Good day, and welcome to the RPM International Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to hand the call over to Matt Schlarb. Please go ahead.

Thank you, Andrea, and welcome to RPM International's conference call for the fiscal 2024 fourth quarter and full-year. Today's call is being recorded. Joining today's call are Frank Sullivan, RPM's Chair and CEO; Rusty Gordon, Vice President and Chief Financial Officer; and Mike Laroche, Vice President, Controller and Chief Accounting Officer. This call is also being webcast and can be accessed live replayed on the RPM website at www.rpminc.com. Comments made on this call may include forward-looking statements based on current expectations that involve risks and uncertainties, 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 may be 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. Also, please note that our comments will be on an as-adjusted basis and all comparisons to the fourth quarter of fiscal 2023, unless otherwise indicated. We have provided a supplemental slide presentation for our comments on this call. It can be accessed in the Presentations and Webcasts section of the RPM website at www.rpminc.com. As a reminder, certain businesses in Asia-Pacific that were previously part of the Construction Products Group are now being managed and reported under the Performance Coatings Group effective June 1, 2023. As a result, all references to CPG and PCG today reflect the updated structure. This change has no impact on consolidated results. At this time, I would like to turn the call over to Frank.

Thank you, Matt, and good morning. I'll start our conference call with a high-level review of our results, then Mike Laroche will provide more details on our fourth quarter and full-year financials. Matt Schlarb will then give a balance sheet update and discuss how we are using innovation to grow, after which Rusty Gordon will cover our outlook, then we'll be pleased to answer your questions. I'll begin on Slide 3 with our fourth quarter results. Overall, we're pleased with how RPM's associates executed. Despite challenging end markets in several of our businesses, we leveraged MAP 2025 improvements to generate our 10th consecutive quarter of record adjusted EBIT. For the year, sales were a record and adjusted EBIT increased approximately 12% to a record which was within the guidance we provided a year ago. This included approximately $160 million of MAP 2025 benefits on a run rate basis or roughly $100 million through the P&L in fiscal '24. Although a portion of these are being temporarily masked by lower fixed cost utilization from reduced volumes. In addition to margin expansion, MAP 2025 has played a critical role in our ability to structurally improve working capital throughout the entire year. This resulted in record cash flow from operating activities of $1.12 billion during fiscal '24, an improvement of over $545 million from fiscal 2023 and $356 million or 46% more than our previous annual record cash flow. We used a portion of this cash to reduce debt by approximately $557 million during the year and the resulting lower interest expense helped us grow adjusted EPS by 14.7% to a fourth quarter record and by 14.9% for the full-year to a record $4.94 per share. Moving to Slide 4, our Construction Products Group led growth during the quarter with broad-based strength in most of their businesses with roofing and its differentiated turnkey offerings demonstrating particular strength. Consumer also executed well during the quarter as they achieved market share gains, upgraded product mix and realized MAP '25 benefits generating record adjusted EBIT despite a sales decline due to continued DIY softness. After multiple years achieving record results, our Performance Coatings Group declined in the fourth quarter as they faced challenging comparisons to the prior year and experienced negative headwinds from the timing of project completions, something we highlighted on our prior earnings call. In the Specialty Products Group, some end markets showed signs of bottoming out but we continue to remain challenged in this segment. The economic situation remains very challenging. However, we did a good job managing what we can control with a focus on MAP '25 and margin improvements to generate record adjusted EBIT and record levels of cash flow. Turning to geographies on Slide 5. North America, Africa and the Middle East grew. And while sales declined in other regions, we're still executing well in these areas. European sales declined 4% due to FX headwinds and divestitures in the Performance Coatings Group. However, their profitability improved meaningfully as targeted MAP '25 initiatives in the region gained momentum, including those focused on generating favorable product mix. Excluding FX, sales in Latin America grew mid-single digits as we continue to benefit from product serving infrastructure projects. Asia-Pacific is performing well under our new management structure. However, fourth quarter sales declined due to challenging comparisons as a large project was completed in the prior year period. To summarize our performance, in the face of several end market and economic challenges, we have realized good improvements in gross margins as a result of our MAP 25 initiatives. In addition to gross profit benefits, MAP '25 is allowing us to better leverage the power of RPM to create a more efficient and streamlined SG&A structure. We took several SG&A reduction initiatives in the fourth quarter, which will benefit us as we work our way through fiscal 2025. As economic headwinds persist, it's important to remember that the improvements we are making are structural. While they are helping us navigate near-term challenges, their benefits will be even more apparent as end markets eventually recover and we begin to generate better organic growth. I'd now like to turn the call over to Mike Laroche to cover our financial results in more detail.

Thanks, Frank. Starting on Slide 6. Consolidated organic sales increased 0.4% as pricing was slightly higher and volumes overall were flat. FX was a 0.7% headwind to revenue and divestitures net of acquisitions decreased sales by 0.1%, resulting in a modest decline in sales for the quarter. EBIT margins expanded 90 basis points, which was driven by MAP 2025 benefits, improved fixed cost leverage at the Construction Products Group and favorable mix at the consumer group. SG&A increased during the quarter driven by incentives to sell higher-margin products, long-term growth investments and compensation and benefits. As Frank mentioned, we implemented MAP 2025 enabled initiatives to streamline our SG&A structure in the fourth quarter, and those benefits will be realized in fiscal year 2025. Adjusted EPS increased 14.7% to $1.56, which was a record, driven by the adjusted EBIT growth and lower interest expense as strong cash flow allowed us to repay debt during the quarter. Next, moving to the Construction Products Group results on Slide 7. The segment experienced broad-based strength with roofing and wall systems performing particularly well. The growth came from both new building construction and renovation, and we gained market share in construction chemicals. They also generated growth in product serving infrastructure projects, including those that reduce both the cost and carbon footprint of their construction. Some of these include driving gains, which reduced the amount of energy needed to produce cement and synthetic fibers that serve as a substitute for steel rebar and produce significantly lower CO2 emissions and require less labor to install. The rise in adjusted EBIT was led by improved fixed cost leverage from volume growth, MAP 2025 benefits and driving a favorable product mix. On Slide 8, the Performance Coatings Group sales declined as they faced challenging comparisons to the prior year period when sales grew 10.8% and the unfavorable timing of project completions as some were pulled forward into the third quarter while other projects are experiencing delays. Additionally, Europe had pockets of weakness. FX and the prior divestiture of the non-core European service business also pressured sales. Adjusted EBIT declined as a result of lower sales and reduced fixed cost leverage from volume declines. This was partially offset by MAP 2025 benefits. Moving to Slide 9. Specialty Products Group sales declined primarily due to challenging comparisons to the prior year period for the disaster restoration business. In the prior year, customers were rebuilding inventories that had been depleted as a result of increased storm activity and bursting pipes from freezing weather in prior quarters. Overall, specialty OEM markets, particularly those related to residential remained soft. The reduction in adjusted EBIT was driven by the sales and volume declines, which resulted in unfavorable fixed cost absorption. On Slide 10, the consumer group gained market share with the help of new products and grew in markets outside the U.S., which helped to offset continued softness in the DIY space. The rationalization of lower-margin products also contributed to the sales declines. MAP 2025 initiatives and an improved mix resulted in record EBIT, which is partially offset by under absorption associated with lower volumes and higher expenses from wages and benefits. Now I'll turn the call over to Matt, who will cover the balance sheet and cash flow and provide an update on innovation.

Thank you, Mike. Moving to Slide 11. Cash flow from operations totaled $1.12 billion for the year, an increase of $545 million from the prior year and $356 million more than our previous annual record. Over the past two years, operating cash flow has improved by $944 million. MAP 2025 initiatives that resulted in improved profitability and working capital drove the increase. In Q4, working capital as a percentage of sales fell by 350 basis points from the prior year period to 23.5%. A significant portion of this cash flow is used to repay debt, which declined by $557 million during the year. This has resulted in lower interest expense and increased flexibility to invest in future organic and M&A growth opportunities. During fiscal 2024, we returned $287 million to shareholders through dividends and share repurchases, which both increased during the year. As we enter fiscal year 2025, the quarter remained strong at $1.36 billion. On the next slide, I'd like to highlight an example of how we are using innovation to help grow a business we acquired a few years ago. In September 2020, we acquired Ali Industries, a leading manufacturer of sand paper and other abrasives that goes to market under the Gator brand. Like many of these businesses, they experienced supply chain disruptions over the past several years, but as those challenges have been resolved, they are back on offense and bringing new products to market and gaining share. One we'd like to highlight today is the new Reptilion product line. These innovative products use a proprietary design encoding that helps channel away dust while sanding, which prevents buildup and improves efficiency for the user. The Reptilion product line also lasts four times longer than traditional power tool sanding accessories. Reptilion products are on the shelf now and build on Gator's legacy of providing high-performance abrasives to both Pro and DIY customers alike. Now I'd like to turn the call over to Rusty to cover our outlook.

Thank you, Matt. Our outlook for the first quarter is detailed on the next page. At a consolidated level, we anticipate first quarter sales to be roughly flat compared to last year's record period, with many market trends from the previous quarter carrying over. In the CPG segment, we expect low single-digit revenue growth following nearly 11% growth in the first quarter of 2024, benefiting from our focus on restoration, selling building envelope systems, and unique turnkey offerings. PCG sales are projected to remain flat due to tough comparisons from larger projects completed last year and ongoing delays beyond the first quarter of 2025. In SPG, overall demand is expected to stay soft, but with easier comparisons leading to a low single-digit decline in sales. For the Consumer Group, we anticipate a low single-digit downturn in sales, with trends similar to the fourth quarter, market share gains, and strength in international markets being counterbalanced by ongoing DIY weaknesses. Consolidated first quarter adjusted EBIT is likely to rise in the mid-single-digit percentage range compared to the record from the previous year, driven by MAP 2025 benefits. As part of this initiative, we are currently consolidating or have recently consolidated 12 facilities, showcasing our ongoing efficiency improvements. Our full-year guidance for fiscal 2025 is on the next slide. We expect sales growth to be in the low single digits, with adjusted EBIT projected to grow in the mid-single digits to low-double digits. On the top line, volume growth is uncertain due to limited visibility regarding the global economic outlook, including the potential impact of elections in the U.S. and other markets. Our strategic focus on repair and maintenance should help us navigate this mixed economy. We expect slightly positive pricing in reaction to ongoing inflation in labor and benefits, and moderate raw material cost increases in the second half of the fiscal year. By segment, CPG is projected to outperform its markets with its unique product and service offerings, continuing to benefit from infrastructure and restoration project spending. After a year of solid growth, CPG will face tougher comparisons in fiscal 2025, while commercial construction remains sluggish. In PCG, we will continue to benefit from increased spending on infrastructure projects and our collaborative strategy in emerging markets, which is driving profitable growth. Although spending on reshoring projects appears to be slowing, PCG may encounter temporary headwinds from the under absorption related to new plants opening in India and Malaysia. However, these plants will ultimately contribute positively to PCG in the long term. For SPG, we expect several key end markets to continue being sluggish. Consequently, SPG has streamlined certain products and their SG&A cost structure, which, along with easier comparisons, should aid in returning to growth, especially if end markets improve. In the Consumer segment, we will keep benefiting from new products and market share gains while improving our product mix, which should more than compensate for the near-term softness in DIY. When end markets recover, Consumer is positioned for strong profitability growth from the implemented MAP 2025 initiatives. The main driver of EBIT growth at the consolidated level is expected to be the benefits from MAP 2025, including improvements in manufacturing and commercial excellence, as well as efforts to streamline our SG&A structure. This includes leveraging RPM to enhance efficiencies in areas like automation, digital selling tools, and centralizing back office functions. These efficiencies will become increasingly visible over time as we deal with the short-term effects of under-absorption from MAP-enabled plant consolidation. Lastly, due to strong cash flow and debt reductions throughout fiscal year 2024, we will experience lower interest expenses in fiscal year 2025. This wraps up our prepared remarks. We are now happy to address your questions.

We will now begin the question-and-answer session. Our first question will come from Mike Harrison of Seaport Research Partners. Please go ahead.

Hi, good morning. Congrats on a nice finish to the year here. I'm just curious on the Performance Coatings business. It looks like the revenue number came in maybe a little bit worse than you had anticipated. And I know you guys indicated that there were some delays going on in projects. But can you talk about some of the broader trends that you're seeing in terms of project activity? And what kind of visibility you have in that business? I'm particularly intrigued by this comment in here that you're expecting maybe some moderating growth from reshoring impacting that business this year.

Sure. I think the biggest impact in the quarter for our Performance Coatings Group was project timing, and we talked about that on our last call. We had a number of projects that ended up being accelerated into Q3, which negatively impacted the fourth quarter. We anticipate continued growth, although at a more modest level in the Performance Coatings Group for the balance of fiscal '25. And so there's still solid results there. The other thing that I think is worth noting in fiscal '24, was the divestiture of a number of the European, U.K. based service businesses in our Performance Coatings Group, which hampered our results year-over-year. But it was the right thing to do. It's improving profitability. And so we'll annualize that pretty quickly. And I think those are reasons to believe that we'll see positive momentum but at a more modest rate than what we experienced in the past year.

All right. Thanks. And then I was also curious, you mentioned that there are some MAP 2025 initiatives to streamline SG&A that you implemented during Q4. Can you elaborate on those actions and maybe the timing and magnitude of potential benefits from those changes? Thank you.

Sure. They really fall in two categories. One was a necessary rip across a number of our business units that impacted about 170 RPM associates. And the benefits of that on an annualized basis will be in the $25 million. And then the other area is, as we've talked about investments in a number of significant growth areas. And so we are continuing those where they are providing good momentum, and we are paring back on some of those that have not met our expectations as we go into fiscal '25.

Thanks very much.

The next question comes from Kevin McCarthy of Vertical Research Partners. Please go ahead.

Thank you and good morning. Good morning. Hope you're doing well. Hey Frank, I wanted to follow-up on a comment that you made in the prepared remarks, whereby, I think you indicated that some lower operating rates and associated fixed cost absorption was masking some of the MAP program restructuring benefits. Can you quantify that? And what is your expectation for that dynamic going into fiscal 2025, will there be less masking perhaps?

Let me turn it over to Rusty for more details. Generally, as we've mentioned previously, you can see the improvement in gross profitability over the last two years. This is often the toughest aspect to change. Our MAP initiatives have been aimed at this, particularly through consolidating production facilities. We are currently working on MAP '25, which includes around a dozen more consolidation opportunities on top of the 30 we completed in the original 2020 MAP to Growth program. We've also implemented a structured approach to introduce lean manufacturing and continuous improvement in our plants. This has resulted in a reduced plant footprint and increased productivity in conversion costs. These improvements become evident when we make sales. The only significant organic growth of nearly 7% in the fourth quarter came from our Construction Products Group, as the others were either slightly down. This gives you a broad overview. Now, let me have Rusty provide more specific details.

Yes, Kevin, in fiscal '24, there is a little over $50 million of unfavorable impact from unfavorable absorption on conversion costs. In the fourth quarter, it was a little over $15 million. We expect more of that in this low volume growth environment. As you could see in specialty and consumer and now in Performance Coatings, they are experiencing volume challenges. And as Frank mentioned, as we go through a lot of these plant consolidation projects, we are building new plants, for example, in India and Malaysia, we are closing certain plants and relocating production to other plants with increased capital spending and some capacity expansions at certain sites. So as that transition goes on, we will have some start-up inefficiencies that will eventually work their way over time and generate efficiencies overall for RPM.

Kevin, your question really addresses the core of our outlook for fiscal '25, which is quite broad. Currently, we are in a low or no growth environment. I anticipate that if volumes increase, especially in the second half of the year, and assuming economic conditions remain stable, we will benefit from easier comparisons in our Specialty Products Group and Consumer segments. Any volume growth will positively impact our bottom line. This is why we have presented a broad range for our EBIT forecast. Our MAP '25 initiatives will continue to produce strong results, but when volume growth occurs, it will significantly enhance our profitability.

That's very helpful. To follow up on that, Frank, if volume growth does increase, how would you describe the contribution margins in your businesses based on the new asset and cost structure that RPM has?

Without getting into specific details, I think the two main points to focus on this year are the improvement in our gross profit margins and the $50 million of unabsorbed overhead costs that Rusty mentioned. The gross margin will provide more profitability per dollar of sales. At some point, we will see favorable comparisons to these under absorption impacts, which will enhance our profitability.

Got it, thank you very much.

The next question comes from Frank Mitsch of Fermium Research. Please go ahead.

Good morning, Frank. Good morning, Frank. Congratulations on your initial guidance for fiscal 2024, and I also want to congratulate Matt on his recent promotion. Given your strong forecasting abilities, you indicated that you anticipate volume growth perhaps in the latter part of fiscal 2025. So as you're reviewing your order books for the latter half of calendar 2024, should we refrain from expecting any DIY improvement? Is that a fair assessment?

I think that's fair to say. I actually think both for the fiscal year and in the fourth quarter, we're executing at a really high level in our consumer group. We've been through what's now 15 months, maybe more 18 months of negative consumer takeaway across the DIY paint space. Some of that, 18 months ago, was I think still continued fallout from the COVID bump, which was huge. But as we sit here today, it's really driven by housing turnover. We are at a 30-year low in terms of housing turnover and housing turnover is one critical element that drives consumer takeaway. But having said all that, for the year and in the quarter, you're looking at negative units of about 1% versus our identifiable peers, it's pretty strong result in terms of how we're performing. And it's a lot of the things that Matt talked about, some market share gains, some new product introductions, some strength in some new product introductions in the U.K. and Europe. And so I think our consumer group is performing at a pretty good level in this environment. And I would expect that to continue. We don't have a better crystal ball than anyone else in terms of where the economy is going.

Got you. Understood. And I think you had indicated, obviously, your balance sheet has been improving. You've been generating a lot of cash. So that makes the question, what to do with cash? And I think you'd indicated prior that the valuations have been a bit of a hindrance in terms of M&A. I'm not going to ask specifically about PPG and what's going on there. But was wondering if you might be able to offer thoughts on potential M&A opportunities to think about in fiscal 2025?

Sure. So as we've talked about, we have structurally improved our cash generation capabilities. So we're at new levels of cash flow, which we expect to maintain, marginally improved because there's still some more work to do in working capital improvement. Our balance sheet is in the best shape it's been in 30 years. And so we have plenty of opportunities for acquisition activity. I would expect that to pick up versus what's been a pretty modest acquisition period, particularly relative to RPM's history. Our focus continues to be on the small and medium-sized acquisitions that are highly strategic to our businesses, and that's where you'll see us focus.

Terrific, thanks so much.

Thank you.

The next question comes from John McNulty of BMO. Please go ahead.

Yes, good morning. Thanks for taking the questions, Frank. Hey, Frank. So can you help us to think about what the cost savings would be tied to the 12 facilities that you're rationalizing? I understand some of it's tied to efficiency at other plants and that means to get the full benefit may take volumes. But is there just a flat cost benefit on the plant rationalization that we should be thinking about?

I don't have those details. I don't know if Rusty has a swag at that. But I don't have a good sense of that, good enough to give you a number that I could stand behind. Rusty, do you have any more insights?

Yes, it will be, John, very meaningful and fiscal '25 as you might have seen a few times before, we are projecting $185 million of annualized MAP savings in wave 3 of our MAP program in fiscal '25. That's the highest year for savings and these planned consolidations are a big part of that.

Okay. Fair enough. So, Frank, when considering your guidance for 2025, you mentioned around $25 million in SG&A cuts and significant benefits from plant rationalization. It seems like you could achieve a margin in the low to mid 14% range without relying heavily on volume growth. Is that correct? And would any volume growth serve as an additional boost that might bring you closer to your long-term target of 16%? Is that the appropriate way to view it?

Sure. I think we are on track to achieve in terms of delivered results, our goals for fiscal '26. And our program is on an annualized run rate. So we will not experience all of those benefits that Rusty talked about in fiscal '25. But at the end of '25, we will be benefiting fully from plant consolidation and other MAP initiatives. So I think we're in good shape there. It just depends on volume. And it's a broken record here, but we're in a low growth, no growth environment. And given our MAP '25 success with flat results, we should be able to deliver solid EBIT growth. And again, referencing the wide range in EBIT expectations. On the downside, I think we'll be able to deliver mid-single-digit EBIT growth. And when we get some pickup in volume, you're going to see good growth in the teens. And so I don't have much more to add there because of a crystal ball and kind of the dynamics, particularly in our core North American market. I think we're going to be in this low no growth environment in Q1. And it's our expectation that by the time we get to the second half you're going to see some positive results even assuming there's no further deterioration just because we're going to be rounding easier comps, particularly in consumer and specialty products.

Got it. Very clear. Thanks very much, Frank.

The next question comes from David Huang of Deutsche Bank. Please go ahead.

Good morning.

Good morning.

I guess, first, regarding the FY '25 guidance, I guess you noted positive pricing. How should we think about that in terms of your project-based construction pricing and consumer pricing? And then I guess, which business or segment are you seeing the highest year-over-year price increases today?

In general, both pricing and raw materials are currently stable, although there are exceptions in different categories. Prices in the quarter were slightly higher, and I believe that for fiscal '25, price changes will be in the 1% range, possibly a bit more. We continue to see inflation in wages, benefits, and insurance costs, similar to other companies across various industries, though these have moderated compared to a few years ago. Unless there is a significant change in inflation, the impact on results should be minimal.

Okay. Got it. Maybe I'll try PPG one more time. I guess has your interest level or scope changed versus a few months ago? And I guess, absent of any acquisitions, how should we think about capital allocation for FY '25?

Our capital allocation will continue as it has been. I anticipate $50 million or more for share repurchases, depending on the circumstances. I expect our Board to increase our dividend for the 51st consecutive year during their meeting in October. Historically, our payout ratio was consistently at or above 50%, but now it stands in the mid-30s. This change allows us to increase our cash dividend at a rate more aligned with earnings growth. From an M&A standpoint, I foresee increased activity in the coming years compared to the modest growth we experienced recently, primarily targeting small and medium-sized businesses or product lines.

And I guess no update on the PPG acquisition?

Beyond those comments, no update.

Okay. Thank you.

The next question comes from John Roberts of Mizuho. Please go ahead.

Thank you. Good morning. On Slide 14, under the full-year 2025 guidance, Rusty mentioned that PCG had moderating growth from reshoring. Is that expected continued delays on project completions? Or are you seeing declining new project start activity or both?

Some of it is both in our Construction Products Group and PCG, some slowing down of projects that we have already won. And then it's just anticipation of a low, no-growth environment as we round in PCG and CPG, pretty challenging tops. So the opposite of our consumer and specialty. We expect positive growth both in Performance Coatings and Infrastructure products, but they'll be rounding some pretty healthy comps in each quarter of fiscal '25.

Okay. And can you remind us if there were tariffs on tin plate under the prior administration and how you're thinking about any risk around that?

There were tariffs on tinplate and that's kept our packaging, which primarily impacts or most impacts our consumer segment that those prices went up with the inflation, and they never came back down. So they've been sticky near the top, and those tariffs have been a contributing factor.

Thank you.

The next question comes from Ghansham Panjabi of Baird. Please go ahead.

Good morning, Frank. I guess going back to the consumer segment, can you just give us a bit more color as to what exactly you're embedding for volume growth for that segment in fiscal year '25. I know you called out some share gains, but do it yourself still seems a little bit weak?

I expect the first quarter and consumer performance to resemble the fourth quarter. While we see some consumer takeaways that are not great, the introductions of new products and our market share gains, along with our expanding presence in certain new product categories, are progressing well. As we move into the second half of the year, I anticipate low to mid-single digit growth, partly due to easier comparisons. However, in the first quarter, we find ourselves in a similar no growth environment or slightly negative consumer takeaways as we saw in the spring.

Okay. Thanks, Frank. And for CPG and PCG, obviously, comparisons are difficult in CPG and PCG, you called out some moderation just based on project completions, et cetera. Do you sort of see that as multi-quarter sort of dynamics that occur? I'm just trying to get a sense as to the cycles for those particular segments versus maybe consumer that you can ascribe to, maybe a change in interest rates, et cetera, more directly?

Sure. I think the timing issue most impacted Q4 and will continue a little bit into the early part of Q1. But there are still many, many hundreds of billions of dollars through the infrastructure bill and other things that will be spent as the years unfold, a lot of these chip stacks are a good example. We're well positioned in a number of those projects. But some of them have now been slowed down such that the spending is spread out over a couple of year longer period of time than originally envisioned. The dollars are still coming. Concrete is being poured with Euclid admixtures and Euclid fibers, and we would expect to get a reasonable share of the floor and fireproofing coatings and those. So those are just some examples. But if you look just at the Intel project here in Ohio, it's moving forward, but at a slightly slower pace than originally envisioned. Otherwise, I think the dynamics that are driving those businesses continue. We have added sales people. We've introduced new initiatives in the Construction Products Group in particular. We have had a multi-year shift from selling components to selling systems. And that seems to be paying off as our Construction Products Group outperforms what's a pretty punky new construction and commercial construction environment right now.

Perfect. Thank you so much.

Thank you.

Next question comes from Jeffrey Zekauskas of JPMorgan.

Good morning, Jeff. Hi, good morning. Thanks very much. This year, you took $30 million in restructuring charges. Will you take more next year or less?

I think that's probably a pretty good run rate considering some of the plant consolidations that we spoke about previously going forward.

Are the plant consolidations new in that? Through the first nine months, you spent $0.5 million on plant consolidation. Was there a real increase this quarter in your cash spending? Or do you expect one for next year?

Yes. We had a couple of larger plant announcements happened in the fourth quarter this year, which really drove the increased spending in Q4.

Dave Dennsteadt, who leads our Performance Coatings Group and supports all of RPM's operations in Europe, moved to Europe just over a year ago to help coordinate our MAP activities there. As you may remember, we initially focused primarily on North America and started our plant initiatives, but then COVID affected our ability to engage directly with the plant operations. Under Dave's leadership and with the support of our team in Europe, we are making progress. A significant portion of the MAP 2025 plant consolidations is occurring and will continue to take place within our European operations.

Thank you very much.

The next question comes from Josh Spector of UBS. Please go ahead.

Good morning, Frank. I wanted to inquire about the lower end of your guidance, which I assume indicates minimal sales growth. You're indicating mid-single digit EBIT growth, which might translate to around $50 million or $60 million on the EBIT line. Should I think of that as pricing potentially being slightly higher to counterbalance raw material costs, meaning that approximately $50 million could come from the MAP savings you anticipate outside of volume changes? Or is there anything else you would consider in that calculation?

I think that's pretty much it. A price will be modestly positive, but not really meaningful unless dynamics change out there. So the way to think about it is the continuing benefits of the MAP initiatives that we will be building throughout fiscal '25, offset by the volume or lack of volume under absorption that Rusty referenced. And when you net all those, I think we're still in a position to show positive momentum on the EBIT line, both in terms of dollars and margin in a low no growth environment. And so Q1 feels a lot like Q4 in terms of where we sit today halfway through the quarter. So I think your thoughts on the fiscal year are correct. And here we say multiple times that our wide range is based upon what happens with volume as we progress throughout the year.

Understood. I appreciate that. I guess if I build on that and think about the under absorption you sized earlier, $50 million of last year, you're not getting the benefit of that without volumes. You have residual MAP savings with volumes. I guess the question that goes into is how much volume improvement do you need to really realize all the MAP plans? I mean, are we talking 3% to 5%? Are we talking a couple of years of growth catch-up until you get that to really realize that 16% or so margin structure?

Sure. It will play out over a couple of years, but 3% to 4% unit volume growth would sing on our bottom line really nicely.

The next question comes from Stephen Byrne of Bank of America Securities. Please go ahead.

Good morning, Steve. Thank you. Your cost of goods were down 5% year-over-year in the quarter. Can you comment on how much of that 5% was raw material cost deflation versus perhaps your facility consolidations? Volumes were flat. So seeing it would be these other categories. Any comments on that?

Yes, Steve. Most of the decrease in cost of goods sold was due to deflation in raw materials, which was around mid-single digits in the fourth quarter. We began consolidating those plans in the fourth quarter, but we will start to see the benefits as we move into 2025.

We also had math benefits in terms of procurement and manufacturing work streams. And those math savings were north of $20 million impacting cost of goods in the quarter.

Okay. Thank you. And then maybe just drilling in a little bit more in your longer-term outlook for SG&A. Does as a percent of sales in the high 20s seem right to you? Or would you consider consolidating offices and sales forces and things like that beyond manufacturing facilities?

Sure. I believe there are increasing opportunities for us, especially in the G&A area over time. Our goal is to reduce our SG&A to around 26%. It's important to note that RPM's most valuable asset is not reflected on our balance sheet; it's the more than 2,000 sales reps we have. With more personnel in marketing, and given our entrepreneurial approach to sales, marketing, and tech service, I do not foresee consolidating sales forces. My grandfather used to say that having more feet on the street is beneficial. Some growth initiatives have contributed to our rising SG&A, particularly the hiring of additional salespeople. In cases where this is not yielding results, we will make adjustments. For example, in our Stonhard flooring business, bringing on new sales reps has significantly boosted their revenue. In our Performance Coatings Group, they are experiencing solid organic growth. This is our perspective on SG&A moving forward.

Thank you.

The next question comes from Vincent Andrews of Morgan Stanley. Please go ahead.

Thank you and good morning. Can I ask on consumer with the bifurcation of performance in pro versus DIY over the past couple of years? Could you first just give us an update on what you think your business mix is now pro versus DIY and consumer? Maybe we'll just start there.

Sure. I would guess we're probably about 70% DIY and about 30% Pro. Our two primary consumer broad segments would be DAP, it would cost sealants, patch and repair products and they're adding new products and then Rust-Oleum in various small project paint, primers, things like that. We tend to be more consumer and Rust-Oleum small project paint. And the Zinsser Primer and DAP products, I think we're more 50-50 between consumer and Pro.

And as a follow-up, you mentioned a few times that you're waiting for existing home sales to come back. And so I'm just kind of curious, is your portfolio more levered to the work that's done post home sale, versus the prep work that might be done before the home goes on the market? Or are you indifferent?

We're experiencing a unique situation where both the sale and the preparation of a home work to our advantage. When a home is sold, people often invest time into repairs and renovations, such as patching, painting, and improving, which aligns perfectly with our product offerings, especially in paint and repair. This is particularly true for smaller paint projects rather than hiring contractors for full house jobs. Additionally, when new homeowners move in, they typically redecorate and make modest improvements, which again benefits us. Thus, we gain from both the selling process and the actions of new buyers. However, we're not seeing this to the extent we have in the past due to a significant decline in housing turnover, reaching a 30-year low, largely because people are locked into their current interest rates and other factors. This situation is also a major reason behind the underperformance of our Specialty Products Group. Our Industrial Coatings Business, the largest segment of our Specialty Products Group, which accounts for almost half of its revenues, supports cabinets, wood products, and various woodworking applications. Consequently, we remain connected to a significant portion of what's still produced in the U.S. housing market, facing challenges both in new construction and housing turnover, particularly regarding furniture and major home improvements.

So the increase we've seen in homes for sale so far, I guess the answer would be, it's just not material enough to really move the needle for you yet. Is that fair?

That's correct. We are currently experiencing a 30-year low. Unfortunately, a recent report from the Wall Street Journal indicated that housing prices have reached a new high. The value of homes, considering the inflation we have faced in North America and the significant rise in interest rates affecting mortgages, are all contributing factors. Despite unit volume being down about 1% in the quarter, the performance of our consumer group is outstanding, especially when compared to our identifiable peers. I believe we are doing well given these circumstances, and it further indicates that when conditions improve, we will likely see a boost in volume, particularly due to new shelf placements for abrasives. Our sandpaper business is growing, which is a category that RPM did not focus on three or four years ago. We are also expanding into cleaner product categories and pursuing several new initiatives that I believe will support growth.

Great. Thanks very much.

Thank you.

Next question comes from Mike Sison of Wells Fargo. Please go ahead.

Good morning, Michael. Hey, good morning. Nice end of the year. Hopefully, the Guardians can follow through. Frank, what does demand get worse going forward? I certainly don't hope that's the case. But if things get a little bit weaker, can you accelerate some of the MAP savings to still sort of have a good year relative to your guidance?

Sure. I believe our team is executing the MAP initiatives exceptionally well, and I don't think there's a way to speed those up. We're taking a methodical approach to continuous improvement and lean manufacturing across the globe. One initiative that has taken us about 20 years to develop is our platform approach to the developing world. We had inconsistent efforts with our businesses as we either expanded organically or made small acquisitions in Southeast Asia, China, or India. Our high-performing leadership team in South Africa has succeeded due to the uniqueness of that market across our consumer brands, construction products, and Performance Coatings brands. This success fundamentally related to Carboline when we acquired the South African operation. The Performance Coatings business has consolidated administration and production but operates independently in sales and market focus across nearly all of RPM's brands. They are responsible for the Middle East, Africa, India, and Southeast Asia, which is yielding significant returns for us. This is a new strategy for RPM, and while it may not seem small, the growth percentages are quite impressive, with much more to come. These are the kinds of strategies, Michael, that will help us maintain positive momentum in a low or no growth environment. We don't expect further deterioration. There has been a rolling recession, despite the headlines in the manufacturing sector. The impacts on housing are evident, affecting our supply chain partners who faced a tough year. I can't comment on services or tech, but manufacturing has been challenging over the past 12 to 18 months, and we don’t foresee it worsening. Lastly, should conditions worsen, unrelated to our MAP initiatives, there is potential for additional expense reductions in the SG&A area if necessary.

Got it. And then a quick follow-up in terms of innovation. I recall Nudura was one that had a lot of momentum, a lot in commercial areas, but have you seen any progress in moving that product into the residential applications?

We have and also, I think, more importantly, into commercial. And so we have a real significant effort to get Nudura specified, get it understood, communicate and educate about Nudura and get it specified into the new construction market for schools. We now have a specification throughout schools in Kentucky, for instance, following the terrible tornadoes they had a couple of years ago. We're moving it into other states, particularly states that are kind of in the tornado all area. Specification doesn't mean we'll get to work. but you've got to educate architects and engineers and builders, and then you need to build momentum, and we're starting to see that happen in the school market. So that's a nice area. The last comment I'll make about Nudura is my wife and I had an unfortunate sewer flooding circumstance in our home in Cleveland, Ohio. And after working with our insurance company for a few months to remediate that, we made the decision to tear it down and build a new home. And so we are in the midst of building a 5,000 square foot Nudura home. Paying for it directly through the builder, new to the architect, and new to the builder, and I am learning along with them, and the construction products group knows that I'm going to learn firsthand, all the good things that they're talking about Nudura and what challenges there are through direct experience.

Got it. Thank you.

Thank you.

Good morning.

Good morning. Frank, what is your expectation for infrastructure sales for your business in fiscal '25 and beyond?

Sure. I think they're going to continue. You've got a $1 trillion infrastructure bill that will impact a lot of the areas. You've got a chips act in terms of chip manufacturing in the U.S., and we're well positioned in our Performance Coatings Group and Construction Products for some of that work. And so we would expect to see the benefits of that, I think, through 2026. But again, you'll see a more modest sales growth than the past year just because we're rounding some very challenging comps. But nonetheless, we'll see positive growth there, and we're well positioned to benefit from it.

Frank, you made some comments on restoring potentially slowing down this fiscal year. Is it mostly comps or in some of the slowdowns that you see there could be other reasons like, I don't know, lack of resources or demand or anything like that? If you can give more color on the slowdowns that you already see?

Sure. It's a mix of tougher comparisons and a slowdown in some project completions. Interestingly, it's as much about labor and new facilities and training personnel to staff new chip plants as it is about construction labor. The projects are ongoing, and the funding is committed. However, the expectation for how the funds will be utilized is now expected to extend over a longer time frame. Therefore, the impact in fiscal 2025 will be pushed into 2026 and possibly beyond, compared to what was a strong start in fiscal 2025.

This concludes our question-and-answer session. I would like to turn the conference back over to Frank Sullivan for any closing remarks.

Thank you, Andrea. Well, I'd like to conclude by recognizing and thanking our more than 17,000 associates around the globe who are executing at a really high level on our MAP initiatives making huge differences for RPM and for our shareholders. Thank you all for your participation in our conference call. And we look forward to talking to you about the development of fiscal '25 in October. And to having you participate in our shareholder meeting as well that will happen at the same time. Thanks again for your interest in RPM and for your investment in research and have a great rest of, let's say, very quickly happening summer of 2024. Thank you.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.