Specialty chemical products company RPM International, Inc. (RPM) on Tuesday reported a 16.5% decline in second-quarter profit, due to write-down charge on its investment in India-based Kemrock Industries and Exports Ltd. Adjusted earnings climbed from last year, but missed Wall Street estimates. The company also backed its forecast for fiscal 2013, with earnings projected to be in line or below analysts' view.
Chairman and Chief Executive Officer Frank Sullivan said, "Second-quarter operating results, on an adjusted basis, continue to meet our plan with sales, EBIT and net income posting strong double-digit increases. We are also seeing benefits from our robust acquisition program, which has added businesses generating approximately $300 million in annual sales during the past 12 months."
For the second quarter, net income declined 16.5 percent to $41.67 million from $49.93 million a year ago. Earnings per share fell 18.4 percent to $0.31 from $0.38 last year.
The latest quarter results were hurt by a non-cash charge of $10.8 million or $0.09 per share for the write-down of RPM's remaining equity investment in Kemrock, due to continued deteriorating economic conditions in India. The prior year's results included a benefit of $5.2 million or $0.04 per share.
On an adjusted basis, which excluded the Kemrock impact from both periods, RPM's net income grew 17.4 percent to $52.5 million from $44.7 million last year and earnings per share improved 17.6 percent to $0.40 from $0.34 a year ago.
On average, eight analysts polled by Thomson Reuters expected earnings of $0.42 per share. Such estimates typically exclude special items.
The company's consolidated EBIT decreased 3.7 percent to $89.5 million, while adjusted EBIT improved 14.3 percent to $100.4 million.
Net sales for the quarter increased 11.1 percent to $1.02 billion from $916.09 million a year ago, while analysts estimated sales of $998.28 million.
Segment-wise, industrial sales grew 7.7 percent. The company noted that most of its industrial product lines continued to perform well, with the exception of industrial businesses in Europe and roofing division. Consumer segment sales climbed 18.9 percent.
For fiscal 2013, RPM continues to expect adjusted earnings per share to grow in a range of 9 to 12 percent to $1.80 to $1.85, on projected sales growth between 8 and 10 percent, implying sales between $4.07 billion and $4.15 billion.
Wall Street analysts are currently looking for full-year 2013 earnings of $1.85 per share on annual sales of $4.11 billion.
Sullivan added, "As usual, we expect weaker results for the seasonally difficult fiscal third quarter ending February 28, 2013, but anticipate a strong fiscal 2013 fourth quarter. We see continued strength in top- and bottom-line performance in our consumer segment as the U.S. residential housing market steadily improves."
RPM expects that current-year acquisitions will offset its weaker sectors and contribute to its results.
The company also projects to continue the recent trend of recouping gross profit margin during the last half of this fiscal year as well.
RPM closed Monday's regular trading session at $30.57, up $0.07 or 0.23 percent.
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