit in the coming months, stabilizing performance and reassuring investors of its long-term strategy.