Peter Steyn

Peter Steyn questioned the trend in working capital, particularly the increase in inventory days, and whether commercial synergies and network redesign could reduce volatility and improve efficiencies in inventory management, especially for the Decking business.

Answer

CFO Ryan Lada explained that the inventory build is partly to satisfy commercial synergies, expecting normalization as these roll out. Jon Skelly, President and GM in North America Building Products, clarified that no major network redesign benefits are contemplated beyond the recently announced footprint optimization, which focuses on rebalancing inventory and freight.

Peter Steyn questioned the trending of working capital, specifically inventory days, and whether commercial synergies and one-step space gains could reduce volatility in the decking business's inventory profile and improve overall business efficiencies.

Answer

COO Ryan Kilcullen explained that the current inventory build is partly to satisfy commercial synergies as they come to fruition, expecting normalization as these roll out. Jon Skelly added that no major network redesign benefits are contemplated beyond the rebalance of inventory and freight from the recently announced footprint optimization.

Peter Steyn of Macquarie inquired about the commercial synergies from the AZEK acquisition, specifically asking how the integration of the manufacturing and logistics network would help realize these synergies, particularly within the dealer channel.

Answer

CEO Aaron Erter responded that while it is too early to discuss network integration specifics, he is very encouraged by early 'quick wins' on revenue synergies. He described recent meetings with major customers alongside legacy AZEK and Hardie leadership, noting verbal commitments from large dealer partners. Mr. Erter also highlighted the cross-selling of leads between the two sales networks as a testament to the complementary nature of the businesses, expressing strong confidence in exceeding synergy targets.

Peter Steyn from Macquarie inquired how the national launch of an architectural panel product reflects confidence in the R&R market. He also asked about the company's strategy for the high-end R&R segment versus the traditional vinyl replacement market.

Answer

CEO Aaron Erter positioned the new panel product as another innovative solution to offer customers, helping them differentiate their offerings. He confirmed that high-end products, including panels and the Artisan line, are specifically targeted at the upper end of the market, which he noted could be an area that recovers sooner.

Peter Steyn of Macquarie Group inquired about the contribution of new large builder contracts to the company's Primary Demand Growth (PDG) target and asked about the drivers behind the quarterly inventory increase.

Answer

CEO Aaron Erter stated that the company is on track to hit its 4% PDG goal for North America, noting that wins like the Meritage contract will help, but reiterated that PDG is best measured annually. CFO Rachel Wilson explained that the inventory increase was an appropriate investment to maintain high customer service levels.