Has the process of implementing price increases started, how long will it take to catch up, and will the FIFO benefit prevent a lag in price vs. cost?

Price increases are ongoing and vary by business and geography. In Q3, pricing was up slightly over 1%, with favorable price/cost. Q4 pricing will be higher, still with favorable price/cost. Q1 FY27 will see further incremental price increases to address anticipated inflation, with confidence that pricing will be higher than Q4. “In the third quarter, pricing was up a little over 1% and price/cost was favorable because we were catching up with some prior inflation. In the fourth quarter, because we're implementing some price increases now, pricing will be higher again, and we still expect price cost to be favorable.”

Quantify the Q3 headwind from inefficiencies and whether they are largely resolved or will continue into Q4/FY27.

Inefficiencies cost a little over $6 million in Q3, with about two-thirds in Consumer (due to new distribution facility and plant consolidation in Europe) and one-third in Construction Products (North America plant consolidation, Europe facility repurposing). These are expected to be completed by Fall, with no negative impact beyond Q2 FY27. “In terms of the third quarter, it was a little more than $6 million that cost us in some of these facility consolidations. About 2/3 is in consumer... Probably the remaining 1/3 is mostly at our Construction Products group.”

How is this supply-shock-driven inflation different, will reversal be pronounced if oil prices drop, and will inflation flatten after Q1 FY27 or continue to increase?

This inflation is not demand-related. If Middle East hostilities cease, a quick reversion in oil and raw material prices is possible. The company was anticipating stability before the current disruptions. If hostilities persist, it could lead to a sustained inflation spike similar to the Biden administration period. Confidence in outlook diminishes beyond Q1 FY27. “If the hostilities in the Middle East are drawn to a close in a more stable basis, you could see a reversion to oil prices and the related impact on raw materials pretty quickly.”

RPM

RPM International (RPM) Q3 FY26 earnings call: guidance and Q&A

Earnings call· Feb 2026 (Q3 FY26)· Materials· Apr 8, 2026

Source: earnings call transcript

Executive summary

RPM International Q3 FY26 — Record EBIT and Sales Amid Geopolitical Volatility

RPM International delivered record Q3 FY26 results, leveraging strong volume growth and operational improvements to achieve significant adjusted EBIT expansion despite volatile economic conditions and geopolitical headwinds. The company is actively implementing price increases and cost optimization programs to mitigate rising raw material and freight inflation, particularly stemming from the Middle East conflict. Management remains focused on high-performance building solutions and strategic acquisitions while navigating softness in DIY markets and global supply chain disruptions.

Highlights

Consolidated sales increased nearly 9% to a record, driven by higher unit volumes and engineered solutions.
Adjusted EBIT increased by nearly 50% to a record, marking the 15th record adjusted EBIT in the last 17 quarters.
SG&A-focused optimization actions generated approximately $5 million in savings during Q3 FY26, with $20 million expected in Q4 FY26.
Cash flow from operations year-to-date reached $656.7 million, the second highest in company history.
Liquidity remains strong at $1.02 billion, providing flexibility for M&A opportunities.

Concerns

Raw material inflation is expected to be 1% to 2% in Q4 FY26, increasing to mid- to high single-digit range in Q1 FY27 due to Middle East conflict.
Continued soft DIY demand partially offset sales growth in the Consumer Group.
Temporary inefficiencies from plant consolidations cost over $6 million in Q3 FY26, primarily in the Consumer and Construction Products groups.
Europe's organic sales contracted in Q3 FY26, impacted by geopolitical events and focus on margin improvement.
Health care costs were up $4 million in Q3 FY26, contributing to inflationary pressures.

Guidance & targets

Category	Target	Timeline	Confidence
Q4 FY26 Revenue Growth	mid-single-digit high materiality	Q4 · FY26	Medium
Q4 FY26 Raw Material Inflation	1% to 2% high materiality	Q4 · FY26	High
Q1 FY27 Raw Material Inflation	mid- to high single-digit range high materiality	Q1 · FY27	Medium
Q4 FY26 SG&A Optimization Savings	around $20 million medium materiality	Q4 · FY26	High
Q4 FY26 Adjusted EBIT Growth	low to high single-digit percentage growth high materiality	Q4 · FY26	Medium
FY27 SG&A Optimization Savings	$75 million high materiality	FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Construction Products Group Achieved record sales and improved adjusted EBIT, driven by strong performance in North America, favorable currency, and recovery from government shutdown. SG&A optimization and fixed cost leverage boosted profitability, despite temporary plant consolidation inefficiencies. Broad-based strength in North American businessesRoofing solutionsWall systemsConcrete admixturesCurrency translation contributedRebound from government shutdown contributedImproved sales mixSG&A-focused optimization actions drove EBIT growthFixed cost leverage drove EBIT growthTemporary inefficiencies from plant consolidations offset EBIT growth	Record	—	—	Improved
Performance Coatings Group Achieved record sales and adjusted EBIT, fueled by broad-based growth, particularly in protective coatings, passive fire protection, and infrastructure solutions in emerging markets. SG&A optimization and fixed cost leverage contributed to strong profitability. Broad-based growth across businessesProtective coatings performed wellPassive fire protection performed wellInfrastructure solutions performed well in emerging marketsHigh-performance building solutions performed well in emerging marketsHigher sales drove EBIT growthSG&A focused optimization actions drove EBIT growthImproved fixed cost leverage drove EBIT growth	Record	—	—	Record Adjusted EBIT
Consumer Group Generated record sales driven by M&A and pricing, but faced headwinds from soft DIY demand and product rationalization. Adjusted EBIT grew due to MAP improvements and SG&A optimization, despite reduced fixed cost leverage from lower volumes and temporary inefficiencies. M&A contributed to salesPricing to recover inflation contributed to salesSoft DIY demand partially offset salesProduct rationalization partially offset salesMAP operational improvements contributed to EBIT growthSG&A focused optimization contributed to EBIT growthReduced fixed cost leverage from lower volumes offset EBIT growthTemporary inefficiencies from facility closures and transitions offset EBIT growthM&A integration added to EBIT growth	Record	—	—	Adjusted EBIT grew
Europe Sales grew over 20%, primarily driven by M&A and favorable FX rates, though organic sales contracted due to economic activity challenges and a focus on margin improvement. Driven by M&ADriven by FXOrganic sales contracted	—	Over 20%	—	—
North America Sales grew 6.3%, primarily driven by increased demand for high-performance building solutions and aided by M&A. Driven by increase in high-performance building solutionsAided by M&A	—	6.3%	—	—
Emerging Markets Growth was led by Africa and the Middle East, driven by success in high-performance building and infrastructure projects. Growth led by Africa and Middle EastSuccess serving high-performance building projectsSuccess serving infrastructure projects	—	—	—	—

Orderbook & backlog

Performance Coatings Group Backlog Solid Q3 FY26

Maintained

Shift from larger projects to more small, medium-sized projects, which is good for margins.

Construction Products Group Backlog Growing Q3 FY26

Growing

Growing in roofing, waterproofing, and building envelope areas. HVAC restoration business also growing nicely.

Deals & partnerships

Kalzip Purchase of a leader in high-performance metal roofing and facade options.

Expands CPG's system offerings. Kalzip is a German-based leader, mostly European-based, with plans to bring products into the U.S.

Capital programs

MAP 3.0 Strategic Plan Under development

Benefit:New long-term strategic plan

Development is far along, expected to be completed by summer and presented to the Board in July, with public details sometime in the fall. Fiscal '26 will be the base year for the forecast out to 2030.

Risks & headwinds

Geopolitical volatility and raw material inflation Q4 FY26 and Q1 FY27

Raw material inflation of 1-2% in Q4 FY26, increasing to mid- to high single-digit range in Q1 FY27. Raw materials represent ~60% of COGS.

Mitigation:Leveraging contracts, FIFO accounting, multiple suppliers, strategic long-term supplier relationships, and implementing price increases. Center-led procurement team execution.

Continued soft DIY demand Ongoing

Negative organic growth in Consumer Group for four consecutive quarters.

Mitigation:Reallocating assets towards highest growth opportunities, maintaining financial discipline, adjusting expense base, focusing on growing categories, and driving consumer purchases more effectively.

Temporary inefficiencies from plant consolidations Expected to be completed by Fall (Q2 FY27)

Over $6 million in Q3 FY26 (2/3 Consumer, 1/3 Construction Products).

Mitigation:These are temporary impacts from strategic actions to optimize operations and improve long-term profitability.

Rising health care costs Ongoing, expected to stabilize somewhat in FY27

Up $4 million in Q3 FY26.

Mitigation:Decision to add weight loss drugs to program, believing it will have a positive long-term effect on costs.

Europe organic sales contraction Q3 FY26, ongoing

Europe sales grew over 20% driven by M&A and FX, but organically contracted (not quantified, but not meaningfully down).

Mitigation:Focusing on margin improvement through production and distribution consolidation.

Middle East supply disruptions Q4 FY26 and beyond

Immediate impact seen, March strong but not expected to continue in Q4 due to inventory burn and raw material supply challenges.

Mitigation:Strategic approach to developing world, but acknowledging this specific regional challenge.

What to watch in Q4 FY26

Raw Material Inflation Trajectory

Q1 FY27

Current 1-2% in Q4 FY26

Target Mid- to high single-digit range in Q1 FY27

Why it matters

This will significantly impact profitability and pricing strategies, especially given the geopolitical volatility.

As Frank mentioned, we currently anticipate fourth quarter raw material inflation will be in the 1% to 2% range with mid- to high single-digit inflation expected in the first quarter of 2027.

Find out whether RPM delivers this. Inve re-checks your case every morning.

Q&A highlights

What market conditions would lead to the low vs. high end of the mid- to high single-digit inflation guidance for Q1 FY27?

Management stated that volatility in the Middle East is the key factor. A period of stability could lead to modest mid-single-digit inflation, while continued conflict could result in high single-digit inflation. They are confident in supply stability but acknowledge that an escalation in the Middle East could change this.

“There's a scenario in which we would have modest mid-single-digit raw material growth. There's a scenario in which we will have high single-digit inflation. And so TBD, depending on volatility in the Middle East, the one thing that we're very confident in as we look out over the next 6 months is stability in supply.”

asked by Matthew DeYoe · answered by Frank Sullivan

2 min read 6 chapters

Detailed narrative

Operational Excellence and MAP Program

RPM's operational improvement initiatives, including the Green Belt program, have generated over $50 million in savings with an additional $30 million in the pipeline. SG&A-focused optimization actions, announced last quarter, contributed $5 million in savings in Q3 FY26 and are expected to yield $20 million in Q4 FY26.

These actions aim to enhance agility, customer service, and accelerate growth, with significant changes occurring in the Consumer segment.

Geopolitical Impact and Raw Material Management

The Middle East conflict has caused supply chain disruptions and increased raw material costs, which represent approximately 60% of RPM's cost of goods sold. While North America (70% of sales) is less affected, Europe and South America (20% of sales) are experiencing meaningful inflation.

RPM leverages existing contracts, FIFO accounting, multiple suppliers, and strategic relationships to mitigate these challenges, with supply generally remaining good except for limited disruptions in the Middle East.

Strategic Focus on Maintenance, Restoration, and Energy Efficiency

Approximately two-thirds of RPM's sales are derived from maintenance, repair, and restoration solutions. This focus allows end-users to extend asset life and improve performance at a fraction of replacement cost, proving to be a key differentiator during economic volatility. The company also offers solutions for energy-efficient structures, such as Nudura insulated concrete forms and Dryvit exterior insulation systems, which lower operating costs and provide environmental benefits.

Consumer Segment Reallocation and Leadership Change

The Consumer Group is undergoing a transformation under new President Don Harmeyer, reallocating assets towards high-growth opportunities and maintaining financial discipline. Despite M&A and pricing efforts, the segment continues to face soft DIY demand and product rationalization. Management acknowledges the need for a different approach, focusing on growing categories and driving consumer purchases more effectively, rather than waiting for market recovery.

Construction Products Group Momentum

The Construction Products Group achieved record sales with broad-based strength, particularly in North American roofing solutions, wall systems, and concrete admixtures. This success is attributed to a strategic shift towards turnkey and system solutions, direct selling on major projects (now 60% direct vs. 40% a decade ago), and strategic small acquisitions like Kalzip.

The segment is building solid momentum through system selling and expanding product lines.

Cash Flow and Liquidity

RPM generated $656.7 million in cash flow from operations year-to-date, the second-highest in company history. This strong cash generation has supported $255.3 million in shareholder returns (dividends and share repurchases) through the first nine months of the year. Liquidity remains robust at $1.02 billion, providing financial flexibility for M&A, including the recent acquisition of Kalzip.

The revolving credit facility was extended to February 2031, maintaining its size at $1.35 billion.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.