00:00 Speaker A
Saint-Gobain shares rising as we speak after the French provider of development supplies posted higher than anticipated income for the primary quarter. It additionally reaffirmed steerage amid tariff issues. For extra, we have got Mark Rayfield, Saint-Gobain North America CEO. Mark, it is good to see you once more. Thanks lots for being right here.
00:15 Mark Rayfield
Good to see you as properly. Thanks for having me.
00:17 Speaker A
So, as we have talked about earlier than, however simply to reiterate right here for our viewers, you guys will not be very uncovered to tariffs as a result of the development supplies you are promoting within the US, roofing, drywall, and many others., is just about made within the US, proper? Speak me by way of, um, you realize, form of the the move of your provide chain simply briefly for for individuals who aren’t acquainted.
00:35 Mark Rayfield
Certain. I like to. So we now have about 60 vegetation within the US and 30 vegetation in Canada to service these native markets. We manufacture the roofing and gypsum very native to the place they’re provided. So we now have vegetation in Florida for the Southeast and New England for the Northeast. They’re very heavy merchandise. The uncooked supplies are native, the purchasers are native. So we’re not very closely impacted by tariffs in any respect. There’s some very minor uncooked supplies that will cross the border right here or there, however actually we’re an area enterprise for native prospects.
01:11 Speaker B
So have a query for you, Julian and I had been right here discussing proper earlier than you got here on simply what’s subsequent for the housing markets, proper? We see this sort of conflicting knowledge that is an unsure path. Who higher to ask than somebody that serves that straight with provides? I imply, how do you make sense of the truth that we now have extra completed houses proper now within the US than we did proper round, you realize, pandemic ranges, proper? The final disaster. Um, and pri- is it a pricing challenge? Is it rates of interest? Is it a provide, you realize, inflation? The place do you come down on that? And what what’s the the the issue that breaks the levy in order that housing actually, uh, rekindles its progress?
02:14 Mark Rayfield
Yeah, I will offer you an opinion. I believe the solutions are very tough to reply and I most likely haven’t got the right one. I imply, the fact is there’s so many alternative indicators going ahead. What we take a look at is the fundamental fundamentals of housing are sturdy, the household creation, the underbuilt idea of about 2 to three million within the US and virtually 2 million in Canada of underbuilt houses. So there’s a demand there, there is a want there for housing within the quick, mid, and long run. You could have a lot of totally different numbers popping out. So you may have the very low new or current house gross sales quantity that simply got here out this week. Once you take a look at that, it is okay, that is the tip of the world. In case you take a look at the opposite aspect of that, you would say, okay, inventories now are constructing as much as a traditional stage of houses on the market. That is bringing costs down under inflation, which is making affordability, which has been one of many larger points off the desk to some extent. So I believe when rates of interest get to six% or so, you may have a releasing of numerous exercise after which you may have a shopper confidence challenge that form of touches on every little thing in that perspective. Having stated that, numerous our enterprise and numerous enterprise within the constructing supplies enterprise is renovation and reworking. And you may take the identical either side of the coin view there that while you promote a home, you rework it earlier than you promote it, while you purchase it, you rework it so it matches what you need. By the identical token, in case you keep in it longer, resolve to not promote since you had been could not discover the suitable home, you once more rework there like we noticed in COVID. So every indicator that we take a look at has form of a counterbalance to it. And what offers us consolation is our nice leads to the primary quarter and the truth that over two thirds of our enterprise is renovation reworking, and a very good portion of that’s non-discretionary. Your roof leaks, you exchange your roof. Your siding’s broken, you exchange your siding.
05:00 Speaker A
And and so Mark, is that the case even when there have been to be a recession? And I wish to ask this query not only for the US, however for Canada, which is a giant marketplace for you guys as properly, and which is certainly in danger from tariffs. So while you begin to see even when it is only a delicate recession, say, in case you do see any financial pullback, we already know that shopper sentiment is awful. Um, how do you anticipate all of that to have an effect on spending in your merchandise on this market and in our, uh, northern neighbor?
05:41 Mark Rayfield
Properly, I believe, you realize, what we’re seeing in Canada as we speak is definitely form of stunning. We’re seeing an uptick in housing proper now there. So that they’re really having a very good swing up off of a low base. However but when there is a recession, it might most likely impression everyone. However once more, it does not impression renovation and reworking wherever close to the extent it does new home constructing, and it does not impression non-discretionary spending, which most of your roofing, a very good portion of your siding is in that non-discretionary aspect of the enterprise. And numerous your industrial tasks the place your gypsum and insulation go into are long-term tasks which can be began. So, I imply, you are all the time trying on the financial system, taking a look at threat going ahead, however however in essence, I I do the identical factor you do. Take a look at all of the reviews popping out day by day and, you realize, a part of your physique goes, oh my god, this may very well be actually dangerous right here, then you definately return and take a look at the counter aspect of it, and then you definately look what we’re seeing available in the market, which continues to be good demand. A few of our companies are nonetheless bought out and we’re nonetheless seeing good pull by way of below distribution and into {the marketplace}.
07:20 Speaker B
Yeah, I I believe I assume what are the unfavorable potential threat for the enterprise as a result of I sit right here not very accustomed together with your firm, and now I’m intrigued since you’re basically a shopper staple in the true property market, proper? For non-discretionary spending, you are not uncovered to tariffs, which is a whole rarity as we speak. Um, is there a valuation concern? What do you see as potential dangers that might change the enterprise for you?
08:02 Mark Rayfield
I believe they they evolve. I imply there was a threat when rates of interest had been going up that individuals had been ready for decrease rates of interest. I believe that is settled a bit bit. I believe now individuals is perhaps pondering, you realize, six on the rate of interest versus a 3 is an efficient rate of interest, so we’re nearer to that quantity going ahead. You could have an affordability index. So once more, the the variety of houses which can be in the marketplace now rising, whereas it may very well be seen as a unfavorable so far as month on month gross sales, really is bringing deflation into {the marketplace}, making it extra reasonably priced from that perspective. After which there’s all the time, on a very good market, the problem we take a look at is labor, ensuring there’s sufficient labor to construct and renovate houses going ahead. And that is all the time form of has been the the purpose of, of, you realize, inflection, so to talk, on when the housing market picks up that may gradual us down.
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