Q1 2022 RPM International Inc Earnings Call
Yeah.
Ladies and gentlemen, this is the operator today's conference call is scheduled to begin momentarily until that time your lines will again be placed on music hold thank you for your patience.
[music].
Welcome to today's RPM Internationals conference call for the fiscal 2022 first quarter.
Today's call is being recorded this call is also being webcast and can be accessed live or replay. It on the RPM website at Www Dot R. P. M I N C dot com.
It's made on this call may include forward looking statements based on current expectations, they involve risk and uncertainty which.
Which could cause actual results to be materially different.
For more information on these risks and uncertainties. Please review Rpm's reports filed with the SEC.
During this conference call references maybe made to non-GAAP financial measures to assist you in understanding. These non-GAAP terms RPM has posted reconciliations to the most directly comparable GAAP financial measures on the RPM website.
Following today's presentation, there will be a question and answer session at which time if you wish to ask a question you will need to press Star then one on your telephone. Please note that only financial analysts will be permitted to ask questions. At this time I would like to turn the call over to Rpm's, Chairman and CEO, Mr. Frank <unk>.
Allison for opening remarks. Please go ahead Sir.
Thank you Tammy.
And welcome to the RPM International Inc, Investor call for our fiscal 2020 to first quarter.
Joining me on today's call is Rusty Gordon Rpm's, Vice President and Chief Financial Officer, and Michael Roche, who will become our vice President controller, and Chief Accounting Officer effective November one.
Mike was previously the CFO of our specialty products operating our specialty products group operating segment.
Succeed Keith Smiley, who will be retiring at the end of the month after nearly 30 years of distinguished service to RPM.
I'll begin by sharing broad commentary on our performance for the quarter. Mike will then provide details on our financial results and Rusty I'll conclude our formal remarks with comments on our outlook for the second quarter of fiscal 2022.
Our comments will be on an as adjusted basis unless otherwise indicated.
Please note that we provided a supplemental slide presentation to support our comments on this call. It can be accessed in the presentations and Webcasts section of the RPM website at Www Dot RPM, Inc. Dot com.
After our formal remarks, we'll be pleased to take your questions.
As you can see on the third slide of the presentation. Our results this quarter demonstrate the benefits of our balanced business portfolio.
Where softness in one segment is typically offset by strength in others.
For the first quarter of fiscal 'twenty, two three of our four operating segments. Our construction products group performance coatings group and specialty products group generated solid sales and adjusted EBIT growth.
Combined sales in these three segments increased more than 15% and their adjusted EBIT was up more than 14%.
This performance was especially notable in light of the raw material shortages and supply chain disruptions and inflation all of our segments and businesses are facing.
Due to this supply disruption we lost the equivalent of nearly 300 production days across RPM facilities around the globe during the 2020 to first quarter.
More days that were lost due to COVID-19 related shutdowns in last year's first quarter.
We estimate the negative impact on consolidated sales during this first quarter was about $200 million.
Due to these challenges and disruptions over half of which occurred in our consumer segment.
This was about double the negative sales impact we experienced in the fourth quarter of fiscal 'twenty one.
Sales and earnings for our consumer group decreased during the quarter as a result of these factors as well as a difficult comparison to the prior year period, when sales increased on an organic basis by 34% and adjusted EBIT was up 122%.
These growth rates in the prior year period were largely driven by extraordinary DIY demand during the pandemic.
All indicators suggest that the underlying demand for our consumer products is still strong and the supply and that the supply of material disruptions. This segment is currently experiencing are temporary.
During the first quarter and early in the second quarter, we made strategic growth investments in our businesses.
And as you can see on slide four among these were the recent acquisitions of Dudek pure air and a recent purchase of a large manufacturing facility in Corsicana, Texas.
Acquired in June <unk> will allow our carbon line business has strengthened its position in the secondary containment linings market.
As an established and trusted product line, while simultaneously opening the door to expanded sales and future growth opportunities around the globe.
Pure <unk> was acquired in August and provides indoor air quality service and is complementary to our <unk> roofing and <unk> business.
We intend to swiftly scaled pure air by leveraging <unk>, North American sales force strategic partnerships and operational infrastructure.
Also on this slide Youll see an image from the 178000 square foot plant, we purchased on a 120 acres in Texas.
This will serve as a manufacturing center of excellence for multiple RPM businesses.
Plant is fully operational has an experienced operating team that will allow us to add long term resilience and our supply chain improved fill rates and more easily expand production of a number of our high growth product lines in the coming quarters and years.
From a more long term macro viewpoint, there are a number of market opportunities and industry trends.
That we are well positioned to capitalize on for continued growth and success.
Among them are market opportunities on slide five are the following.
The increasing need for investment in infrastructure with spending estimated to be two eight trillion dollars globally, our performance coatings group and construction products group have a vast array of products and services to meet this need.
The new Diyer as pandemic, who continue to tackle home improvement projects with both our core product ranges and expanding sales and relatively new categories like abrasives and architectural coatings.
The continued growth and more holistic connected building envelope such as those provided by our construction products group, which make structures more air tight weather tight and energy efficient.
And the demand for wall systems like those that could be constructed using insulated concrete forms made by our new <unk> business. They make building stronger more energy efficient and reduced construction cycle time and labor.
Industry trends benefiting RPM include nesting by consumers, who are making more home improvements.
<unk> re openings, requiring more maintenance repair a need for building owners and facility managers to consolidate their construction management to a single source and a greater desire for energy efficient driven by both the cost benefits as well as the desire to minimize environmental impacts RPM is well positioned to meet and grow with.
All of these trends.
I'd now like to turn the call over to Mike Laroche to discuss our segments financial performance during the quarter.
Yes.
Thanks, Rick and good morning, everyone.
Turning to slide six on a consolidated basis, our sales increased to a record $66.0 billion up two 7% over a strong fiscal 2021 first quarter, which grew nine 1% largely due to the unprecedented demand for our consumer groups home improvement products during the pandemic.
The growth was two 1% from recent acquisitions and one 6% due to foreign currency translation tailwind more than offsetting an organic sales decline of 1%.
Adjusted diluted EPS of $1, eight decreasing 25% compared to the prior year periods extraordinary adjusted diluted EPS growth of nearly 52%.
Our consolidated adjusted EBIT of $214.0 million decreased 23, 2% due to supply chain challenges inflation and the consumer groups tough comparison against the prior year.
If you look at our consolidated results on a double stack basis that compares to the first quarter of fiscal 2022 to the pre pandemic first quarter of fiscal 2020, our sales EBIT net income and diluted EPS. All showed strong growth. This indicates that last year's results were a bit of an anomaly created by the <unk>.
Downtick that we are now getting back to a more steady level level of performance across the business.
Raw material shortages and inflation continue to be serious challenges in order to protect our margins. We are continuing to implement price increases where appropriate across all our segments. We also continue to benefit from incremental cost savings, resulting from our recently concluded map to growth operating improvement program.
It continues to pay dividends as we generate further operational efficiencies in our manufacturing procurement and administrative business functions.
Moving on to slide seven our construction products group was our fastest growing segment in the first quarter generating record sales and record adjusted EBIT.
Ganic growth of 15% was particularly impressive given that nonresidential construction put in place a relevant market indicator for this segment is down 11, 6% this calendar year.
Nearly all of the CPG businesses experienced strong top line performance.
Partially by focusing on growing markets, such as technology and distribution.
CPG businesses that performed particularly well where those that provide commercial roofing systems concrete admixtures and repair products and insulated concrete forms the.
This segment's European operations generated double digit topline growth due in part to the comparison to last year's first quarter when shelter in place requirements for most severe.
Earnings increased due to market share gains operational improvements cost controls and selling price increases, which offset production inefficiencies due to supply chain disruptions and cost increases.
On slide eight you'll see that sales recovered at our performance coatings group as they increase that nearly all of its major business units.
Really aided by comparisons to last year's first quarter went to pandemic restrictions did not allow contractors on work sites and poor energy market conditions led to deferrals and industrial maintenance spending.
Sales were strong at the recently acquired Bison, which is a manufacturer of raised flooring systems.
We also experienced strong growth in emerging markets and in industrial maintenance outside of the energy sector. It was encouraging to see EBIT growth outpacing sales in spite of inflation because PSEG has been a segment that has been most heavily impacted by the pandemic.
Earnings were boosted by improved pricing incremental savings from operating improvement initiatives and two recent acquisitions.
Turning to slide nine our specialty products group produced record topline growth largely driven by its businesses, providing marine coatings powder coatings wood stains and Sealers and disaster restoration equipment.
Earnings increased due to higher sales volumes and incremental operating improvement program savings, which were partially offset by high raw material inflation inefficiencies associated with supply chain disruption and investment in SG&A for future growth initiatives and response SPD businesses are continuing to institute price increases.
<unk>.
Next on Slide 10, our consumer group faced a tough comparison in the prior year for the reasons as Frank mentioned earlier during the first quarter of fiscal 2022. This segment experienced a negative sales impact of roughly $100 million.
From production outages due to supply constraints and disruptions.
However, the consumer group's fiscal 2022 first quarter sales were $12, 3% above pre pandemic levels of the first quarter of fiscal 2020.
And in spite of the negative sales impact from supply chain challenges during the current year.
There is pent up demand for our products and inventory in many of our channels sort of LOE, we expect to recover the lost sales when conditions normalize.
Earnings declined during the first quarter of fiscal 'twenty, two as a result of inflation in materials freight and labor as well as the unfavorable impact of supply shortages on productivity.
These factors were partially offset by price increases and savings from our operating improvement program.
We are proactively building resiliency in our supply chain to secure raw materials required today and in the future. In addition, we are adding manufacturing capacity to serve new DIY demand.
While this additional capacity is being established in the near term we are using contract manufacturing at higher costs to meet customer demand.
Now I'll turn the call over to Rusty to discuss our outlook. Thanks, Mike.
I'll now move on to slide 11.
As we look ahead to our fiscal 2022 second quarter, we anticipate that raw material freight and wage inflation will persist as well the raw material shortages and supply chain challenges we have been experiencing.
In addition, we face another difficult comparison to the prior year when sales on a consolidated basis increased 6% and adjusted EBIT increased nearly 30% driven by a 66% increase in the consumer segment's adjusted EBIT.
We anticipate these factors to be partially offset by price increases operational improvements and new manufacturing capacity.
We expect our fiscal 2022 second quarter consolidated sales to increase in the mid single digits. Our construction products group performance coatings group and specialty products group are anticipating double digit sales growth our consumer group is.
Two experienced a double digit decrease in sales due to continued raw material shortages and a difficult comparison to the prior year period, when pandemic fueled demand rapidly drove organic growth up 15%.
However, in a similar similar manner to the first quarter, we expect the consumer segment second quarter sales to be above its pre pandemic level, which is a fair comparison.
While underlying demand remains strong for our products and services, we still face material shortages and inflationary pressures. So adjusted EBIT is expected to be down 15% to 25%.
Our Q2 results will be directionally similar to Q1 with significant year over year declines again in our consumer group, which is still lapping tough comparisons and double digit sales and earnings increases for our other three segments in aggregate.
Turning to slide 12, moving forward, we intend to maintain the positive momentum created by our operating improvement Graham as we complete its remaining projects.
Such as the one plant closure completed during Q1 of F. 'twenty two.
Leverage resources across RPM to manage supply chain issues and meet customer demand <unk>.
Identifying new opportunities for efficiencies through our continuous improvement culture and make investments in growth opportunities including capacity expansions.
This concludes our formal comments, we will now be pleased to take your questions.
Thank you at this time to ask a question. Please press star followed by the number one on your telephone keypad.
First question comes from the line of Ghansham Panjabi with Baird.
Good morning, guys hitting everybody.
Morning, Frank.
In the comments on the on the construction side.
You noticed that you noted that sales were very strong despite the indicator in terms of construction put in place are being down significantly. So far this year is that dynamic an issue as we look out over the next six months or so in terms of maybe an air pocket in demand or do you not see that at this point.
No I think youre going to continue to see strong performance there and its really a combination of how our leadership team has positioned our construction products group and I'll just give you a couple of examples.
As you know our <unk> business has been the leader in roof restoration coatings.
<unk>.
These are allowing for the expansion or continuation of the useful life of an old roof by.
Another 10, 15, 20 years and a third of the cost.
And to the extent that we can get resins for these roof restoration coatings and we're shifting between typical Petro case.
Petroleum based resins, which in some instances are in short supply.
And more organic resins and bio based resins.
Allowing us both an advantage in a growing area and also in an advantage where in today's market carrying off a roof and waiting for all the components and in some cases, particularly foam based insulation is a problem. So I think our position in roof restoration coatings.
Is providing us somewhat of an advantage in this material constrained environment.
Other area is in the <unk> waterproofing sealants business they've been the leader in facade restoration.
Manner that allows systems to be used to.
Renovate and repair besides without pulling out windows and other construction components and again because of the <unk>.
Component and supply challenges that we're facing across construction materials, we're seeing some advantage there as well. So those are just two examples I would expect in the second quarter and beyond not only will we see double digit sales growth, but youll start to see modest margin expansion with EBIT growth at or.
We're slightly better than the sales growth in our construction products group.
Thank you Frank and then in terms of guidance I mean last quarter, you gave us guidance for both the first quarter and second quarter in the first quarter certainly came in line and obviously in the second quarter has been rebates just based on what's occurred in costs.
<unk> scheduled to be et cetera.
Can you help us think about the outlook for the back half of the year in terms of the cost inflation trend line the <unk>.
<unk> loss progression from a dearth of raw materials.
Just give us a high level view in terms of what you know at this point and how we should kind of see the full year unfold.
Sure so.
For inflation today.
We anticipate for the full 22 fiscal year overall inflation to be somewhere in the high teens call. It 17.18, 19% today as we sit here year over year inflation includes labor and freight, but mostly material driven is 30% higher.
And a lot of that's driven by materials couple of examples that you would be familiar with Apache resins are double what they were a year ago asset tones up 90% MDI is up 80% alkyd resins are up 50% and that's to the extent that we can get them as you know there's been shortages, particularly related to a plan.
Explosion of a primary north American alkyd resin producers.
Producers. So that's the environment that we see today there is a broad range on our outlook for Q2 and.
I think all of these things are foreseeable the impact is not as foreseeable so the thing that we're focused on now the most is what's happening in China.
And some combination of it.
Trade fight with Australia around coal and I think efforts to maybe clean.
Cleanup air pollution in front of the.
Winter Olympics are resulting in currently in estimated more shutdowns of industrial production and power.
And so that's certainly going to have a negative impact on the downstream chemical supply as well.
Yes.
Thanks, so much Frank.
Thanks Ghansham.
Your next question comes from the line of John Mcnulty with BMO capital markets.
Good morning, John.
Hey, good morning.
On for John help that's alright.
Sure Hey, Caleb.
So clearly there are some supply chain issues and I know you had previously mentioned the $100 million impact to ball by consumer and I believe the total impact of $200 million.
And I was just wondering if you could quantify the impact of that in Q2, and I know you had said.
That one just supply chain issues, there would be a snapback, but I was just wondering how quickly youre expecting that snapback in demand to occur at the Warner.
Two year timeframe market's a little bit longer than that.
Yes in terms of Q2.
It looks now kayla its going to be pretty similar to Q1, we would expect.
Again, roughly $200 million of sales loss.
And theyre not in lost sales I should clarify those are most all deferred sales.
On the consumer side, if people have a paint project. They are eventually going to have to paint. It. Even if we are out of stock on a particular color in a given moment and on our industrial type businesses. Most of these products are specced and these are projects that are moving forward. So if we have some.
Play availability issues, most likely our competitors do and these projects will continue.
Okay. Thanks for that and then can you speak to any thoughts on map to point out is the types of opportunities youre seeing that.
And how you could look to scale those in the future.
Sure I think.
The most obvious ones there are in the manufacturing area.
Instituted the <unk> 106, eight lean.
Our lean manufacturing and continuous improvement measurements and disciplines.
And there are still 60 small to medium sized manufacturing facilities that we have not gotten too.
Because of the interruptions of Covid, it's pretty intensive hands on on the factory floor process and so.
Would expect that there'll be tens of millions of dollars of benefits there as we can get to it.
There is some more in procurement, but not nearly the extent of what we experienced in the first round of map to growth and then there'll be some elements I will tell you that they're providing details on this and really quantifying. This has been interrupted by this global supply chain issue.
Into our plants, but.
The literally week to week and month to month fight on supply chain is occupying our focus.
We will see some easing up in some of our primary resins, we think going into November and certainly into this spring. Some of that is is finding alternative suppliers <unk>.
Some of that will be from the Corsicana, Texas facility that we acquired where we're standing up some critical resin production and so we're moving in the right direction there and.
And so we will have more to say on a map to grow two point out but.
Our detailed communications on that are going to be delayed until.
We really feel like we've got the supply chain challenges.
I wouldn't say behind us but.
A little better managed than they are today I mentioned earlier on the call the challenges in <unk>.
China that we're seeing that's likely to impact silicones and a more meaningful way in silicones have already been impacted today as well as some other critical raws so.
There continue to be circumstantial elements, whether it's hurricanes are winter storms or now it's coming in China that exacerbate in already global supply chain challenge, it's not unique to our industry.
Okay. Thank you for that.
Sure.
Your next question comes from the line of Vincent Andrews with Morgan Stanley.
Good morning, Steve Haynes on for Vincent.
Just want to ask a quick question on pricing and if you could provide an update there as to what realization was in the quarter and kind of what youre expecting for the back half as well.
Sure.
So for obvious competitive reasons, we're not going to get into pricing by segment or business, but I can tell you. The numbers that we would provide here on a consolidated basis are generally accurate plus or -50 basis points for most of our different businesses.
And this relates to pricing that we were able to affect in the spring and then a second round of pricing across most of our business is at the end of the summer early fall.
So on a consolidated basis in Q1.
Price had an impact of about four 5%.
The effect and this is the effect of the pricing that we have.
<unk> instituted.
Again in the spring or in the fall some of which is coming online. This does not anticipate the need for additional price increases, which time will tell relative to the supply issues. So Q1, four 5% on a consolidated basis Q2 should be about seven 5% and.
All things being equal, which is a very loose statement relative to the supply chain issues.
Youll see the impact in the second half of the year somewhere in the 8% to 10% range.
Okay. Thank you and then just a follow up on cash flow.
Thank <unk>.
<unk> kind of took a sizable hit year on year, and obviously last year probably.
Maybe a little bit stronger than usual.
You called out inventory, specifically, but there are some other working capital headwinds as well can you just provide some color there and how youre thinking about working capital and Capex you said in the back half.
Yeah sure in terms of last year, we had.
Strong demand in our consumer DIY business, and we were able to meet that demand really buy.
Pulling sales out of inventory and converting inventory to cash so we have an excellent.
First quarter and if you turn to this year, it's the opposite of course for consumer.
Or a declining in sales and.
The inventory has been drawn down right now, we're actually trying to build inventory to try to improve fill rates and service levels. So from a working capital perspective, that's really the main driver and that team does apply as well across our other three segments.
Well are trying to build resiliency and build inventory where possible because we seem to have supplied shocks happening pretty regularly and if you look at our track record of late.
Thank you.
Youre welcome.
Your next question comes from the line of Josh Spector with UBS.
Good morning, Hey, good morning, Frank and everyone else. Thanks for taking my question.
Just on the consumer products side, I mean, you guys continue to maintain the stance about demand being strong and you guys. Obviously aren't the only ones, saying that in that channel just curious what data youre seeing and maybe specifically.
What percent of your Skus, what would you say are out of stock versus low stock sofas in stock, maybe somebody who would be buying or if that's not the data youre looking at what are you. What are you seeing that gives you confidence there.
So we're in part seeing comparisons to the pre pandemic levels in terms of units, which is still strong up high single digits or low double digits.
And I won't get into specific fill rates by customers, but historically, we've been at 90, 899% fill rates and neither we or any of our competitors are close to that.
And if we were close to that.
In terms of consumer takeaway and what we're unable to supply because of the global supply chain disruptions.
I have high confidence would move off the shelves and Thats an issue. It's a problem for us it's a problem for our customers.
We're addressing it in ways that we think are.
Competitively in a good position.
And we're also confident that as we resolve some of these resin issues and can.
Can get fill rates back to closer levels.
Youll see a nice pickup in revenue growth, but that's the principal reason behind the $200 million of estimated loss sales in the quarter half of which was consumer its literally not being able to meet demand and that being close to the historically.
Excellent and expected fill rates.
Okay. Thanks, that's helpful and just in terms of the new Texas facility and you guys have continued to talk about the consumer need to outsource production curious what that cost was in this quarter and if you could just remind us maybe on the prior quarters and does that facility address that.
Entirely or is that a separate issue from what youre doing with that facility.
No.
I don't have a specific answer for the cost other than.
We're outsourcing.
Significant.
Phil filling in some areas. The other issue is and we've talked about this before one of our principal suppliers had a plant explosion and they were a provider of about 30% of alkyd resins to North America, and a significant supplier to us and alkyd resins is a more meaningful resin.
Two rust Oleum, then it might be to some of our architectural paint competitors. So we are working with them on outside colors. We are standing up day by day more capacity, we're not where we need to be yet, but we're confident we'll get there in the next month or two but at a substantially higher cost.
So as we can get back to a normal supply base and as we can address a portion of that but not not the majority of it.
In our new plant.
First and foremost, we will get back to being able to meet demand and get back to fill rates that we all desire and then you'll see the profitability issue addressed as well.
Okay. Thank you.
Our next question comes from the line of Kevin Mccarthy with vertical research.
Good morning, Kevin.
This is corey on for Kevin.
Going back to the $200 million impact of supply chain and raws it sounds like the $100 million in consumer was mostly shortage related I was wondering if you could breakout the other $100 million.
By segment or by what type of pressure it was whether it was.
Supply chain issues or shortages or.
Just raw material availability.
In every case, it's shortages it is.
For instance, in our construction products group is strong as their revenues were in the quarter.
We certainly missed tens of millions of dollars of volume there.
And you.
You really have to trace it back to the supply chain. So there were a number of instances where a critical intermediate chemical to one of our suppliers inhibited those suppliers from providing us resins.
Our roof coatings business and we're always overcoming this now but in the first quarter, we literally had weak long plant shutdowns, while we were waiting for raw materials.
And so in that case, we are making that up because we've solved that issue.
But you are seeing rising.
Cost and some availabilities in silicones, you've seen or the acrylic resins youre seeing it in alkyd resins and in some cases it is a shortage like in alkyd resins of a direct raw material, which we purchase in many other cases.
It is a critical element of our suppliers' production that's inhibiting their ability.
Two to deliver their products timely to us.
And so it impacted construction products in the first quarter I think we've overcome most of that.
We anticipate unfortunately disruptions and silicones because of the issues on China, I mentioned that will negatively impact our consumer and construction products group, but it's incorporated into our outlook.
Okay. Thank you very much for that.
You had mentioned that.
You had done some contract and tolling manufacturing can you can you talk through that on a dollar margin basis and any detail you can provide.
No we haven't provided the detail on that other than to say if you look at our gross margins in consumer or gross margin RPM in general.
The biggest decline of the RPM gross margins in the quarter.
Driven by our consumer group.
And you can see it in the EBIT.
Which is down dramatically and a huge chunk of that is gross margins because of material and it's not only higher material costs, but it's substantially higher conversion costs because of outside tolling and because of the disruptions in the supply chain. So the other issue that has increased substantially particularly in consumer.
Is freight.
And so historically, where we would be shipping only truckloads of stuff, sometimes we're shipping less than truckload.
Disruptions to incoming supply and those chemicals are elements that we get from China I think it's no secret to folks that you've got a huge backlog in the long Beach port.
So there are a multitude of reasons why the disruptions have happened that resulted in the shortfall of sales that we're talking about.
Got it much appreciate it thank you for the color.
Thank you.
Again to ask an audio question. Please press star one on your telephone Keypad. Your next question comes from the line of Steve Byrne with Bank of America.
Good morning.
Hi, Good morning. This is Luke washer on for Steve.
Wanted to touch.
Just quickly again on raw materials. It sounds like a lot of the headwind is due to raw material availability, but as you think of just rising cost generally and I appreciate some of the detail around MDI and proxy resins.
But it's interesting because I would assume that a lot of those higher priced.
<unk> or going into more of your construction products and performance coatings segments.
I think margins have been much more resilient. So I guess when you think about the higher cost in those segments offsetting maybe by some of your map to growth initiatives, and perhaps acquisitions or mix shifts.
Do you think that it is.
Largely just due to that mix shift in map to growth offsetting raw materials or raw materials still a big headwind in those segments.
So raw materials are still a big headwind in those businesses, but they're.
We are talking about map to growth savings, they're real and I think we had talked in the spring about $50 million Rusty for the fiscal year, Oh, Yes, yes follow on many savings and they are real.
It's hard to see them for exactly the reason that you are talking about so we have follow on map to growth savings.
We don't have the conversion cost disruptions in our other segments that we have in consumer.
So we're not facing that.
And and we have been effective in getting price increases and so those are the principal reasons why we don't have the same.
Deterioration, particularly in our construction products group.
Our performance coatings group and the EBIT margin that youre seeing in consumer.
Okay.
Helpful. And then on the supply chain are you thinking about your supply chain, a little bit more differently, given the disruption that youre seeing today and also just from the pandemic and does that impact your decisions going forward on map two point, though and.
And your Texas manufacturing plant, which it sounds like it's going to create more resilient from your supply chain. So are you thinking about your supply chain differently and what do you expect to kind of deal with that going forward.
On the market, it's a great question and on the margin, we aren't thinking about it differently and so.
This of course, we cannot Texas plan is allowing us to extend what we have been doing with arnett polymers, which has been a great.
Asset for RPM in this mix there a producer of specialty polymers for our businesses.
And of course, we cannot gives us the same type of capacity, but.
Times five if you will.
And so that is a part of the answer.
Our core customers I'm, sorry, our core suppliers in our supply chain isn't changing.
We are sourcing some raw materials.
Offshore that previously we had not been so we're learning more about.
Global supply and we're working hand in hand, with a lot of our largest suppliers on how to manage our way through this so I think the and this is true across the supply chain the level of cooperation and efforts to try and solve these issues.
It's pretty remarkable given.
What's happening and so.
That's kind of the best answer I have for you today and hopefully it will be better a quarter from now, but it's pretty dynamic stone.
Very helpful. Thank you Frank.
Your next question comes from the line of David Page with RBC.
Good morning, Hey, this is good morning, Hey, this is David <unk> on for Arun Viswanathan of RBC.
Sorry, if this was asked we already but can you guys just remind us what your top use of cash is for the next six to 12 months and if you have any plans to return capital to shareholders. Thank you.
Sure Yes.
Ben.
Going back shares since we got out of the depths of Covid, we have repurchased $62 million of stock.
In the.
The winter time.
In terms of capital expenditures, we do have a lot of projects are.
Revenues and volumes are growing in a number of our businesses. So we have a lot of capacity expansion going on and we have increased the acquisition flow. We have had a number of small deals close and that has picked up as well since the pandemic. So those are.
Probably the principal areas for capital allocation to.
Two areas that will impact cash most of this year, we've talked about one is capex, which I think year over year will be up what Rusty 50.50.
<unk> 50 million Bucks higher than last year, and all of that's for capacity expansion and that's on that's in addition to the Corsicana, Texas plant acquisition, which is while it was an acquisition of manufacturing assets is really an extension of capital expansion.
And then the other area will be working capital both in comparison to a very strong cash flow.
Impact positive impact from working capital last year and building inventories.
Where we can in key areas.
As one key element of addressing this global supply chain issue.
Thank you.
Thank you.
And there are no further questions at this time I will turn the call back to Frank Sullivan for closing remarks.
Thank you.
Tomorrow at two PM Eastern time, we will hold our annual meeting of shareholders. The meeting we will again be held virtually this year in order to protect the health and wellbeing of our shareholders and employees.
It can be accessed via the RPM website at Www Dot RPM, Inc, dot com or at Www Dot virtual shareholder meeting Dot com.
Forward Slash RPM 2021.
We are optimistic that we'll be able to return to an in person meeting next year. So we can resume our tradition of engaging with nearly 1000 of our shareholders and providing them samples of rpms latest products and answering their questions in person.
I'd like to thank our shareholders for their ongoing investment in RPM, we remain focused on generating long term value for you.
I'd also like to thank our associates worldwide for their continued work and dedication, particularly during these extenuating challenging circumstances around the global pandemic and now global supply chain challenges.
Speaking of dedication I'd like to take a moment to recognize two retirements at RPM.
Keith Smiley Rpm's, Vice President of Finance and controller will retire this month after nearly 30 years of service.
When he started at RPM and $111.0
Was our internal audit department.
He subsequently became corporate controller at <unk> 93, and Treasurer at $116.0, and was elected Vice President Treasurer, and assistant Secretary of $118.0, and Vice President controller in 2012.
Kathy Rogers Rpm's manager of Investor Relations will officially retire this Friday after nearly 40 years of service to RPM.
Kathy has been the voice and face to our nearly 200000 individual shareholders throughout most of that time.
When Kathy joined RPM revenues were $154 million when Keith joined RPM seven years later revenues had grown to 550.
Both Cathy and Keith had been integral parts of the team responsible for generating a lot of growth and a lot of value creation for our shareholders represented by the $6 billion in revenues today, and the nearly $11 billion in market cap.
On behalf of RPM, I wish Keith and Kathy all the best in their well earned retirement.
On the call I wish you and your families. Good health and we look forward to updating you on our fiscal 2022 second quarter results in January. Thank you for joining our call today and have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect.
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