Keith Hughes

Julian, on behalf of Keith Hughes, asked when Ferguson anticipates an easing of HVAC comparable sales, which were impacted by pre-shipments ahead of last year's efficiency standard changes.

Answer

CEO Kevin Murphy stated that the HVAC market is currently in a tough spot, having worsened through the quarter. He attributed this to several factors, including the A2L transition's pull-forward effect, equipment price increases for new standard products, a pressured consumer shifting towards repair over replacement, and the conclusion of some multifamily new construction activity. While difficult to pinpoint when the market will return to a replacement environment or see residential RMI pick up, Ferguson remains bullish on the long-term outlook for the HVAC market and continues to invest in convenient locations, OEM brand representation, and M&A for dual-trade contractors.

Keith Hughes pointed out that the gross margin impact from deflation seemed far greater this quarter than in the previous five quarters and asked for the specific reason. He also inquired if the decline in the Fire business was mostly due to steel pipe deflation.

Answer

CFO Bill Brundage explained that the significant margin impact was due to a confluence of factors in a seasonally light quarter: weak volumes, a competitive market, persistent deflation, and the sales mix shift. CEO Kevin Murphy confirmed that the Fire business's sales decline was heavily driven by deflation in steel pipe, which is a major component of that business, though he noted that underlying volumes remain solid.

Keith Hughes inquired about the significant SG&A deleverage in Q1 and its expected trajectory for the fiscal year, and also asked about the slight gross margin compression despite a stable pricing environment.

Answer

CFO Bill Brundage explained that SG&A pressure was anticipated due to market headwinds and commodity deflation, particularly in the first half. He noted that while total costs rose about 5%, volume grew 3%, with the difference driven by wage inflation and strategic investments in trainees, HVAC expansion, and large project teams. Regarding gross margins, Brundage attributed the 10 basis point decline to a business mix-shift, as faster-growing, lower-margin businesses like HVAC (+10%) and Waterworks (+3%) had a greater impact. CEO Kevin Murphy added that the company is pleased with the gross margin profile of its commodity business amidst deflation.

Keith Hughes asked about pricing expectations for the decking business, considering a competitive market and potential discounting. He also inquired about future plans for railing, including new product launches and different substrate materials.

Answer

CEO Aaron Erter and Jon Skelly, President of AZEK Residential, stated that their approach to pricing remains consistent, and they expect to continue taking inflationary pricing in the marketplace. Regarding railing, Jon Skelly highlighted the recent Advantage Rail launch, which expands their portfolio to include good, better, and best options across vinyl, steel, aluminum, composite, and PVC, aiming to simplify offerings for dealer partners and leverage the TimberTech brand.

Keith Hughes asked about price expectations for the decking business for the end of the year and into next year, considering a competitive market and potential discounting. He also inquired about future plans for railing, including new launches and different substrate materials.

Answer

CEO Aaron Erter and President of AZEK Residential Jon Skelly affirmed that they have taken price and will continue to take inflationary pricing, with no change in their consistent approach. Jon Skelly detailed new product introductions like Advantage Rail, which expands their composite offering, and the strategy to fill out the railing portfolio with vinyl, steel, aluminum, and PVC options to provide a complete offering for dealer partners, simplifying choices and leveraging the TimberTech brand.

Keith Hughes from Truist Securities challenged the company's guidance, suggesting that the expected inventory reductions imply a significant market share loss. He also questioned the lowered sell-through outlook for AZEK and asked if there were any integration issues.

Answer

CEO Aaron Erter reiterated that customers will continue managing inventory down in Q2 and Q3 due to market cautiousness. He pushed back on the share loss narrative, emphasizing differences in reporting timing and market segment focus compared to competitors. Regarding AZEK, Mr. Erter stated there are no integration problems or business slowdowns, describing the outlook as prudent amidst market challenges and reaffirming his confidence in the AZEK business.

Keith Hughes from Truist Securities asked for clarification on the key drivers behind the guided mid-single-digit volume decline in North America, specifically the influence of interior products and the multifamily segment.

Answer

CEO Aaron Erter detailed the outlook, noting R&R is expected to be down mid-to-high single digits and multifamily will also be down, though less than in FY'25. He clarified that the core single-family exteriors business experienced solid growth, but this was offset by significant declines in the multifamily and interiors businesses.

Keith Hughes from Truist inquired about the specific raw materials that caused the most margin pressure in the third quarter. He also asked if the upcoming price increase would fully offset cost inflation or if HOS savings would be required to bridge the gap.

Answer

CFO Rachel Wilson confirmed that pulp and cement were both significantly up year-over-year and were the main drivers of margin pressure. CEO Aaron Erter added that while pricing is expected to offset most raw material inflation, the HOS program provides a crucial lever to cover any remainder and to fund growth initiatives.

Keith Hughes from Truist inquired about the conditions under which Somnigroup would consider acquiring another retailer or manufacturing brand, moving beyond passive investments, and if such acquisitions are on the horizon.

Answer

Chairman, President, and CEO Scott Thompson reiterated that Somnigroup's capital allocation strategy remains consistent, prioritizing disciplined balance sheet management. He confirmed that the company continuously evaluates opportunities for acquisitions of other manufacturers, adjacent businesses, or retailers globally. While they don't budget or target acquisitions, he believes it's "likely" they will pursue more in the coming years, dependent on finding the right company at the right price, acknowledging that such moves could impact deleveraging timelines or target ratios.

Keith Hughes inquired about Somnigroup's potential strategy to acquire other retailers or manufacturing brands, rather than making passive investments, especially given the company's plan to shift free cash flow towards shareholder returns.

Answer

Scott Thompson, Chairman, President, and CEO, Somnigroup International, affirmed that the company's capital allocation strategy remains consistent, prioritizing a disciplined balance sheet while continuously evaluating opportunities for acquisitions of manufacturers, adjacent businesses, or retailers globally. He stated that while they don't budget or target acquisitions, it's likely they will pursue more in the coming years if the right opportunities arise at the right price. Thompson acknowledged that such acquisitions might influence the pace of deleveraging or the final leverage ratio, but emphasized that they continue to actively explore various companies.

Keith Hughes inquired about the impact of the Quikrete deal on SG&A spending, potential mixed impacts within aggregates next year, and confirmation that the 2026 preliminary guidance is organic.

Answer

Michael Petro, SVP and CFO, clarified that the Quikrete deal is a clean carve-out, with some retained SG&A already accounted for in discontinued operations' EBITDA. Ward Nye, Chairman and CEO, acknowledged a potential optical geographic mix headwind in aggregates due to new central region businesses. Ward Nye confirmed that the preliminary guidance for 2026 is based on organic numbers.

Keith Hughes inquired about the impact of the Quikrete asset exchange on Martin Marietta's SG&A spending, potential mixed impacts within aggregates next year, and confirmation if the 2026 preliminary guidance numbers are organic.

Answer

SVP and CFO Michael Petro clarified that the Quikrete transaction is a clean carve-out with some retained SG&A, but the EBITDA in discontinued operations already accounts for this. Chairman and CEO Ward Nye noted there would likely be some geographic mixed impacts within aggregates due to picking up businesses in the central region and Virginia, which could be an optical headwind. Ward Nye confirmed that the preliminary guidance for 2026 is based on organic numbers.

Keith Hughes of Truist Securities followed up on the discussion of new surface transportation legislation, asking if there is an emerging timeline for its introduction and passage. He also inquired if the funding for roads, bridges, and streets in a new bill might be greater than the $350 billion allocated in the IIJA.

Answer

Chair and CEO Ward Nye shared anecdotal information suggesting a push to get a new bill done before the mid-term elections next year for a smoother transition. While he would not be surprised to see a headline number smaller than the IIJA's $1.2 trillion, he expects the proportion dedicated to highways, bridges, roads, and streets to be much higher. When asked if the amount for roads and bridges could be greater than the IIJA's allocation, Nye responded, 'I think that's certainly where people are trending, yes.'

Keith Hughes followed up on commercial roofing acquisitions, asking if TopBuild is targeting specific geographic regions and whether the choice of major membrane suppliers to installers influences potential deals.

Answer

Robert Buck, President and CEO, stated that given the highly fragmented nature and white space in the market, TopBuild is not focusing on a particular geographic region for roofing M&A, but rather on acquiring high-quality companies and talent. He added that TopBuild has strong existing relationships with major roofing suppliers, so the supplier base of potential acquisitions does not significantly influence deal decisions.

Keith Hughes asked if there is a specific geographic region targeted for commercial roofing acquisitions and whether the identity of major membrane suppliers to installers influences potential deals.

Answer

Robert Buck (President and CEO) noted the highly fragmented nature of the market and extensive white space, indicating no particular geographic focus for acquisitions. He emphasized seeking quality companies and talent. He also stated that major roofing suppliers are already significant TopBuild partners, so their identity does not heavily influence acquisition decisions.

Keith Hughes from Truist Securities sought to clarify if the 40% commercial/industrial sales mix included Progressive, asked about Progressive's business mix, and inquired about any signs of recovery in light commercial orders.

Answer

CFO Rob Kunins confirmed the 40% C&I mix includes Progressive. CEO Robert Buck stated Progressive's business is majority heavy commercial, with Kunins adding that 70% is reroof/services. Buck noted Progressive is 'agnostic' on roofing applications. Management indicated no signs of recovery yet in the light commercial market.

Keith Hughes of Truist Securities asked for a breakdown of the organic performance within the Specialty Distribution segment, specifically between the residential-focused Service Partners business and the commercial-focused businesses.

Answer

CFO Rob Kuhns provided specific figures, noting a clear divergence. On a same-branch revenue basis, the residential side of the segment was down approximately 5%, while the commercial side was up around 2%. He highlighted that the mechanical insulation business was the strongest performer within the commercial group.

Keith Hughes asked if the flattish outlook for commercial and industrial implies that the distribution business will experience less pressure than the installation segment. He also questioned the near-term pricing outlook for jobs that are primarily fiberglass and whether there is a risk of job price compression.

Answer

CFO Rob Kuhns confirmed that since the C&I business (guided to low-single-digit growth) is a larger part of Specialty Distribution, the Installation segment will face tougher year-over-year sales comparisons. CEO Robert Buck reiterated that fiberglass price increases lack traction. Kuhns added that while some price pressure exists in slower markets, especially for spray foam, it is not widespread, and margins are holding up well overall due to a focus on optimizing the volume-margin balance.

Keith Hughes of Truist Securities asked about the expected performance of the multifamily business in the fourth-quarter guidance. He also questioned what market conditions would be necessary to drive higher price inflation for TopBuild's products.

Answer

CFO Rob Kuhns indicated that total residential sales are expected to be roughly flat for the full year, implying a slight decline in Q4 driven primarily by multifamily. He noted multifamily would be a challenge in early 2025 but that the company expects to outperform the market. CEO Robert Buck added that a steady increase in single-family starts and the continued adoption of stricter energy codes would be key drivers for future pricing power.

Keith Hughes asked about the sustainability of Vulcan's cash gross profit per ton run into 2026 and beyond, and what factors could potentially drive it even higher.

Answer

Ronnie Pruitt, COO, explained that past growth came from inflationary pricing and cost momentum. He anticipates demand recovery will aid pricing, while 'Vulcan Way of Operating' and 'Vulcan Way of Selling' will continue to support cost and commercial efforts, expecting cash gross profit per ton to remain above historical norms.

Keith Hughes from Truist Securities asked for the expected timing of volume growth from the positive non-residential construction outlook and inquired about the forecast for aggregate pricing in the second half of the year.

Answer

J. Thomas Hill, Chair & CEO, indicated that while some non-residential volume impact will occur in H2 2025, it's more of a 2026-2027 story. Regarding H2 pricing, he expects continued momentum but noted that sequential growth might be moderated by product mix due to a higher proportion of base material for the strong highway sector.

Keith Hughes from Truist asked for specifics on why costs were down in the quarter and what the cost outlook is for the rest of the year.

Answer

CEO James Hill attributed the 3% decline in freight-adjusted unit cash cost to three main factors: improving operating efficiencies from the 'Vulcan Way of Operating', disciplined spending control during cold weather, and the weather-related delay of certain expenditures like stripping. He emphasized that costs can be lumpy quarter-to-quarter and reiterated the full-year guidance for low-to-mid-single-digit cost growth, while noting the company's goal is to outperform that target.

Keith Hughes of Truist Securities asked about the quarter-to-date weather impact on shipments and the operational fit of the recent Southern California acquisition's downstream assets.

Answer

CEO Tom Hill described the weather in January and February as 'not a great start' due to cold and snow, but noted the annual plan anticipates some weather disruptions. Regarding the acquisition, he stated it fits 'very well,' with aggregates and asphalt integrating with existing operations, while the ready-mix assets provide an excellent new market position for Vulcan.

Keith Hughes inquired about the potential magnitude of aggregate volume growth in 2025 and whether achieving the company's pricing goals would necessitate sacrificing shipment volumes.

Answer

Chairman and CEO James Hill projected low single-digit volume growth for 2025, assuming normal weather patterns. He stated that this level of growth would not require sacrificing volumes to achieve their high single-digit pricing targets. The growth is expected to be driven by project deferrals from 2024, strength in public and residential construction, partially offset by weakness in private non-residential.

Keith Hughes from Truist Securities first asked about the nature of the distribution disruption (inventory levels or price) and whether it is expected to be fully resolved by Q1. He then inquired about pricing in CWT, specifically if MDI, tariffs, and anti-dumping duties are leading to or expected to lead to near-term price increases due to cost pressures.

Answer

Chris Koch, Chair, President, and CEO, explained that the distribution disruption likely varied by location due to M&A integration and management changes, leading to uncaptured sales. He expects it to be largely resolved by 2026. Regarding CWT pricing, Koch noted mixed raw material trends, with MDI showing an upward trend in 2025 but flattening quarter-over-quarter, while EPDM polymers are increasing. Kevin Zdimal, CFO, added that CWT pricing is down slightly (less than 1%) due to pressure on select categories like underlayments and insulation, despite MDI and anti-dumping duties.

Keith Hughes asked about the nature of the distribution disruption, whether it's resolved for Q1 2026, and the pricing dynamics in CWT given MDI, tariffs, and anti-dumping duties.

Answer

Chris Koch, Chair, President, and CEO, stated he doesn't know the exact nature of the distribution disruption, as each location was affected differently by integration and management changes. He expects it to be resolved for 2026, though it may still impact Q4. Regarding CWT pricing, he noted mixed raw material trends (MDI up in 2025 but flat Q-o-Q, polyol lower, EPDM increasing), generally biased towards increases for Q4. Kevin Zdimal, CFO, added that CWT pricing is down less than 1% due to pressure on select categories like underlayments and insulation in softer demand markets.

Keith Hughes of Truist Securities questioned the outlook for MDI costs in the second half of the year and asked if any specific products within the CWT segment were struggling to achieve pricing traction.

Answer

CEO D. Christian Koch stated that after a slight rise in Q2, MDI costs are expected to flatten out for the remainder of the year. VP of Investor Relations Mehul Patel clarified that CWT pricing is stable year-over-year across all product lines. He specifically noted that pricing pressure in spray foam has bottomed out, with prices expected to remain stable rather than increase.

Keith Hughes of Truist asked for the specific pricing decline in the CWT segment during Q1, whether it was driven by spray foam, and if pricing is expected to turn positive in the near term.

Answer

CFO Kevin Zdimal confirmed that CWT pricing was down approximately 1% in the first quarter. CEO D. Koch affirmed that the decline was driven by the spray foam product line. In response to the outlook, Koch noted that cost pressures from materials like fire retardants (ATO), fasteners, and plates were having a significant industry impact and are expected to continue into the second quarter, suggesting a basis for future price realization.

Keith Hughes asked about the implied flattish year-over-year EBITDA at the midpoint of Q4 guidance, seeking details on expected positives and negatives, and confirming the resolution of cement production issues for the fourth quarter.

Answer

Jan Jenisch, Chairman and CEO of Amrize, explained that Q4 guidance is cautious due to market uncertainties like tariffs and interest rates, but expressed optimism for the long term. He confirmed that cement production issues are resolved, and the company expects solid margins in Q4 and beyond.

Keith Hughes asked about the implied flattish Q4 EBITDA guidance, seeking details on the positive and negative factors expected, and specifically inquired if the cement production issues were fully resolved for Q4.

Answer

Jan Jenisch, Chairman and CEO, explained that the Q4 guidance is cautious due to ongoing market uncertainties, particularly regarding tariff politics and future interest rates affecting the commercial market. He confirmed that the cement production outage is resolved, and the company expects solid margins in Q4 and beyond.

Keith Hughes inquired about the specifics of the plumbing inventory reserves discussed, including whether it involved obsolete inventory and its dollar impact, and if it was a cash or non-cash element.

Answer

VP and CFO Rick Westenberg explained that the inventory reserve adjustment was part of a normal quarterly review, driven by the overall market environment and slow industry sales, and was larger than typical this quarter. He dimensioned its impact as representing about a quarter of the year-over-year operating profit or margin impact for the plumbing segment. He confirmed that it is a non-cash item.

Keith Hughes asked for details on the plumbing inventory reserves discussed, specifically whether they involved writing up obsolete inventory, the dollar impact, and if it was a cash or non-cash element.

Answer

Rick Westenberg, VP and CFO, explained that the inventory reserves were a larger-than-typical adjustment made during the quarterly balance sheet review, driven by the overall market environment and slow industry sales. He stated that it represented about a quarter of the year-over-year operating profit impact in the plumbing segment and confirmed it was a non-cash adjustment.

Keith Hughes of Truist questioned the company's M&A strategy following the Kichler divestiture, asking if the focus remains on bolt-on acquisitions in core areas. He also asked for the closing date of the Kichler sale.

Answer

CFO Rick Westenberg affirmed that Masco's M&A strategy is consistent and focused on bolt-on acquisitions within its core plumbing, coatings, or wellness businesses, similar to the Sauna360 transaction. He also stated that the Kichler divestiture closed on September 18.

Keith Hughes asked about the expected trend of SG&A expenses, particularly healthcare-related costs, over the next quarter or two. He also sought an outlook on manufacturing costs and the impact of inflation on inputs. Additionally, he inquired whether the shift from Class C to Class A office space is occurring in significant quantities or if the office market remains a lagging category.

Answer

CFO Chris Calzaretta confirmed that both incentive compensation and medical costs are expected to return to a normal run rate, as the Q3 impact was atypical. He stated that manufacturing costs would continue to experience inflation, but productivity gains are expected to maintain a run rate similar to the first two quarters of 2025. CEO Vic Grizzle indicated that ground-level activity in the office market, such as tenant improvement projects, is just beginning, suggesting it's a stabilized vertical with potential green shoots for 2026, but not yet a significant needle-mover.

Keith Hughes questioned whether the elevated SG&A expenses, particularly healthcare-related costs, would normalize in the upcoming quarters and asked about the outlook for manufacturing costs and potential inflation. He also sought an update on the office market's recovery, specifically the Class C to Class A transition.

Answer

CFO Chris Calzaretta confirmed that incentive compensation and medical costs are expected to return to normal run rates, as Q3 was atypical. He noted that manufacturing costs face inflation, but productivity gains are expected to maintain a consistent run rate. CEO Vic Grizzle stated that the office market is showing early "green shoots" with ground-level tenant improvement projects, broadening beyond major cities, but not yet significant needle movers.

Keith Hughes asked about the impact of recent distribution channel consolidation on Armstrong's go-to-market strategy. He also inquired about the timeline for the Temploc product to become a meaningful revenue contributor and whether it is accretive to average unit value (AUV).

Answer

CEO Vic Grizzle described the distribution consolidation as a continuing trend from which Armstrong has historically benefited. He expressed confidence in the situation due to management continuity at the acquired distributor. Regarding Temploc, he stated that while it's a long-term opportunity, he expects meaningful traction and sales acceleration in 2026 and 2027, and confirmed it is 'very nicely' accretive to AUV.

Keith Hughes from Truist Financial asked about the impact of steel tariffs on the WAVE joint venture, its pricing strategy, and whether there's a historical margin drag. He also questioned how much pricing contributed to Architectural Specialties' growth.

Answer

CEO Victor Grizzle explained that WAVE is experiencing indirect tariff impacts as domestic steel prices rise, and it has already implemented two price increases to stay ahead of inflation, expecting to expand margins this year. He contrasted this with 2018, when there was a lag. For the Architectural Specialties segment, Grizzle stated that price contribution was minimal, with growth primarily driven by winning more projects. CFO Christopher Calzaretta added that they still expect mid-single-digit equity earnings growth from WAVE for the full year.

Keith Hughes inquired about order patterns in the office renovation market at the end of 2024 and the outlook for 2025. He also asked which end-user market was demonstrating the most strength entering the new year.

Answer

CEO Vic Grizzle reported that the office vertical is stabilizing, with consistent, sideways order patterns and positive bidding activity. He identified transportation and data centers as the strongest end markets, with healthcare also remaining positive and education being supported by state and municipal bonds.

Keith Hughes asked for the outlook on Mineral Fiber input costs for Q4 and early 2025, and questioned whether the strong growth in Architectural Specialties (AS) was disproportionately driven by the transportation vertical.

Answer

CFO Chris Calzaretta projected a continuation of low single-digit input cost deflation in Q4, with modest inflation expected for raw materials in 2025. CEO Vic Grizzle clarified that while large transportation projects are a meaningful contributor to AS growth, the organic growth is broad-based across the portfolio, supported by a healthy backlog.

Keith Hughes asked about the U.S. Spring volume in the bedding segment, noting it was only down a point or two in the quarter, and questioned if it would continue to track more closely with the industry in the near term. He also inquired about the resolution of customer-related issues in adjustable bed and specialty foam, the varying retail performance in the bedding sector, and the future direction of the textiles business given its growth and potential price pressure.

Answer

EVP and President of Bedding Products Tyson Hagale confirmed that U.S. Spring volumes are trending with the domestic mattress market, with content gains contributing to profit improvement. He explained that adjustable bed and specialty foam challenges are due to specific customer issues, not market share loss, and are expected to impact through next year. Tyson Hagale indicated that online channels, big box stores, and Mattress Firm show stronger unit volumes in bedding. EVP, President of Specialized Products and Furniture, Flooring and Textile Products Sam Smith explained a bifurcation in textiles, with traditional fabrics facing price pressure while geo and engineered materials drive growth.

Keith Hughes asked about the textiles business, which has shown growth for several quarters, but also mentioned potential price pressure, similar to flooring, and sought clarification on the future trajectory of textiles.

Answer

Sam Smith, EVP, President of Specialized Products and Furniture, Flooring and Textile Products, explained a bifurcation in the textiles business. The traditional side (furniture, bedding fabrics) is experiencing significant price pressure due to soft demand, similar to flooring. Growth is primarily driven by the geo side, benefiting from strong U.S. civil construction, and engineered materials markets (automotive, filtration, specific building products) which are showing good volumes.

Keith Hughes from Truist Securities asked about the performance of the Home Furniture business, which experienced a downturn in the second quarter, and inquired about its expected performance over the next six months.

Answer

EVP and President – Specialized Products, Furniture, Flooring & Textile Products R. Samuel Smith explained that the business is bifurcated, with higher-end products performing well. The Q2 volume decline was driven by lower-price-point customers and significant disruptions from April's tariff announcements on Southeast Asia and China, which caused a 'start-stop' in orders from retailers. Smith anticipates the business will improve in the second half as trade policies stabilize.

Keith Hughes of Truist Securities sought clarification on the impact of automotive tariffs on Leggett's North American operations and asked about the effect of tariffs on the sub-$500 mattress market, including whether importers had pre-shipped inventory.

Answer

An executive, likely Sam Smith, explained that Leggett's North American auto components are USMCA compliant and thus face minimal direct tariff impact, though indirect risks from lower auto sales exist. Tyson Hegel, President of Bedding Products, stated it is difficult to forecast the impact on low-price mattresses but noted reciprocal tariffs would be key to leveling the playing field. He also confirmed they saw a ramp-up of imported mattresses late in 2024, suggesting a pre-tariff inventory build.

Keith Hughes from Truist Securities sought clarification on the 2025 Bedding segment guidance, specifically why it would underperform a flat industry, focusing on the adjustable bed business and its reported metrics.

Answer

CEO Karl Glassman explained the underperformance is partly due to a negative mix shift in adjustable beds, where lower-priced promotional models are outselling higher-end ones. He stressed the conservative guidance is based on macro concerns, not company-specific issues. Bedding Products executive Tyson Hagale added that restructuring attrition and lapping a customer exit also contribute to the delta. Hagale clarified that slide data on adjustable beds reflected a higher mix of lower-priced units.

Keith Hughes inquired about the improved retail traffic observed in Q3, where it was seen, and whether this trend continued into October, noting it didn't appear to translate into sales.

Answer

President and COO Paul De Cock confirmed slightly improving retail traffic through Q3, based on customer information. He explained that consumer uncertainty, postponement of large discretionary projects, and declining home sales continue to limit remodeling activity and flooring sales through specialty retailers, but anticipated a strong recovery when the market turns after three years of deferrals.

Keith Hughes asked about the performance of the core flooring business within the Flooring Rest of World segment, excluding the under-pressure panels business, and whether its EBIT would have been positive without the panels division.

Answer

President & COO Paul De Cock acknowledged continued price pressure in the panels business but noted it was partially offset by growth in high-end decorative panels. He described the European flooring market as difficult but highlighted that laminate performance improved throughout the quarter. CFO James Brunk added that while he wouldn't speculate on the exact margin profile, laminate and LVT are margin accretive.

Keith Hughes noted the positive price/mix in Ceramic and Flooring North America and asked what was driving the improvement. He also questioned the timing of tariff-related price increases hitting the LVT industry.

Answer

Executive James Brunk attributed the positive mix to strong performance of premium products and a favorable channel mix from the commercial business. President and COO Paul De Cock and CEO Jeff Lorberbaum added that price increases are being announced and implemented throughout Q2, with the full impact of higher-cost inventory expected to flow through in Q3.

Keith Hughes sought clarification on the timing of the $285 million in restructuring savings, asking how much was realized in 2024 and how much is expected in 2025. He also asked for more detail on the drivers of the anticipated positive product mix in 2025.

Answer

CFO James Brunk detailed the savings, stating that approximately $80 million was realized in 2024, with an incremental $100 million expected in 2025. CEO Jeff Lorberbaum explained that the positive mix is expected to come from new product introductions, which carry higher average selling prices and margins than the products they are replacing.

Keith Hughes asked for clarification on the magnitude of the previously announced $100 million cost reduction plan and inquired about how much of the savings had been realized through the third quarter.

Answer

Executive James Brunk confirmed the plan, originally announced at $100 million, should now yield slightly more as plans have been firmed up. He stated that the company expects to realize $20 million to $25 million of the savings this year, with the majority (about two-thirds of the remainder) flowing through in 2025 and a small portion carrying over into 2026. He affirmed the projects are on schedule.

Keith Hughes asked for expectations regarding pricing trends in Q3 and Q4 2025.

Answer

CFO Robyn Bradbury stated that pricing is expected to remain flattish and stable for the remainder of the year, with no notable changes anticipated in Q3 or Q4.

Keith Hughes asked for more detail on the Q3 volume turnaround, including strong regions or end markets, and inquired whether Core & Main had received any subpoenas related to antitrust issues facing its suppliers.

Answer

CFO Mark Witkowski highlighted that the central U.S. region, which was heavily impacted by weather in Q2, saw a strong resumption of construction activity, and the municipal market also rebounded well. CEO Steve LeClair stated definitively that Core & Main has not received any subpoenas and is not named as a defendant in any related cases.

Keith Hughes asked about the domestic commercial and industrial insulation business, specifically focusing on the performance and outlook for the light commercial segment, which has appeared more pressured.

Answer

CFO Todd Fister acknowledged a mixed outlook for light commercial markets like retail and office buildings. However, he emphasized that the insulation take-per-unit in these applications is significantly lower than in heavy commercial and industrial projects. The accelerated growth in high-value end-markets like data centers is more than offsetting any softness in light commercial, resulting in a positive overall outlook for the C&I business.

Keith Hughes of Truist Securities sought clarification on the Q4 EBITDA margin guidance for the Doors (Masonite) business, asking for a comparable historical baseline to better understand the outlook.

Answer

CEO Brian Chambers acknowledged the difficulty of a direct year-over-year comparison due to acquisition-related accounting noise. He stated that the low-to-mid-teen EBITDA margin guidance would equate to a mid-single-digit EBIT margin. He also announced that the company will guide on EBITDA for the Doors segment going forward to provide a clearer view of operational performance.

Keith Hughes from Truist Securities sought clarification on the company's upcoming debt maturities and questioned the rationale for reconsidering a strategic change for the European business, asking if it was driven by the balance sheet or a shift in strategy. He also asked how the core revenue guidance translates to total company revenue decline, including the Towanda divestiture.

Answer

CFO Samantha Stoddard clarified that the next major debt maturity is the $400 million senior notes due in 2027, which become current in late 2026. CEO William Christensen explained that the re-evaluation of the European business is a comprehensive assessment of whether JELD-WEN is the best long-term owner, considering operational progress, market recovery potential, and future capital needs. Stoddard quantified the Towanda revenue impact to be at the high end of the guided range, representing a 5-6% headwind to North American revenue.

Keith Hughes questioned where the company could achieve pricing power given the significant mix pressure in the industry. He also asked about the anniversary date for the major Midwest customer loss and sought confirmation on the nature of the corporate cost headwind.

Answer

CEO Bill Christensen responded that the negative mix impact is now at a predictable run rate and that price increases are necessary to pass through persistent inflation. CFO Samantha Stoddard added that some pricing is carryover from last year. Christensen stated the customer loss would be anniversaried around the end of Q3, and Stoddard confirmed the corporate cost headwind is from the reinstatement of normal variable compensation.

Keith Hughes from Truist Securities sought further clarification on the sequential EBITDA margin improvement for Q3 and asked about monthly sell-through trends, particularly heading into July.

Answer

SVP & CFO Brenda Lovcik reiterated the Q3 and Q4 adjusted EBITDA margin guidance of 32% and 31% respectively, driven by gross margin improvements from the elimination of Enhance-related costs and the benefits of level-loading. President & CEO Bryan Fairbanks described sell-through as variable, noting it was weak in May due to weather but picked up considerably in mid-June and continued to do well into July.

Keith Hughes from Truist Securities sought further clarification on the sequential EBITDA margin improvement from Q2 to Q3 and asked about sell-through trends, particularly month-to-month variations in the second quarter and into July.

Answer

SVP & CFO Brenda Lovcik reiterated the Q3 and Q4 EBITDA margin guidance of 32% and 31% respectively, driven by gross margin improvements from eliminating Enhance costs and level-loading benefits. President & CEO Bryan Fairbanks noted that sell-through was weak in May due to poor weather but picked up considerably in mid-June and continued to be strong into July.

Keith Hughes inquired about the quarterly cadence of SG&A spending relative to the full-year guidance of 16% of sales. He also asked about the production outlook for Q4 and whether the new inventory strategy would lead to less revenue volatility in future years.

Answer

CFO Brenda Lovcik confirmed that SG&A spending is typically front-loaded for marketing and product launches, so the dollar amount should decelerate after Q1. CEO Bryan Fairbanks anticipated Q4 production would be flattish with Q1 levels and affirmed that the new inventory strategy is designed to reduce quarter-to-quarter revenue volatility in a more normalized market environment.

Keith Hughes from Truist Securities asked for a breakdown of the 6% revenue growth guidance between decking and railing, and whether production levels would match sales projections.

Answer

CEO Bryan Fairbanks declined to provide an exact split but noted that railing is expected to see double-digit growth, with the remainder coming from decking. He confirmed that railing production, which includes both internally manufactured and sourced products, is expected to expand to meet demand, highlighting that year-end inventory was built up to ensure service levels during the busy season.

Keith Hughes sought clarification on whether the Q4 channel inventory reduction would occur in the big box or pro distribution channel. He also asked about the cost-effectiveness of the Arkansas recycled plastic facility.

Answer

CEO Bryan Fairbanks clarified that the inventory reduction is expected primarily in the pro distribution channel, as home center inventory is managed via consignment. He also confirmed the Arkansas facility will replace purchased recycled pellets, not virgin material, providing a net cost benefit even with transportation costs.

Keith Hughes of Truist Securities asked for a breakdown of the 10% decline in manufactured products sales, specifically requesting color on the impact from acquisitions versus organic price and unit volume changes.

Answer

CEO Peter Jackson confirmed that acquisitions have grown the truss profile but that the category has been impacted by the downturn, with competitive pressure extending to trusses and EWP. CFO Pete Beckmann added that the significant 28% decline in the multifamily segment, which is heavy in manufactured products, was a major contributor to the overall category's performance, with unit volume being the primary driver.

Keith Hughes from Truist Securities asked for a breakdown of the decline in value-added products between unit volume and price pressure. He also sought to confirm if the guidance assumes the multifamily business will start to flatten out in the third quarter.

Answer

CFO Pete Beckmann stated the company doesn't break out price versus volume but noted the decline was disproportionately impacted by multifamily, where truss sales were down 46%. He clarified that the multifamily business is starting to flatten out now, but year-over-year comps won't reach parity until closer to the fourth quarter due to lapping the prior year's strength.

Keith Hughes asked about the cadence of the projected mid-teens decline in the multifamily business for 2025, questioning if it could bottom out mid-year, and if that dynamic would allow for year-over-year EBITDA growth in the second half.

Answer

CFO Pete Beckmann clarified that the multifamily headwind is front-half weighted due to lapping difficult prior-year comparisons. CEO Peter Jackson stated that despite this cadence, the dynamic would not be enough to drive overall year-over-year EBITDA growth in the second half.

Keith Hughes of Truist Securities asked for more characterization of the improvements at the 'focus branches,' seeking to understand the primary drivers behind the 200 basis point margin gain.

Answer

CEO Doug Black explained that the improvements stem from several areas. Key drivers include strengthening the leadership teams at these branches, enhancing customer service to drive organic sales growth, and implementing SG&A reductions to align costs with market demand. He cited the significant SG&A takeout at Pioneer as a prime example of this effort.

Keith Hughes from Truist Securities sought confirmation on a $4.5 million one-time charge in Q4 related to brand rationalization and asked for the approximate percentage of sales for deflationary products like PVC pipe and grass seed.

Answer

Executive John Guthrie confirmed the $4.5 million was a one-time charge that is not expected to recur in 2025. He also specified that annual grass seed sales are roughly $150 million and PVC pipe constitutes approximately 4% of total company sales.

Keith Hughes asked for an update on the Pioneer acquisition's profitability, specifically if it was still EBITDA-negative, and questioned whether the announced branch consolidations would significantly impact the rising base business SG&A.

Answer

EVP & CFO John Guthrie confirmed that Pioneer remains a 'very low contributor' and is 'measurably diluting' to the overall EBITDA margin. CEO Doug Black stated that while the branch consolidations will contribute to cost savings, they are just one part of a broader strategy to manage SG&A, which also includes turning around Pioneer and other operational initiatives.

Keith Hughes from Truist Securities asked about the drivers for the year-over-year decline in wallboard pricing, including any mix impact, and inquired about the near-term outlook.

Answer

EVP & CFO Craig Kesler clarified that while pricing was down year-over-year, it was sequentially flat, with the decline having occurred in prior quarters. He described the pricing environment as 'range bound' and expects it to remain stable until there is a meaningful change in demand volume.

Keith Hughes asked for the outlook for the American Building Solutions division for the remainder of the year, including its two product groups and margins, and also requested the 2024 land sales figure for comparison.

Answer

Executive Jim Mintern described the division's Q1 as resilient. He noted a delayed spring season for the Outdoor Living business but saw a good recovery in April/May. For the Building and Infrastructure business, he sees a positive outlook driven by water and energy infrastructure demand. Executive Alan Connolly confirmed that 2024 land sales were an exceptional $237 million, compared to the normalized expectation of $75 million.

Keith Hughes asked about CRH's M&A focus for 2025, specifically regarding the target mix of aggregates, ready-mix, and asphalt, and inquired about the next strategic steps for the Outdoor Living business.

Answer

CEO Jim Mintern described 2025 as an 'opportunity-rich environment' for M&A, emphasizing that CRH's strength lies in acquiring and integrating businesses across its existing footprint in high-growth markets. He explained that the Outdoor Living business is fundamentally connected to the core materials business (concrete and aggregates) and that growth will come from acquiring similar businesses and connecting them to the existing network.

Keith Hughes of Truist asked for an outlook on pricing for aggregates and cement in the Americas, particularly for Q4 and 2025, noting the strong performance relative to peers in Q3.

Answer

Executive Randy Lake stated that the strong demand environment supports continued pricing momentum. He projected double-digit aggregate price growth for the full year 2024 and anticipated mid-to-high single-digit price increases in 2025, alongside low single-digit volume growth, driven by strong backlogs and the need to offset ongoing cost inflation.

Keith Hughes asked for specifics on which commercial construction sectors were driving the significant downward revision in the outlook and inquired about the realization timeline for the announced $50 million in cost savings.

Answer

CEO John Turner identified weakness in retail, office, and high-rise mixed-use projects, which are sensitive to private financing, as the primary drivers of the commercial downturn. He noted that data centers, healthcare, and public education remain stable. Turner and CFO Scott Deakin clarified that the initial $30 million in cost savings is fully realized on a run-rate basis, with the additional $20 million to be fully implemented by Q1 fiscal 2026, resulting in a steady ~$12-15 million quarterly impact.

Keith Hughes sought clarification on whether the negative outlook for multifamily and commercial construction was a near-term or longer-term view. He also questioned the differing volume trends between commercial Wallboard and Ceilings, where Ceilings appeared stronger.

Answer

CEO John Turner clarified that the challenging conditions in multifamily and commercial are expected to persist for the next few quarters until interest rates improve. He explained that Ceilings volumes are outperforming Wallboard because they benefit more from resilient project types like data centers, healthcare, and education. Turner also highlighted that the recent Kamco acquisition significantly strengthened their Ceilings business, particularly in the recovering New York City market.

Keith Hughes of Truist Securities questioned why it has been so difficult to achieve price stabilization in the steel market despite lapping substantial prior-year declines. He also asked for more detail on the weakness observed in July for commercial and multifamily, and whether the trend of multifamily declining more than commercial would persist.

Answer

CEO John Turner attributed the steel pricing pressure to an oversupplied market, noting that demand from larger consumers like automotive and appliances is stagnant. On the July slowdown, he explained that the market weakness arrived a quarter or two faster than expected. He confirmed his expectation that multifamily volumes will continue to decline more sharply than commercial volumes until a recovery begins, likely in mid-2025.

Keith Hughes inquired about the outlook for the price/mix component of sales for the beginning of 2025.

Answer

CFO Michael Miller explained that the current inflationary environment is benign, with recent price/mix benefits being carryovers from prior periods. He characterized the overall pricing environment as relatively soft for both IBP and its suppliers.

Keith Hughes asked about the price versus cost dynamic for fiberglass insulation in the third and fourth quarters and whether that trend is expected to continue through the winter.

Answer

CEO Jeffrey Edwards characterized the price-to-cost spread for fiberglass as 'fairly neutral' to 'slightly negative.' He confirmed that this dynamic, which was present in the third quarter, is expected to persist through the winter months.

Asked for clarification on the company's EBITDA breakeven point, the context of a prior comment about 'flat volume', and details on unit performance.

Answer

The $45 million per month breakeven is for EBITDA and represents the current level before full restructuring savings are realized, which will lower it further. The 'flat volume' comment referred to quarter-over-quarter performance, not year-over-year, where revenue was down significantly. Calculating same-store sales units for wholesale is complex and not readily available.

Keith Hughes of Truist Securities asked for more detail on the moderating decline in average ticket, specifically whether any product categories are beginning to see price increases or inflation.

Answer

An executive explained that the improvement in average ticket is a significant factor in the improving comp trend. However, the primary headwind on ticket remains the wood and laminate categories, as fewer home flips mean fewer large-scale projects. Customers are focusing more on smaller bathroom jobs. CEO Tom Taylor added that despite this, the trend of customers choosing 'better and best' products continues, which helps profitability.

Asked for details on the pacing of future synergies, specifically whether they will be realized consistently or in lumpy increments tied to specific projects.

Answer

The company plans to deliver another $40 million in synergies next year, for a total of $80 million in the first two years. The realization will have some 'lumpiness' as the focus shifts from scale synergies to larger cement plant capital projects, which must be executed during planned shutdowns, but they expect a good run rate overall.