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RPM says overhead held margin as costs outran price; adjusted EBITDA growth guided to mid-single digits

RPM met its first-quarter sales and adjusted EBITDA guidance, with the company crediting overhead leverage while raw material cost outran price; it now guides full-year adjusted EBITDA growth to mid-single digits from 5-10% and expects higher inflation next quarter.

Published · Inve Research Desk

RPM International stock page → More news from Oct 10, 2026

Pails of paint on a conveyor in a coatings plant
Illustration: Inve Research Desk

9-11%

second-quarter raw material inflation now expected

Up from 6-8% in July; the CFO said the outlook must now offset inflation that has risen since July.

How they did last quarter

RPM met its July guidance for sales and adjusted EBITDA, but gross margin slipped, the company says overhead leverage filled the gap, and Construction Products missed.

  • Net sales
    $2,215.6 million, up 4.8% on a year ago
    vs July guidance: "In total, we expect sales to increase in the mid-single-digit range."
    Met: growth landed inside the guide, helped by the stronger Performance Coatings segment.
  • Adjusted EBITDA
    $405.5 million, up 4.5%; margin 18.30% against 18.36% a year ago, by our arithmetic
    vs July guidance: "we expect adjusted EBITDA to increase in the mid-single-digit range"
    Met; the company says it held the margin by leveraging SG&A while gross margin fell.
  • Construction Products sales
    $859.2 million, up 0.8% (organic sales down 1.7%); adjusted EBITDA down 9.7%
    vs July guidance: "all segments expected to grow in the mid-single-digit range"
    Missed: the largest segment barely grew and its profit fell.
  • Gross margin
    41.25%, down from 42.26% a year ago
    vs July guidance: "we expect price cost to be somewhat negative in the first half of the year"
    Consistent with July's warning on the margin rate: it fell 101 basis points as inflation's rate outran pricing's, though the CEO says dollars of inflation were covered.

A quarter that met guidance, then a changed year

RPM International's sales and its adjusted EBITDA, the company's chosen profit measure, both grew in the quarter ended in August, and both met the mid-single-digit growth management had guided in July. Then the year changed. Full-year adjusted EBITDA growth is now guided to mid-single digits, against 5% to 10% in July, which on our reading lowers the midpoint; an analyst on the call put the reduction at roughly $25 million at the midpoint, and management did not dispute it. The sales guide was narrowed.

The chief financial officer said the plan must now offset inflation that has risen since July, and named start-up costs at new facilities and harder second-half comparisons as further pressures; the chief executive, asked to break the change down, said it is partly a bet on when Construction Products recovers. On the call, management gave no figure for how much of the change came from each. The chief financial officer said raw material inflation expectations have risen since July, partly because shortages of polyurethane feedstock got worse. For the second quarter the company now expects inflation of 9% to 11%, well above July's guide.

Cost outran price; the company says overhead covered the gap

Gross margin, the share of each sales dollar left after making the product, was lower last quarter than a year earlier, 41.25% against 42.26%. The chief executive said so himself in his prepared remarks: "gross margins declined 100 basis points as the rate of raw material inflation outpaced pricing and MAP benefits in the quarter." He added that the company offset raw material inflation on a dollar basis, though not in rate terms.

Adjusted EBITDA margin held almost level; the company says it did so by leveraging overhead. Reported selling, general and administrative expense fell, but that includes an earn-out gain booked in the same line; without it the fall was $8.8 million, by our arithmetic. In the release, the line that holds a further gain on closed facilities is not given, so the fall is not a clean measure of saving. The company credits its own SG&A programme. Its phasing has changed: in April the chief executive said the savings would be spread relatively evenly across the fiscal year's quarters, but in July the chief financial officer said $25 million of it would land in the first quarter alone, a third of the year's total by our arithmetic.

Less relief in the guide; management sees margin rebuilding

In July management said price would trail cost in the first half and roughly catch up in the second, with inflation at its highest early in the year. Three months later the company has raised the peak. Its third-quarter inflation guide of 7% to 9% sits above the midpoint of July's second-quarter range, and the chief executive said the plan does not assume the Middle East conflict eases. Management's counter is that margin should improve sequentially through the year, and that second-quarter pricing should cover inflation in dollars a little better than the first quarter did. Whether price catches cost in the second half is what the guide asks a reader to take on trust.

There is a precedent in the filed numbers. Taking fiscal 2021 as the start, by our arithmetic gross margin fell more than three points the following year and passed its starting level only in fiscal 2024.

The second half has to do the work

Last quarter's growth was uneven. Construction Products, the largest of RPM's three segments, barely grew, with organic sales falling, against a July guide of mid-single-digit growth for every segment. The company now expects it to return to positive organic growth only toward the end of the year. Performance Coatings carried the quarter instead.

Now the sums for the year. By our arithmetic, if sales grow 5% for the year and 3.5% in the second quarter, the second half must grow about 5.8%, against tougher year-ago comparisons than the second quarter faces. The chief executive described the outlook beyond the next quarter as a guess: "So it's a little bit of a swag in the sense that I think we have some good visibility into Q2."

What we do not know yet

On the call, management did not say when the plant-consolidation costs end. In April the chief executive said the consolidations would be completed by this fall. The outlook given on 6 October still lists start-up costs at new shared facilities, and the chief executive left the timing to the investor day on 9 November. The calendar fall has not ended, so nothing has been missed yet, and start-up costs were already in July's outlook.

Companies tend to save their hardest questions for the event they host. A date for the detail is a fair answer, but it cannot be tested until the investor day.

RPM International stock page →

The record: notes, full financial tables

Notes

  1. Impact 4/5 Guidance Negative

    RPM now guides FY27 adjusted EBITDA growth to mid-single digits, from 5-10% in July

    RPM said on 6 October 2026 that full-year adjusted EBITDA will grow in the mid-single digits, down from 5% to 10% in July, which on our reading lowers the midpoint, and narrowed its sales guide from 3% to 7% to mid-single digits. It follows a quarter that met guidance: sales rose 4.8% and adjusted EBITDA 4.5% in August 2026. The CFO said the plan must offset inflation that has increased since July, and named start-up costs at new facilities and tougher second-half comparisons as further pressures. An analyst put the reduction at about $25 million at the midpoint, a figure that is the analyst's, not the company's.

    “So it's a little bit of a swag in the sense that I think we have some good visibility into Q2.”— Frank Sullivan, Chair and CEO

  2. Impact 4/5 Margin Negative

    RPM lifts second-quarter raw material inflation guide to 9-11% from 6-8%

    RPM now expects raw material inflation of 9% to 11% in the second quarter, up from 6% to 8% in July, and 7% to 9% in the third, citing worse polyurethane feedstock shortages and higher oil prices. Gross margin was 41.25% in the August 2026 quarter against 42.26% a year earlier. In July the company said price would trail cost in the first half and become more neutral in the second; on 6 October the chief executive said the plan does not assume the Middle East conflict eases. The chief executive expects price of 2.5% to 3.5% in the second quarter.

    “we now expect second quarter inflation will be in the 9% to 11% range, up from our previous estimate of 6% to 8%.”— Russell Gordon, Vice President and CFO

  3. Impact 4/5 Demand Negative

    RPM Construction Products sales rise only 0.8%; adjusted EBITDA falls 9.7%

    Construction Products sales rose 0.8% in the August 2026 quarter, with organic sales down 1.7%, against a July guide that had every segment growing in the mid-single digits. Adjusted EBITDA fell 9.7% to $166.2 million, including a $6.3 million warranty charge at a small European unit and a $4.4 million higher bad-debt charge from a customer bankruptcy. The company expects the segment to return to positive organic growth only toward the end of the fiscal year.

    “I think sequentially, you'll see an improvement in Q2 over Q1 in our Construction Products Group.”— Frank Sullivan, Chair and CEO

  4. Impact 3/5 Margin Mixed

    RPM says overhead leverage held its adjusted EBITDA margin level as gross margin fell

    RPM's adjusted EBITDA margin was 18.30% in the August 2026 quarter against 18.36% a year earlier, by our arithmetic, even though gross margin fell to 41.25% from 42.26%. RPM says overhead covered the gap: reported SG&A fell $13.8 million, or $8.8 million excluding a $4.9 million earn-out gain booked in the same line, by our arithmetic (in the release, the line that holds a further $10.8 million facility-sale gain is not given).

    “gross margins declined 100 basis points as the rate of raw material inflation outpaced pricing and MAP benefits in the quarter.”— Frank Sullivan, Chair and CEO

  5. Impact 3/5 Demand Positive

    RPM Performance Coatings sales rise 10.2%, adjusted EBITDA 18.2%

    Performance Coatings sales rose 10.2% in the August 2026 quarter (organic 7.9%) and adjusted EBITDA rose 18.2% to $121.1 million, against a July guide of mid-single-digit growth for every segment. Consumer sales rose 5.3%, with unit volume positive after a 2% to 3% fall in the quarter before; the chief executive put the improvement down to share gains and new placements, though he said the underlying market is not getting better. The company guided the second quarter to mid-to-high single digits for Performance Coatings and low-to-mid single digits for Consumer, slower than the first quarter's 10.2% and 5.3%.

Financials

Income statement, last 8 quarters

$ million; YoY and margin in %
Quarter endSalesYoYPBTNet profit
Aug 20262,216+4.8%337256
May 20262,232+7.2%292221
Feb 20261,608+8.9%6951
Nov 20251,910+3.5%211161
Aug 20252,114+7.4%298228
May 20252,082+3.7%248226
Feb 20251,477−3.0%4152
Nov 20241,845+3.0%213183

Balance sheet

$ million
As ofEquityDebtCashFixed assetsTotal assets
Aug 20263,4792,4073131,5538,231
May 20263,3122,5343151,5578,345
Feb 20263,1472,5562941,5207,885
Nov 20253,1292,5203171,4987,870

Cash flow

$ million
Year endOperatingInvestingFinancingFree cash flow
May 2026899−417−482675
May 2025768−826122538
May 20241,122−206−890908
May 2023577−250−301323