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RPM International Inc  (NYSE:RPM)
Q3 2019 Earnings Conference Call
April 04, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to RPM International's Conference Call for the Fiscal 2019 Third Quarter. Today's call is being recorded. This call is also being webcast and can be accessed live or replayed on the RPM website at www.rpminc.com.

Comments made on this call may include forward-looking statements based on current expectations that involves 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 reconciliation to the most directly comparable GAAP financial measures on the RPM website.

Following today's presentation, there will be a question-and-answer session (Operator Instructions). 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 Sullivan for opening remarks. Please go ahead, sir.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Thank you, Richard, and good morning. Welcome to the RPM International, Inc. investor call for our fiscal 2019 third quarter ended, February 28th, 2019. On the call with me today are Rusty Gordon, RPM's Vice President and Chief Financial Officer and Kristine Schulze, our Senior Director of Financial Reporting. I'll begin by providing broad perspective on our third quarter results, after which Kristine, will run through our numbers in more detail. She'll be followed by Rusty Gordon, who will provide a progress update on our MAP to Growth operating improvement plan and share our outlook for the balance of the year.

Note that during our comments, we will walk through some slides that we have posted on the investor information section of our website, which can be found at www.rpminc.com, which illustrate progress in our MAP to Growth operating improvement plan. After this, we'll take your questions.

During the fiscal 2019 third quarter, we generated consolidated sales of $1,140 million, which was an increase of 3.4% over the same period in fiscal 2018. This was a solid performance during what is our seasonally slowest quarter due to winter weather conditions across many of the countries and markets we serve. Organic growth was 4.3%. Acquisitions contributed 2.1%, while foreign exchange was a significant headwind mostly in our Industrial segment, which reduced sales by 3%. From a geographic perspective, our companies in North America and particularly in the United States performed well, while international operations, particularly those in Europe and Latin America, were challenged reflecting challenging macroeconomic conditions in those regions.

Price increases helped to offset higher costs for freight, labor, energy and raw materials, which were higher for the seventh straight quarter. Current quarter EBIT finished behind last year's third quarter when EBIT was up an extraordinary 53% over the prior year due to a number of non-recurring items. However, we see this quarter's adjusted EBIT of $46.9 million, which is our second best third quarter ever, as still strong as it was well ahead of our third quarter average EBIT of $37.8 million during the three-year period from fiscal 2015 through fiscal 2017.

Our current quarter gross profit margin was 60 basis points behind the 2018 third quarter results, which is a less deterioration than prior quarters. While our MAP to Growth savings initiatives are taking root, the fiscal 2019 third quarter gross profit margin reflects a combination of moderating inflation, MAP to Growth improvements and an unfavorable product mix. And looking at our SG&A on a comparative basis, last year's third quarter SG&A was favorably impacted by an incentive reversal of $3.4 million, something we mentioned on our January conference call, while this year's SG&A includes additional expense from recent acquisitions and continuing higher advertising and distribution cost.

Implementation of our MAP to Growth operating improvement plan has moved rapidly and we are making significant progress toward our goals. While we are starting to experience some benefits from our MAP to Growth operating improvement plan, due to FIFO accounting, many of the MAP to Growth initiatives we have executed in manufacturing and procurement areas will start to show up in our income statement in the coming quarters.

I'll now turn the call over to Kristine Schulze, who will walk you through our results in more detail.

Kristine Schulze -- Director of Financial Reporting

Thanks, Frank. And good morning, everyone. During our fiscal 2019 third quarter, we reported restructuring charges of $8.7 million and other related expenses of $11.9 million. As I walk through our results of operations for the quarter, my comments will be on an as-adjusted basis, which excludes these charges. As Frank mentioned, our consolidated net sales were $1.14 billion, which was an increase of 3.4% over the $1.1 billion reported during the third quarter of fiscal 2018. Organic growth was 4.3% or $47.5 million, acquisitions contributed 2.1% or $23.3 million, while foreign exchange was a significant headwind that reduced sales by 3% or $32.9 million. Impacting earnings were higher costs for raw material, freight, labor and energy, as well as unfavorable foreign exchange resulting from the strengthening of the US dollar.

While some raw materials are moderating, others continued to increase, including packaging. We have been successfully implementing selling price increases to close the gap on our margins and are starting to see the benefits. Our margin recovery tends to lag because we utilize the FIFO method of accounting for our inventory. So the impact of easing raw material costs should be more fully realized in the coming quarters.

Industrial segment net sales increased by $11.7 million or 2.1% in the third quarter of fiscal 2019 versus the same period last year. This increase was comprised of organic volume growth of $27.2 million or 4.8% and acquisitions of $7.6 million or 1.3%. This sales growth was offset by a 4% headwind from translational foreign exchange. Topline growth in this segment was led by our North American businesses providing corrosion control coating, fiberglass grating, commercial sealants and concrete admixture and repair products. Businesses in this segment also continued to benefit from the energy and market recovery. This was partially offset by foreign exchange and international weakness in the segment, which has our greatest international exposure. Adjusted EBIT was $19.5 million during this year's third quarter.

In our Consumer segment, fiscal 2019 third quarter net sales increased by $21.6 million or 6% versus the same period last year. This quarter's sales were comprised of organic growth of $19.3 million or 5.3% and acquisitions of $9.9 million or 2.7%. Partially offsetting sales growth was a 2% headwind from translational foreign exchange. Raw material costs were still a headwind, but began to moderate. Again, because we use the FIFO method of accounting for our inventory, our margin recovery tends to lag our peers on LIFO. During the quarter, we gained market share from our competitors in the small project paints category, continuing the favorable trend that started last spring at major retailers. Earnings would have been ahead of the prior year, except for higher distribution and advertising expenses. Adjusted EBIT was $27.1 million during this year's third quarter.

Specialty segment net sales increased $4.6 million or 2.7% in the fiscal 2019 third quarter versus last year's third quarter. Organic growth was relatively flat with an increase of $1 million or 0.6%. Sales growth was primarily the result of our acquisition of insulated concrete forms manufacturer Nudura, which contributed $5.8 million or 3.4% to sales. Foreign exchange had an adverse impact of $2.2 million or 1.3%. Contributing to organic growth were our businesses providing fluorescent colorants, marine coatings and exterior cladding systems.

Sales at our restoration equipment business were behind the prior year, which was extraordinarily strong due to a large sales backlog that resulted from Hurricane Harvey. Substantially all of the segment's third quarter EBIT decline versus the prior year was due to start-up investments for our NewBrick exterior cladding product and Nudura, which has pronounced seasonality in the third quarter. Adjusted EBIT for the fiscal '19 third quarter was $18.8 million.

Also during the quarter, we issued $350 million in bonds and used the proceeds to pay down a portion of outstanding borrowings on our revolving credit facility and for general corporate purposes. Additionally, as of today, we have effectively repurchased approximately $400 million of our common stock, half of which was accomplished through the redemption of our convertible bond last November. The share repurchases support our MAP to Growth objectives to return $1.5 billion in capital to our stockholders by May 31st, 2021 through a combination of dividends and share repurchases.

I'll now turn the call over to Rusty, who will provide an update on our MAP to Growth initiative and also share our outlook for the remainder of fiscal 2019.

Russell L. Gordon -- Vice President and Chief Financial Officer

Thanks, Kristine. In regard to our MAP to Growth operating improvement initiative, we have moved with great urgency and are making excellent progress toward the objectives we laid out at our Investor Day last November. Since the initiation of the plan, we have closed or are in the process of closing 12 manufacturing plants and have announced the reduction of 502 positions. We have also taken great strides to upgrade our manufacturing processes, optimize assets, reduce inventory and improve our supply chain.

If you take a look at the second slide in the deck on our website, you'll see the progress we have made in procurement. Our center-led purchasing team has changed our approach since they are authorized to speak for all RPM volume. As a result, we have narrowed our supplier base and changed our strategies to enable better pricing and terms than our historic norms.

Another example is manufacturing, which you'll find on slide number 3, where we are implementing a culture of continuous improvement, we continue to reduce our plant footprint and optimize existing assets. We are working individually on a plant-by-plant basis to reduce yield losses and improve equipment uptime.

On the SG&A front, which you'll see on slide number 4, we have delayered top management. As a result, we have simplified our organizational structure and better aligned with our strategy to create global brands. The resulting cost savings from our first WAVE, which you'll see on slide number 5, will conclude at the end of this fiscal year and are projected to meet our original targets. As you may have noticed on this slide, manufacturing appears to be running slightly behind the WAVE 1 target, while SG&A is running a bit ahead. This is simply due to a reallocation of distribution expenses between these two expense categories. Based on the success of the MAP to Growth so far, we expect to meet the long-term margin improvement objectives that we laid out at our November 28th, 2018 Investor Day.

I'll now turn to our fiscal 2019 outlook. Our outlook for this year's fourth quarter, which is seasonally our strongest, is positive. In the quarter, we expect to generate low single-digit consolidated sales growth and double-digit EBIT growth, resulting from recently implemented price increases taking hold, our MAP to Growth savings being realized and moderating raw material costs.

Industrial segment sales in the fourth quarter are expected to be flat-to-slightly down, as this segment will be impacted by tough comparisons to last fiscal year, as well as its exposure to weakening international markets and unfavorable foreign exchange. This should be offset by savings from our MAP to Growth operating improvement plan and moderating raw material expenses.

For our Consumer segment, we anticipate high single-digit sales growth due to easier comparisons to last fiscal year, as well as margin recovery beginning to take hold. In the Specialty segment, which comprises about 15% of consolidated sales, the sales growth should be modest.

We expect a normal effective tax rate of 26% to 27% in the fourth quarter, which will be higher than last year's rate due to adjustments related to tax reform. Based on our expectations for solid topline sales growth and double-digit EBIT growth, our fiscal 2019 fourth quarter adjusted earnings guidance is a range of $1.12 to $1.16 per diluted share, which includes accretion of $0.03 to $0.04 a share as a result of share repurchases completed this year versus the adjusted $1.05 during last year's fourth quarter.

Now I'll turn the call back over to Frank.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Thanks, Rusty. Before we open up the call to questions, I want to take a moment to thank our associates around the world for their dedication to continuing to grow the RPM businesses, while also implementing our MAP to Growth operating improvement plan. One more note on our MAP to Growth program; many of you met our colleague and friend Steve Knoop at our Investor Day in Baltimore on November 28th of last year. In addition to heading up our Specialty Products group, Steve had made significant contributions to the planning for our MAP to Growth initiative. Unfortunately, Steve has been on medical leave since January. In his absence, I've taken on Steve's duties related to our MAP to Growth initiative, and as you can see, based on his strong efforts, we're off to a great start.

Lastly, I'd like to mention that we recently concluded our Annual Growth and Strategy Conference, which we hold each year in March. This year, I challenged our Company leaders to think big about growth and innovation. They delivered ambitious plans to accelerate growth through innovative new products and service offerings. While we were together, I reminded them that although the marketplace values growth over efficiency, we will be able to deliver both through our MAP to Growth program. We will continue to be world-class when it comes to sales, marketing and topline growth, and we are becoming world-class in our operations. This one-two punch will make us very difficult to beat in the markets we serve.

We're now pleased to take your questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And our first question on line comes from Mr. John McNulty from BMO Capital Markets.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good morning, John.

John McNulty -- BMO Capital Markets -- Analyst

Yeah. Good morning. Thanks. Good morning, Frank. Thanks for taking my question. So, I guess a couple things. It sounds like on the procurement front, you're starting to make some headwind. Maybe we haven't seen it because of FIFO. But I guess, when you're looking out over, say, the next 12 months, I assume there's some improvement on the working capital side of this. So can you give us some color as to how we should be thinking about the potential for improvement in terms on working capital as we're kind of looking out over the next 12 months or so?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. And we did not provide slides on working capital improvement, we will in the future. It's our anticipation that most of the working capital improvement will occur in WAVE 2 and WAVE 3, because the most significant benefits that are sustainable will come out of both the asset optimization, as well as the operating improvement initiatives that we are taking through our businesses plant-by-plant, starting with our largest operations.

And so, while -- if you look at our balance sheet, you'll see a year-over-year decline in inventory, which is a good step in the right direction. Part of that is a result of write-off in our Consumer segment in last year's fourth quarter. And part of that are the beginning of the benefits of these operating improvement initiatives on lower investment and working capital. But the most meaningful benefits will come in WAVE 2 and WAVE 3 as they follow the operating improvement activities we're undertaking.

John McNulty -- BMO Capital Markets -- Analyst

Got it. That's helpful. And then, I guess a question, Rusty had made a comment, I guess, regarding on the manufacturing front, things are maybe a little bit wider or I wouldn't say behind schedule, but maybe coming a little slower and SG&A was a little bit ahead. What was the driver for that again, because I didn't quite catch what you were getting at?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. There's two issues there. The first is, I think we thought and I communicated that the timing of a plant closure announcement and the actual cessation of operations and -- are beginning to benefit from those savings was 90 days. And that was in hindsight incorrect and a little bit naive. I think the timing from announcement to closure is more like five months. And so while we have announced these plant closures and we're in the process of doing it, it's taking a little bit longer in some instances we thought.

The second and more meaningful area is, when we laid out the MAP to Growth initiative in November, we assumed in the manufacturing pieces, all facility closures. And while we have announced the closure of 12 manufacturing facilities, we've also closed, and this was part of the manufacturing piece on our Investor Day, November 28th, more than a dozen warehouses and other offices. And all of those are properly reflected in SG&A, not in cost of sales. And so that's just a reallocation between what we originally communicated during our Investor Day in manufacturing, that is actually an improvement in SG&A.

John McNulty -- BMO Capital Markets -- Analyst

Got it. That's helpful. And then maybe just one last question on a different angle, so -- can you speak to kind of what you're seeing with regard to the M&A environment and pipeline? It looks like it helped you, obviously this quarter with some sales lift. How does the environment look going forward? And also I guess, maybe can you speak to your appetite for M&A, just given that you've got so much going on with the restructuring?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. That's a great question. The pipeline for the typical small-to-medium sized acquisitions that we're looking at is pretty good. We are focused on executing the MAP to improvement program -- the MAP to Growth program. There's a lot of acquisition activity in our space and as we look at it, we are dedicated to first executing on the operating improvement initiative and in any event, maintaining an investment grade rating as it relates to acquisition activity combined with some of our return of capital commitments.

John McNulty -- BMO Capital Markets -- Analyst

Got it. Great. Thanks very much for the call.

Operator

Thank you. Our next question on line comes from Mr. Frank Mitsch from Fermium Research.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good morning.

Frank Mitsch -- Fermium Research -- Analyst

Hey, good morning, Frank. Good morning, folks. Hey, obviously wishing a full and speedy recovery to Steve. Frank, can you -- can you talk about what you're seeing on the ground in Europe in terms of demand? What are you -- what are your expectations in terms of volume growth there?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. Europe's weak and Europe's been relatively flat for most of the year. In some areas, we're seeing year-over-year declines. I think when you look at our total growth, we had regionally 5% plus growth in North America and minus 3% in Europe; a big part of that minus 3% was foreign exchange. So excluding foreign exchange, real modest-to-flat growth in Europe and there is not a lot that suggest that that's going to get better and we're not planning for it to get better as we think about our new fiscal year.

Frank Mitsch -- Fermium Research -- Analyst

And as you look at the MAP to Growth program, how much of that is tied or geared toward Europe?

Frank C. Sullivan -- Chairman and Chief Executive Officer

There are meaningful opportunities for us in Europe, and we certainly are focused there in terms of some opportunities to consolidate various aspects of G&A manufacturing and distribution. And I think that's as far as we would go in terms of detail.

Frank Mitsch -- Fermium Research -- Analyst

All right. I was trying to get how many plants out of the 12. But last question, you folks mentioned a couple items that FIFO is restraining the savings that you're seeing in MAP to Growth and also restraining the ability to recoup the decline in raw materials or at least a moderation in raw materials. With that said, what sort of a tailwind are you entering fiscal fourth quarter just based on FIFO accounting on those opportunities?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Yeah. I can't answer that specifically and it's not really restraining all. All it is, is an accounting difference versus some of our largest industry peers who report on LIFO. And so, to the extent that we are seeing benefits of operating improvements or price increases or moderating raw material costs, capitalized in inventory, it shows up in our results typically 90 days later than it would in somebody who's reporting on LIFO.

But I think as you can see and we hope in the future to be able to add some detail to the MAP to Growth slides that Rusty referred to this morning, we believe there is $34 million of improved raw material cost as a result of our ability to consolidate raw material purchases, and really be a more strategic partner to a smaller and larger, in terms of size and impact, supplier base. And so those are dollars that we're confident we're achieving on the ground, and they will begin to show up in our financial results in Q4 and Q1.

Frank Mitsch -- Fermium Research -- Analyst

All right. That's very helpful. Thanks, so much.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question on line comes from Ms. Rosemarie Morbelli from G. Research. Please go ahead.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good morning, Rosemarie.

Rosemarie Morbelli -- G. Research -- Analyst

Thank you. Good morning, everyone. And also, best wishes to Steve. We have -- we are hearing a lot about the international being weak, and you mentioned Europe and Latin America. So looking at Europe, you don't see any improvement, but what I was wondering is if you could talk about whether the trend during the quarter, are you actually seeing it declining somewhat worsening? And if you could touch on the different markets you serve and the trends in those.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. I think the as-reported results had actually deteriorated a little bit as a result of flat organic growth in those markets and then the negative impact of FX, which certainly hit us in the third quarter, and it's our expectation that we'll see more of the same in Q4. Just seems to be kind of a stagnant environment. And there continues to be among our customer base and even ourselves, as we think about opportunities for improvement in Europe, some decision-making stalling around Brexit and where assets should be and what businesses, including our customers, should be doing in relationship to their thinking about the EU and in the UK and Europe. So we don't see it getting better.

Rosemarie Morbelli -- G. Research -- Analyst

All right. At any particular market that is especially weak versus a flat -- if we exclude FX, a flat demand?

Frank C. Sullivan -- Chairman and Chief Executive Officer

No, as you'll recall in our January quarter, the weakness that we have is regional, not necessarily a product or markets. And so we've got a pretty good quarter in the third quarter and it's continuing in Q4 across all of our businesses in North America and particularly the US, and we are pretty weak, flat-to-weak across all our businesses and product categories in Europe. So I wouldn't point to any particular industry, it's more of a regional issue.

Rosemarie Morbelli -- G. Research -- Analyst

Okay. And then moving on to the Consumer, you are continuing to gain share. Can you talk about the share gain you are seeing, if any, when you exclude the benefit from the switch at the Home Depot, for example, out of Sherwin-Williams?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. That's certainly one and that's going quite well. And we've also had some small project paint pick up in the hardware store chain channels, and we've also had some recovery in some lost share at Lowe's as a result of some of the strategic alignments and changes last year in the spring. As folks know, we lost some business there and we are recovering some of what was lost business. And so our Consumer segment team is doing a great job and they're picking up market share in small project paint because that's where they live, whether it's new colors, new products, new textures, in some cases, new packaging and new delivery, they're doing a really nice job. To that, as we enter the spring, we're seeing some solid POS, so point of sale takeaway by consumers, that's better than it's been for the last four or five quarters and hopefully, that will continue. But it seems like we're finally seeing some good consumer takeaway in those categories after what's been a relatively weak four or five quarters of POS.

Rosemarie Morbelli -- G. Research -- Analyst

Thank you. And lastly, if I may, following up on the M&A pipeline, do you have any appetite for a large acquisition and one that you could fit into one of your industrial products lines?

Frank C. Sullivan -- Chairman and Chief Executive Officer

So, our acquisition pipeline is pretty good, as it always has been, particularly in the small to medium size acquisitions. And as it relates to all the acquisition activity in our industry, whatever we would do, we would seek to maintain an investment grade rating between our acquisition activity and our commitments on returning capital to shareholders.

Rosemarie Morbelli -- G. Research -- Analyst

All right. Thank you.

Operator

Thank you. Our next question in line comes from Mr. Vincent Andrews from Morgan Stanley.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good morning.

Steve -- Morgan Stanley -- Analyst

Hi. This is actually Steve (ph), on for Vincent. So, I have a quick question on SG&A. Last quarter, you guys broke out a reconciliation versus SG&A to adjusted SG&A. And I was curious if you could maybe bucket this quarter where some of your MAP to Growth initiative stood in COGS versus SG&A.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. Just broadly, first of all, it's third quarter when we highlighted that given its seasonality is all over the place. So, this quarter is down meaningfully from last year. There were a lot of one-time items. We are up 25% at the EBIT line from our FY '17 third quarter EBIT. And so that gives you a sense of why we think it's a pretty good third quarter and also the volatility given the seasonal low.

In SG&A, we mentioned in January about the long-term incentive reversal last year in the third quarter. We had a number of incentive comp reversals last year in Q3 as it became apparent that we were not going to hit any of our near term or long-term targets. On a year-over-year basis, looking at comp this year versus comp last year, there is a hit to earnings in the high single-digits in terms of millions of dollars. We have communicated throughout the year that we were going to have a higher level of advertising in our Consumer segment as we picked up market share and picked up new categories and that has been true and it was true again in the third quarter and it will be true in the fourth quarter. And then the last comment I would make is that all of these and this is unique to RPM, we're seeing higher freight and distribution expense, which unique to our RPM, the freight out and distribution expense is reflected in SG&A versus most of our competitors that reflect that in cost of goods sold. And we're seeing higher labor cost pretty much everywhere, whether it's in our core staff or in our plants. And so those are what reflect the big swings in SG&A in what is a seasonally low quarter anyways.

Steve -- Morgan Stanley -- Analyst

Okay. So just in regards to the restructuring charges specifically though, is it possible you could break that out between COGS and SG&A or...?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Yeah, I don't know that we've done that. We highlighted the restructuring charges. The two categories are all restructuring related. The first category, which Rusty, remind me is about $9 million.

Russell L. Gordon -- Vice President and Chief Financial Officer

Yes. For the (multiple speakers).

Frank C. Sullivan -- Chairman and Chief Executive Officer

And so that's really...

Russell L. Gordon -- Vice President and Chief Financial Officer

Charge on the income statement.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Yeah. What you can formally qualify or quantify as for accounting purposes, restructuring. And then the other charges were principally professional fees. We have significant fees with consultants. AlixPartners is the largest one, but other consultants in IT areas that are part of our implementation. Beyond that, we haven't really quantified it between cost of goods sold and SG&A.

Kristine Schulze -- Director of Financial Reporting

And that's true. I would refer you to our website to take a look at our non-GAAP slides where we have further detail on each item.

Steve -- Morgan Stanley -- Analyst

Okay. Thank you.

Operator

Thank you. Our next question on line comes comes from Ghansham Panjabi from Baird. Please go ahead.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good morning, Ghansham.

Ghansham Panjabi -- Robert W. Baird & Co. -- Analyst

Good morning, Frank. Good morning, everyone. I guess first off, on the 4.3% organic growth, can you sort of break that up between volume and maybe price mix? And then related to that, Frank, I mean, a lot of companies have called out unfavorable weather, particularly in January and February. Just curious as to what sort of impact you saw and then maybe related to that what you're seeing so far in March?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. Across RPM, our net organic growth on a consolidated basis is about 2% price and the weather was the negative impact. Our Industrial segment in particular, our Tremco Roofing business, those are challenged businesses when you have a very wet period of time. I think one of our peer competitors highlighted the rain and snow and this is supposedly one of the wettest years since 1983. Weather happens every year and weather happens every quarter and we don't like hearing about it from our operations any more than our investors like hearing about it from us, but it was certainly an impact in the year.

We're off to a good start in the spring and as long as we don't end up with a very wet end of May and June like we had last year, I think we'll have a pretty solid performance in our Industrial businesses that are weather-related and also in Consumer. As I said, the early signs for spring POS are good, but that is most definitely impacted by weather.

Ghansham Panjabi -- Robert W. Baird & Co. -- Analyst

Terrific. That's very helpful. And then just in terms of your guidance specific to the fourth quarter, low single-digit top line growth and double digit EBIT growth, can you just give us a bit more detail on how that breaks out across the various buckets, pricing, cost savings, low raw material costs, whatever way you want us to sort of think about that from a stack rank perspective?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Yeah. I would expect to see the first quarter in about six or so seven quarters, where gross margins are flat to slightly up and that's a combination of mix of business, it's a combination of our Company's price efforts and what we see is moderating raw material costs. In our third quarter raw material cost, again, sequentially were improved by a couple percentage points. But we were still year-over-year up by mid to high single-digit rates. And so, as we get into the fourth quarter, we'll start to annualize the significant increases that started last year -- started before last year in the fourth quarter, but really were pronounced in the fourth quarter. And you'll also see the benefits, as I said, of the MAP to Growth initiatives that have already been completed, but really show up in our cost of sales and our gross margin, as we sell the inventory in which overhead and raw material costs are capitalized.

Ghansham Panjabi -- Robert W. Baird & Co. -- Analyst

And then just one final one in fiscal year '20, if I could. I mean, understanding it's early, but at this point what's reasonable for us to, as we kind of tighten up our models to assume for core volume growth, our core sales growth for fiscal year '20? And then just as a clarification on Slide 5, toward the end, the WAVE plan summary in your slide deck, you called out an annualized run rate to benefit 2020 of $104 million. Is that fiscal year '20 or calendar year '20? Thanks so much.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. So the annualized run rate is fiscal year '20. And again, I think the factors that have impeded our ability to get the head start we had hoped for in fiscal '19 are also impacting all industry and our peers. It's inflation not only in raw materials, but freight, labor and a lot of other factors. Slowing growth in Europe is going to be an issue for everybody and so those issues will impact us. And so we've got to make sure that we continue to push our operating improvement initiatives so that we can overcome as much of these headwinds as possible. I think if we're looking at 13% to 15% EBIT growth in our fourth quarter, we would expect to see something in the neighborhood of 20% or maybe slightly higher EIBT growth in Q1 and that you should see that hopefully accelerate. But we don't finalize our 2020 planning until the end of May. And we will provide more specific details both on our expectations for 2020 and the impact of MAP to Growth when we release fourth quarter earnings on July 22nd.

Operator

Thank you. Our next in line question comes from Jason Rodgers from Great Lakes Review. Please go ahead.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good morning.

Jason Rodgers -- Great Lakes Review -- Analyst

Good morning. I do want to ask about the ERP consolidations if that has begun and maybe just discuss the timeline there.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. We would expect to have the lion's share of our ERP implementations done by December 31st of 2020 and what is left to be done at that point would be small, kind of far away international sites. We're about 50% done across RPM. Some of that is because we were already pretty heavily consolidated into SAP, for instance, in our Construction Products group. And our Specialty Products group under Steve Knoop's leadership had started ERP implementation consolidation into Microsoft D365, (inaudible)15 months ago. So we're two-thirds of the way through there. And it's something that our IT people are pretty adept at because in the last five or six years we have regularly completely integrated acquisitions into the base system of whoever the core RPM acquiring company was.

Jason Rodgers -- Great Lakes Review -- Analyst

All right. And just maybe a few for Rusty. Do you have the number of shares bought in the quarter and the total spent and the share count that you're assuming for the fourth quarter?

Russell L. Gordon -- Vice President and Chief Financial Officer

Sure. Yeah, so far this year, we have, through February 28th, bought back about 2.8 million shares. And in addition to that, we retired the convertible for mostly cash. So that took about 3.3 million shares off the table. So, so far, 6 million shares were down between repurchase and the convertible redemption. So you should see in our fourth quarter that magnitude of a decline in our diluted share count. And that's offset by stock vesting and awards, which will be a small (ph) office .

Jason Rodgers -- Great Lakes Review -- Analyst

And then, just to follow up earlier on the SG&A question. Do you have an adjusted SG&A number for the quarter because that was in the slides last quarter, but I didn't see it this quarter?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Yeah. No, we did not and again it's in relationship to all the moving parts in the quarter and given the seasonality of the third quarter. I think the other thing that negatively impacted us in the third quarter, which Rusty commented on, but we can quantify a little bit better. In our Specialty Products group, the Nudura business, which is off to a great start, we're really excited about it, it's really the wave of the future for construction. Seasonally, they lose money in our third quarter and so they're accentuating our quarterly seasonality. I think their revenues we disclosed it, about $50 million when we acquired them.

And then the other element in Specialty that particularly impacted our third quarter is we're accelerating our investment drive at Brick and that's an exciting new product. Year-to-date we have about $2 million in sales and $5 million of operating losses. Almost half of that was in the third quarter. We have plans to automate most of their production and that's going to be a blockbuster product line at some point at their plants. But if it does not turn out that way, those are operating losses that could easily be eliminated.

Jason Rodgers -- Great Lakes Review -- Analyst

Okay. Thank you.

Operator

Thank you. Our next question in line comes from Mr. Kevin McCarthy from Vertical Research.

Kevin McCarthy -- Vertical Research -- Analyst

Good morning, all. With regard to your Slide number 5, how much of the $104 million in run rate savings would you expect to actually hit the income statement in fiscal '19?

Frank C. Sullivan -- Chairman and Chief Executive Officer

I think we'll have a better sense of that Kevin in July and we'll communicate that to folks. And I think it really depends on also how much of that run rate is experienced in our fourth quarter. And so that's an annualized run rate that we expect to be at as of May 31. There'll be portions of that that will benefit our fourth quarter. And then, of course, there'll be portions of WAVE 2 that should benefit the second half of the 2020 fiscal year. And we'll have a much better sense of how to break that out both by category and by July, we hope, by segment so you can understand that.

Kevin McCarthy -- Vertical Research -- Analyst

Okay. Appreciate that. Second, I was wondering if you could elaborate on your raw material cost trends. As we look at some of the building blocks that tend to go into your industry, propylene has come down hard over last six months, some of the upstream silicone products seem to have as well. So what are you seeing in your basket in terms of sequential trends? And do you have an early read on how fiscal 2020 could trend in that regard?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. The macro picture is pretty volatile. Oil had come down a lot, propylene followed that. Those core building blocks don't translate into raw material savings of the products we buy immediately. Interestingly, since January 1, oil prices were up 30%. And so -- but as I mentioned earlier, sequentially the third quarter was the second quarter in a row where we've seen sequential improvement in our base top raw materials. But we're still year-over-year up high single digits. And so we're gaining on -- gaining on margin through price mix and what feels like moderation across our core largest raw materials. The biggest impact of that in our fourth quarter, we believe, will be the strategic change in approach on procurement as we have consolidated purchasing. I think it took a while for us to hit our stride, but we've had a number of categories where we might have been buying from eight different vendors and reconsolidated down to two or three. And it's moved significant volume to strategic partners and it's moving volume away from either smaller or less inclined to cooperate suppliers. And so it's been an interesting process for us. It's having good results.

Kevin McCarthy -- Vertical Research -- Analyst

Okay. And then lastly, if I may, in your prior quarter you had discussed some mark-to-market impact related to the captive insurance business. Just wondering if you saw any impact from that in the fiscal third quarter or would expect any in the fourth quarter?

Russell L. Gordon -- Vice President and Chief Financial Officer

Yes, Kevin. On investment income line, you'll see we were down about $700,000 from last year. So, the performance was not as good as a year ago. Obviously, a lot happened within our quarter because, December markets took a nosedive and recovered in January and February. As far as the fourth quarter goes, I think based on the trend of the last three months, it's probably anybody's guess. But we are on the new accounting standard, which will require us to mark-to-market our equity securities and run it through the income statement. So to the extent it's an issue, we will certainly highlight that after the fourth quarter.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. And we'll work -- we are working with our audit committee and our auditors on whether or not it's appropriate to carve that out every quarter, because it's a non-operating item. And as I mentioned in January, the equity portfolio of our captive insurance companies that this applies to is about $100 million. And so, we'll have and communicate the consistent manner in which we will address it in the future in terms of either carving it out or just highlighting it to the questions like this.

Kevin McCarthy -- Vertical Research -- Analyst

I see. Thank you so much.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question in the line comes from Mr. Mike Harrison from Seaport Global.

Michael Harrison -- Seaport Global Securities -- Analyst

Hi. Good morning.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good morning.

Michael Harrison -- Seaport Global Securities -- Analyst

Frank, you noted in the press release that energy was a positive in the North America industrial business. I was wondering, if you can give maybe a little bit more detail on that. What specific product lines that's driving and how sustainable you think that strength could be?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. In particular, our Carboline business, which serves energy markets pretty broadly, oil and gas and pipelines, refineries, windmill, windmill blades, and so they have various product lines that are focused on either pipelines which is in ground or associated with chemical facilities. Our Fibergrate business which provides FRP grating which is corrosion and weather resistant has had a good result in the energy markets as well. So those are the principal product lines.

Michael Harrison -- Seaport Global Securities -- Analyst

And looking pretty sustainable going out through the next couple quarters?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Yeah, we think so. I mean, obviously, raw material -- not raw materials, oil prices have been volatile, but as the folks on this call know, there was a period of time when the oil industry and the energy markets cut back meaningfully, not only on expansion, but on maintenance and it feels like we're back to a normal maintenance spend period of time.

Michael Harrison -- Seaport Global Securities -- Analyst

Okay. And then wanted to also ask about the Consumer business. You alluded in the past to some some contracts that were keeping you from raising price, and that those had run their course and expected to get some price traction. Did we start to see that or is that trickling in? Maybe just an update there.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. We had some commitments associated with line reviews and other commitments that inhibit our ability to get price while we were seeing significant raw material cost increases. And the last areas of RPM to get some price increases happened in our Consumer businesses at the end of our third quarter. And so that will help our fourth quarter and it's a much needed and trailed the rest of RPM.

Michael Harrison -- Seaport Global Securities -- Analyst

All right. Thanks very much.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question online comes from Silke Kueck form J.P. Morgan. Please go ahead.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good morning. Good morning, Silke.

Silke Kueck -- J.P. Morgan -- Analyst

Good morning. How are you?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good.

Silke Kueck -- J.P. Morgan -- Analyst

The first question I have is a cash flow question. So in your press release it's says like you know, year-to-date your MAP-related initiative was sort of like $0.50 headwind to -- way it was sort of like a -- you spoke it as a non-recurring item, so maybe that's like $80 million or $90 million pre-tax. Like-what do you expect in the fourth quarter in terms of charges and what are the cash outflows related to that, that may still have to come, like if you've already spent all of it or what are the outflows that may come in the fourth quarter or next year?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Yes. There you should expect continuing outflows in terms of consulting and professional fees, which is categorized by Rusty in this Other category. And that's running now $6 million or $8 million a quarter. In some quarters it'll be more, in some quarters it will be less and they will be ongoing for a period of time. And then the charges that we will continue to incur, particularly in fiscal '20 will be related to plant closures and/or distribution consolidation. And a portion of that will be non-cash asset write-offs and a big portion of that will be severance associated with those plant closures and related terminations. So we would expect to see those costs continue in '20. In July, we will provide more detail by category of our expected closures, closure costs and what are those will be cash and what are non-cash. The other category is ERP implementations and we'll have to get our head around that one, because there's some debate as to how much of that ERP money we would have spent anyways versus what is being spent because of, or accelerated because of our MAP to Growth initiatives.

Silke Kueck -- J.P. Morgan -- Analyst

Okay.

Frank C. Sullivan -- Chairman and Chief Executive Officer

I think previously we talked about a total program cost in the $120 million to $140 million range and the cash cost being in the $80 million to $90 million range. And we'll provide details in July of how much of that has been spent and an estimate of what's to come.

Silke Kueck -- J.P. Morgan -- Analyst

Okay. That's helpful. The second question I have is related to the Rust-Oleum and True Value Initiative, that was in fact put in place. So it's something that's new, as best as I understand. And True Value has, I don't know, 4,500 stores something like that. And what's the sell through that you expect? Is it something like $10,000 a store and the opportunities at $45 million or that's way too optimistic, or it's way too low, or is there like any additional color that you may have?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Yeah. Not really. I mean, without being disrespectful, it's kind of way too in the weeds. And for obvious reasons, we have avoided talking as much as possible about specific customers. A year ago, that was hard to do with some of the strategic changes supply wise in our marketplace. But I had commented earlier that we had picked up market share in the hardware store chain in small project paints with our Consumer segment, and that's been true and actually benefit our fourth quarter. And then we've also regained some big-box share that was lost last spring and some of that's coming back to us.

So the Consumer businesses are doing a nice job in managing their categories, which we lead in and we have formidable competitors. Their focus tends to be more on gallon goods and retail paint stores as opposed to the specialty products that we focus on. And that's allowed us to gain share in hardware and regain some lost share in big box.

Silke Kueck -- J.P. Morgan -- Analyst

If I may ask the question like one other way. So if I look at your fourth quarter guidance, then I look at the guidance for the Consumer group for the fourth quarter, do you think the underlying demand was something like 2%? If you'd like strip out what the business wins may be and what -- and pricing and stuff is like 2%, would you think it's better than that or worse than that?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Our forecast for the fourth quarter Consumer is in the mid-to-high single digits that will all be organic -- that will all be organic.

Silke Kueck -- J.P. Morgan -- Analyst

It will all be organic and it includes price and business wins?

Frank C. Sullivan -- Chairman and Chief Executive Officer

That's correct. And so, it should be a solid fourth quarter for our Consumer segment.

Silke Kueck -- J.P. Morgan -- Analyst

Okay. I think, the last question...

Frank C. Sullivan -- Chairman and Chief Executive Officer

(multiple speakers) Just so you know, I mean, in terms of the quarter, it will offset what we anticipate to be a challenging comp and some regional challenges in our largest segment, which is Industrial.

Silke Kueck -- J.P. Morgan -- Analyst

The last question, I have is on the Specialty segments. You said Nudura is like -- annual sales like maybe $50 million and it's seasonally slow in the February quarter and then it's probably a more normal quarter in -- for the May quarter. And so, if you were to get -- I don't know, like $10 million or $12 million in Nudura-related sales, like that would be like 5% growth in the Specialty segment. So why is your outlook so conservative in terms of modest growth?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Yeah. I mean (multiple speakers).

Silke Kueck -- J.P. Morgan -- Analyst

You think the acquisition benefit would be 5%?

Frank C. Sullivan -- Chairman and Chief Executive Officer

No. I mean, we build that up from our businesses, and in our Specialty segment it's a real crosscurrent of fluorescent pigment. I mean you know all the different product lines. I think they're expecting a modest single-digit growth. And I can't answer that specifically right now. I don't know, maybe Rusty does, if it's versus a tough comp last year. Rusty?

Russell L. Gordon -- Vice President and Chief Financial Officer

Yes. I think another factor you should consider is FX will be going against us. So that'll impact the sales growth. And the momentum this year has been low organic growth. They were the first to get price out of the box, so we'll start lapping the anniversary of price increases. So that impact may tail off a bit too.

Silke Kueck -- J.P. Morgan -- Analyst

Okay. Thanks very much for taking the questions.

Russell L. Gordon -- Vice President and Chief Financial Officer

Sure.

Operator

Thank you. Our next question online comes from Steve Byrne from Bank of America. Please go ahead.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good morning.

Steve Byrne -- Bank of America Merrill Lynch -- Analyst

Good morning. Frank, when you rolled out the MAP to Growth initiative last fall, you put out some margin targets. Were you anticipating some slippage in margins in this fiscal year? And what's your level of conviction on hitting, say, that 16% EBIT margin looking out two years?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. I think that's a great question, and I think we and our whole industry experienced some challenges this year that we did not fully anticipate. So when we get to the end of our current fiscal year at May 31, I think people are seeing and will start to believe the good momentum that we're building. But we'll be a little bit behind the curve in terms of our margin targets. We'll have a better sense of that in July. And the element of that is not a function of if we get there, it would really be a function of timing. So are we going to get there on exactly the timing that we talked about.

And then the other element is, given the pluses and minuses of building an operating improvement plan, can we find additional savings that would compensate for what is a slower start relative to the fiscal '19 margins that we anticipated when we put this plan together in October and November versus where we're going to end up the year.

Steve Byrne -- Bank of America Merrill Lynch -- Analyst

And just to expand on that, Frank, when you say the potential additional savings, are you looking at different areas to potentially integrate? I don't know whether it's facility headquarters or distribution or commercial. Are you looking at some other levers to pull?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Not necessarily. We do have some opportunities in G&A that we're looking at. I think the other area that we're excited about and this is not going to happen as of the December 31, 2020 or even May 31, 2021 timeframe, but the manufacturing improvements and continuous improvement initiatives that we're rolling out, are having a really good effect. And when the MAP to Growth timeline stops relative to the communicated kind of target finish-line that we have, our continuous improvement programs will not. And there is some growing enthusiasm about our ability to add to that $75 million manufacturing and operations target. It's outside of our MAP to Growth timeline, but it's real. And so there's a lot of enthusiasm there and a lot of the things that we're doing when they're effective, will not only impact margins relative to financial targets, but will change our culture in some fundamental ways, particularly in how we allocate capital to fixed assets and how we measure performance and efficiency on the plant floor. And that will continue beyond this program.

Steve Byrne -- Bank of America Merrill Lynch -- Analyst

And just one last one for you, Frank. You've got a lot on your plate right now. Would you consider bringing in any new resources to help but drive this restructuring program given Steve's challenges right now?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Well, we would expect Steve to be back in the saddle hopefully, sometime mid-to-late summer. And as it relates to new resources, Gordy Hyde, leading our manufacturing and operations efforts, we have added four process engineers on the corporate staff that work directly for him. We have in the procurement side taken four or five of our top procurement people out of our operations, put them on the corporate payroll and we've added an additional resource there. And so, we are adding some really good talent in the procurement and the manufacturing continuous improvement areas to, again, not only help us achieve our goals that have been laid out, but really help us fundamentally change our procurement process and our manufacturing and operations focus on an ongoing basis.

Steve Byrne -- Bank of America Merrill Lynch -- Analyst

Very good. Thank you.

Operator

And thank you. Our next question online comes from Arun Viswanathan from RBC Capital Markets.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good morning.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Good morning, Frank. How are you doing? Thanks for taking my question. I guess, first off, is just on price real quickly. Given your comments earlier as far as crude going back up, but maybe the (ph) raw still kind of settling down. Is that a fair, I guess, assessment? And would you think that you need to go out with further pricing as the year goes on, so should we expect kind of a increasing contribution from price in future quarters, or how should we think about that?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. That's a great question. And so here's how we think about it. As I mentioned earlier, sequentially we're seeing a second quarter where raw materials quarter-over-quarter are going down by low-single digits. Year-over-year, we're still up. Hopefully that will even out in Q4. Certainly, that's our expectation. Much of the price increase that we've experienced was developed throughout the fiscal year and the last pieces, as I mentioned earlier, were in Consumer. So I think we'll get the full benefit of price for sure in the first half of the new fiscal year. And then we'll start to annualize price increases as we go through the year across RPM. The area that would drive additional price increases is what's happening in not only raw materials, but freight, labor. There is a higher level of inflation across every business, at least in United States, relative to employment, labor costs. And it will be interesting to see how that plays out as well.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Okay. Thanks. And in the Consumer business, I think you had noted some weakness in this small project category over the last couple years at different times and possibly some of it due to competitive pressures. Have you -- have you seen either a kind of a moderation in those competitive pressures and any benefits to you guys? Have you been able to (technical difficulty) of Varathane?

And then as a second part (technical difficulty) you know, if it's not -- if competitive pressures haven't subsided, do you think that the DIY channel itself is going to continue to be weak just given low unemployment, or how should we think about how the DIY channel and Consumer segment kind of trends from a volume perspective over the next couple of quarters?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. First of all, it's an intensely competitive area. There's some really strong regional players and a lot of big and bigger than us industry players that we compete with every day. The other thing that we suffered through last year, in particular in Q4 and into June, was extraordinarily wet weather, which tamped down POS. I mentioned earlier on the call, the early read on consumer takeaway is pretty good. So the first couple of weeks of our fourth quarter, we're seeing real strong POS in small project paint. And combined with market share gains, we should have a nice recovery in our Consumer business.

I would remind folks that we also took out a significant chunk of SG&A in Consumer in the fourth quarter of last year, and two of the plant closures that we have announced and had been completed were in our Consumer segment. So we've done a lot of work there on the cost side and we've picked up market share and we're seeing better POS at least as the start of the first -- the fourth quarter than we've seen in four or five quarters. And so, it's all -- all pointing in the right direction. Weather could impact that in the fourth quarter. I think that's the only element that would negate what feels like good momentum.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Okay. Thanks. And just lastly if I may, you mentioned some continued softness in Europe. Any chance that, that could turn around, I guess, later as we go through the year? And then maybe you can give us one line or two on Industrial in North America and Brazil? And if you're feeling any encouragement by those markets or offset by those markets? Thanks.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. We don't anticipate things improving in Europe. And if there was a Brexit deal that made everybody happy, that might buoy your spirits across Europe and help things hit -- move in the right direction, but we're not planning on that. As it relates to Latin America, I think that we're seeing some spikiness from one month to the next and in this case, I think it's good particularly in Brazil, where we have our (inaudible) business, our largest presence in Latin America. As the economy turned down in Brazil and geopolitical issues hit, we saw some spikiness that ultimately was a volatility indicator of a significant downward trend. Now we're seeing some spikiness, not only in Brazil, but in other parts of Latin America, which I'm hopeful is like a volatility indicator of a significant movement in the right direction. And so, the feeling on the ground there is more positive than it's been in a couple of years. We're not consistently seeing it in our results yet, although we're hopeful.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Great. Thank you.

Operator

Thank you. Our next question online comes from Mr. Kevin Hocevar from North Coast Research.

Kevin Hocevar -- Northcoast Research -- Analyst

Hey, good morning, everybody. Wondering, just wanted some clarification on Slide 5. The new year-to-date estimate run rate of $104 million, up from the initial target of $83 million. Is that -- and you maintained the 2.90% (ph). Is that implying then that you're realizing savings faster and perhaps pulling some savings forward from future waves and that's the reason for the raise or these -- are you generating more savings than you initially expected, which could be incremental?

Frank C. Sullivan -- Chairman and Chief Executive Officer

That's a great question that we struggle with here. And that's why we have not changed our long-term target. I think it's way too early to decide that after being at this for essentially four months, five months, that we're not only ahead of the curve in terms of timing in the first phase, but that we're actually adding to the whole program. So I think on the manufacturing piece, we're a little bit ahead of the curve; on the procurement piece, we're a little bit ahead of where we thought we were. As we get into next year, we will -- we hope to provide more detail. And I think we'll have a better answer to that question because it is one that we are struggling with internally in terms of what is being off to a good start, but feeling like maybe we're accelerating some of the early benefits. In procurement, in particular, I think there'll be a point at which we will have achieved what is possible with a new approach and the rest of it will be really a function of what happens in the commodity cycle.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Got you. Okay. And then in the guidance, you gave an expectation for Consumer segment margin recovery starting in the fourth quarter, but didn't mention that any similar verbiage in the other segments. So the expectation that those other segments I don't know flattish or something like that margins or Consumer is really the one that's going to see the nice improvements there?

Frank C. Sullivan -- Chairman and Chief Executive Officer

No, I would expect to see margin recovery in all three of our segments in the fourth quarter. It will be a function of mix in part, so the elements that are impacting our gross margins are really three things. They are raw material cost headwinds which year-over-year continuing that should start to mitigate as we get into fourth quarter and rest of 2020, the impact of our price increases, and the positive impact of our MAP to Growth initiatives. So I would expect margin improvement in each of our three segments.

In the fourth quarter, it will be most pronounced in Consumer because our Consumer segment was the first to execute on SG&A cost cutting and that our first plant closure is out of the box in Consumer as well, and we'll also be annualizing a easier comp both in the fourth quarter and the first quarter.

Kevin Hocevar -- Northcoast Research -- Analyst

Okay. Got you. Very helpful. Thank you.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Thank you.

Operator

And thank you. Our final question comes from Mr. Mike Sison from KeyBanc. Please go ahead.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good morning, Mike.

Brendan -- KeyBanc Capital Markets -- Analyst

Oh, this Brendan on for Mike. How are you guys doing?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Good.

Brendan -- KeyBanc Capital Markets -- Analyst

So I know you guys have talked about international weakness specifically in Europe. I was hoping you could talk a little bit more about the positive momentum in North America, specifically the US. What are your expectations for demand in the fourth quarter and maybe how that moves into fiscal year 2020?

Frank C. Sullivan -- Chairman and Chief Executive Officer

Sure. As we had commented earlier, the energy markets that we serve seem to be pretty solid and we're back to a normal level of maintenance spending. The activity in construction markets has been a little bit volatile. But I think recent communications or information around housing starts and commercial construction suggests that that's going to continue to be positive. And just like in our Consumer segment that we've talked about, we've got some new product areas. There's an opportunity to leverage some of the new Nudura business growth in cooperation with our Tremco businesses, the AlphaGuard roof restoration product is continuing to grow at double digits. And so, some of it is market related and some of it is a continuation of some of the new product introductions and new innovation that is coming out of our Industrial segment. So, we see that as positive, and most of the new product introductions that we're talking about happened to also be North America, because those are our biggest markets and where we have our largest sales and distribution effort.

Brendan -- KeyBanc Capital Markets -- Analyst

Great color. Thank you. That's all I had.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Thank you.

Operator

We have no further questions at this time. I'd like to turn the call over to Mr. Sullivan for closing remarks.

Frank C. Sullivan -- Chairman and Chief Executive Officer

Thank you, very much for joining us on today's call. We appreciate all the questions around our MAP to Growth program and hope to provide you with even more details when we release our fourth quarter results and provide outlook for our 2020 fiscal year on July 22nd. We plan to renew our tradition of releasing our earnings in New York, most likely at the New York Stock Exchange, with an Investor Luncheon, where we will also have our segment Presidents to talk in more detail about their expectations for growth in their segment and the impact of MAP to Growth, not only in RPM on a consolidated basis, but also by each of our segments as well.

Thank you very much for your interest in RPM and your investment in RPM and have a great day.

Operator

And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

Duration: 76 minutes

Call participants:

Frank C. Sullivan -- Chairman and Chief Executive Officer

Kristine Schulze -- Director of Financial Reporting

Russell L. Gordon -- Vice President and Chief Financial Officer

John McNulty -- BMO Capital Markets -- Analyst

Frank Mitsch -- Fermium Research -- Analyst

Rosemarie Morbelli -- G. Research -- Analyst

Steve -- Morgan Stanley -- Analyst

Ghansham Panjabi -- Robert W. Baird & Co. -- Analyst

Jason Rodgers -- Great Lakes Review -- Analyst

Kevin McCarthy -- Vertical Research -- Analyst

Michael Harrison -- Seaport Global Securities -- Analyst

Silke Kueck -- J.P. Morgan -- Analyst

Steve Byrne -- Bank of America Merrill Lynch -- Analyst

Arun Viswanathan -- RBC Capital Markets -- Analyst

Kevin Hocevar -- Northcoast Research -- Analyst

Brendan -- KeyBanc Capital Markets -- Analyst

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