Russell Gordon: Yes. I would say that when it comes to inventory, that was clearly our biggest opportunity to get better when we compare RPM to peers. And Kevin, I would say that we’re good at some of our businesses but I’d still say more than half our businesses have plenty of room to improve in sales and operational planning so that we only make the stock that’s needed by our customers and not much more.
Kevin McCarthy: And then secondly, I want to come back to Specialty Products. If you look at the big picture, do you think that the fiscal third quarter margin levels that you just posted are likely to be a durable trough level? And then related to that, I was a little surprised that the fourth quarter sales guide in Specialty Products, just given how much easier your comparison is versus the fourth quarter of last year. I heard your comments on lack of Disaster Restoration business. Is there anything else going on there, perhaps on a sequential basis, that would cause your sales to be running down mid-singles into the end of the fiscal year?
Frank Sullivan: So about half of our Specialty Products Group is our OEM Coatings and the Industrial Coatings OEM piece of our businesses, highly tied to indirectly but to new home disruption, also a significant share in RV — in the RV market which boomed during COVID. And because of that, it’s been very, very soft. And so those dynamics are also impacting our Specialty Products Group. I believe that Q3 is the low point of performance for our Specialty Products Group and you will be seeing sequential improvement, both as we get into Q4 and as we get into fiscal ’25.
Operator: And our next question comes from Ghansham Panjabi from Baird.
Ghansham Panjabi: Frank, as we kind of think about fiscal ’24, obviously, Construction and Performance had outstanding volume years at least so far. And then price cost was obviously a big driver of margin expansion as well. Just based on your comments that some of the commodity input costs seem to have inflected a little bit, certainly in Consumer and then, of course, oil is up a bit. Is it fair to assume that margin expansion in ’25 will be led by productivity and just better fixed cost and operating leverage and just some sort of a reversion back in Consumer? And then also, how should we think about construction and performance for fiscal year ’25 in terms of difficult comparisons and so on, on a year-over-year basis?
Frank Sullivan: Sure. I guess I’ll refer back to some earlier comments and your presumption is correct. A) We expect to see margin expansion; B) It’s going to be more driven by the leverage of unit volume growth to our bottom line and the MAP efficiencies that we’ve gained over the last 3 or 4 years and certainly over the last 1.5 years. So we see margin expansion but it will be driven — will need to be driven by positive unit volume growth. And we’re pretty certain we’ll see that in Consumer in fiscal ’25. I think we’ll have a better sense of when that might be when we report our fourth quarter results and really talk in more detail about ’25. Good momentum in Construction Products, good momentum in our Performance Coatings Group which we don’t see changing and recovery in Specialty Products.
So those are the things that will do it. But your presumption of your question is absolutely correct. You’re going to see margin expansion more driven by the benefits of our MAP initiatives on higher volume levels than on any cost price mix impact. And as we highlighted, even in this quarter, I think we’re at the third quarter kind of the peak of the benefits from commodity cycle, price on a year-over-year price on a consolidated basis is up 1% which is obviously sequentially down from over the last 4, 5 quarters. So it’s going to be the good work that we’ve been done leveraging on higher unit volumes.
Ghansham Panjabi: And then for the second question, in terms of the emerging markets which were pretty solid throughout, what do you attribute that towards? I mean, I know comparisons are a little bit easier in some cases but is this just fundamental improvement? And you also mentioned some changes you made in terms of how you approach those markets internally as well.
Frank Sullivan: Leadership matters everywhere and we’ve got really good leaders now in our developing regions throughout the South Africa, Middle East, Asia Pacific. It’s taken us a while to really focus on a strategy that is leverageable and sustainable and we have one. And so we’re pretty excited about it. Our acquisition approach was not working for a decade plus and acquiring small businesses and not giving them the resources are paying enough attention to them. So the performance you’re seeing here is principally organic. It’s a better structure, better leadership and a better focus. It will continue to be organic, as you see from our first-ever meaningful manufacturing, greenfield manufacturing investments in these regions and we’ll fill up those plants pretty quickly.
And so that strategy is going to continue for the next couple of years. And as we begin to get critical mass, we’ll get back to the point where we can acquire a business but integrate it and make it part of this strategy as opposed to have a small business that’s far away and not paid much attention to. So it’s an area that we’re pretty excited about. And was a key element of our MAP initiatives in terms of how we would be organized to be successful.
Operator: Our next question comes from Arun Viswanathan from RBC Capital Markets.
Arun Viswanathan: Congrats on the strong progress. If we look at fiscal ’24, it looks like Construction Products Group and Performance Coatings drove a large part of the gains this year with Consumer kind of offsetting Specialty. And then if I look into kind of fiscal ’25, wanted to get your thoughts on maybe how those segments would play out. It does appear that maybe we’re seeing a little bit of slowing momentum in Construction Products and Performance Coatings or at least some catch-up there but that could be offset by Consumer coming back and maybe Specialty as well. Is that how you’re thinking about it? And I guess if that is the case, is it mainly MAP gains that would be kind of driving those dynamics? Or how do you kind of think about how your earnings growth is shaping up as you look out in the next couple of quarters?
