UPDATE 3-RPM to raise prices to offset raw material costs

Thu Apr 7, 2011 11:53am EDT

* Sees FY11 EPS $1.40-$1.45 vs est $1.37

* Sees FY11 sales of about $3.35 bln vs est $3.28 bln

* Q3 EPS $0.01 vs est loss $0.05/shr

* Q3 net sales up 2 pct to $678.9 mln vs est $625.2 mln

* Shares up 7 pct, hit all-time high (Adds dateline, analyst, conference call quotes; updates shares)

By Krishna N Das

BANGALORE, April 7 (Reuters) - Coatings and sealants maker RPM International surprised Wall Street with a quarterly profit amid a rebound in consumer spending and an uptick in the construction market, and said it will raise prices to offset higher raw material costs.

Shares of RPM rose 7 percent to $26.00, their all-time high. The stock has outpaced the S&P Specialty Chemicals Sub-Industry index by 3 percent year to date.

The economic slowdown and high raw material prices had taken their toll on the U.S. paints and coatings industry in the last few years. Growth, however, has now slowly come back because of the improving outlook for construction and manufacturing.

"We still are facing raw material challenges," an executive said on a conference call. "We're addressing some of that with price increases, more aggressively as we move throughout the year."

Its raw materials include color pigments, resins, solvents and other natural gas and oil-based components.

The Medina, Ohio-based company -- known for brands such as Rust-Oleum, DAP, Zinsser, Stonhard, Tremco and Day-Glo -- sees sales of about $3.35 billion and profit of $1.40-$1.45 a share for the year.

Credit Suisse said the raised outlook implies fourth-quarter earnings of 47-52 cents a share, versus estimates of 52 cents.

"Following two years of depressed demand for our products serving commercial construction markets, we are starting to see some improvement in our businesses that address this sector of the economy, both domestically and in Europe," RPM founder and Chief Executive Frank Sullivan, whose favorite number is 168 as it represents the total hours in a week, said in a statement.

RPM's industrial segment -- which deals with making roofing systems, flooring systems, corrosion control coatings as well as heavy-duty sealants -- accounts for more than two-thirds of the company's total sales. The segment's sales edged up 2 percent in the third quarter, while the consumer segment rose 10 percent.

"During the third quarter ... consumer sales rebounded from a flat first six months," CEO Sullivan, who heads a company that employs 9,000, operates 77 manufacturing facilities and sells products in about 150 countries, said.

Credit Suisse analyst John McNulty said the improvement in the macro economy, coupled with new product launches and market share gains, drove the strong growth in its consumer segment -- which makes do-it-yourself home improvement coatings and related products.

Third-quarter net profit came in at $1.1 million, or 1 cent a share, while net sales grew 2 percent to $678.9 million. (Reporting by Krishna N Das in Bangalore; Editing by Maju Samuel)

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