Phil Ng

Phil Ng (Maggie on for Phil) asked about the consistent 3% plumbing pricing pace in Q3, similar to Q2, and whether competitive dynamics or pricing fatigue were factors. He also inquired about nuances in pricing realization across channels and how Q3 observations might influence expectations for 2026 price increases.

Answer

VP and CFO Rick Westenberg reiterated that plumbing pricing is gaining traction and is one of several levers for tariff mitigation, executed in a targeted and balanced way, with a favorable impact expected year-over-year. He declined to comment on specific channel pricing performance or future pricing, emphasizing that pricing remains a key lever for mitigating tariffs and commodity inflation.

Phil Ng asked about Mohawk's cost competitiveness in major U.S. categories like ceramic, laminate, LVT, and quartz countertops, especially with new tariffs. He also inquired if laminate is becoming more competitive against LVT and if new placements are being seen from channel partners. He sought clarification on the Q1/Q2 2026 outlook regarding productivity, restructuring, price/cost, and volume growth driving profitability.

Answer

President and COO Paul De Cock confirmed that waterproof laminate is an excellent LVT alternative, with builders shifting to it, and domestic production benefits from reciprocal tariffs. He highlighted laminate's value and competitive setup in North Carolina, while CFO James Brunk added that U.S. and Mexico-manufactured ceramic is advantaged by tariffs. Chairman and CEO Jeff Lorberbaum clarified that the 'equilibrium' referred to tariffs. CFO James Brunk stated that for Q1/Q2 2026, normal seasonality and rising input costs (materials, wages, energy, shipping) are expected, with productivity and tariff price increases planned to offset inflation, anticipating improved year-over-year results.

Phil Ng asked about Crown Holdings' positioning to service North American demand in 2026, given tight inventory and being sold out in summer months, and if upcoming contract renewals present an opportunity to sustain or build profitability. He also inquired about the ability to service strong European demand and the expected timing for new lines in Greece.

Answer

President and CEO Tim Donahue stated that Crown Holdings expects to be able to service North American demand in 2026 and is not unhappy with its margin profile, acknowledging the competitive nature of the business. For Europe, he confirmed ongoing capacity additions, including modernizing a facility in Greece with two new, higher-speed lines expected to be completed early next year, and other incremental capacity additions being explored. Donahue reiterated that mid-single-digit growth is a reasonable long-term expectation for Europe.

Phil Ng inquired about the momentum in the non-residential segment, specifically regarding data centers, bidding activity, areas of strength, and general backlogs. He also asked about pricing inflection, commodity stabilization, and gross margin expansion, including any timing nuances like inventory profit gains and expectations for moderation.

Answer

Kevin Murphy (CEO) confirmed healthy and building backlogs across commercial mechanical, fire protection, waterworks, and industrial PVF, noting that gestation periods vary. He highlighted strength in data centers, biotechnology, pharma, large-scale hospital work, and water/wastewater treatment plants, where waterworks and industrial PVF collaborate. Bill Brundage (CFO) stated that pricing inflected positive, with expectations for modest overall inflation, though the commodity basket (PVC) remains in low single-digit decline. He was pleased with the 31.7% gross margin, attributing it to execution and pricing adjustments, but noted some temporary benefit from supplier price increase timing, expecting normalization to the 30%-31% range.

Phil Ng inquired about the outlook for pricing and gross margins, asking if the recent positive pricing inflection is sustainable, if commodity deflation is stabilizing, and whether the strong gross margin expansion included temporary benefits that might moderate.

Answer

CFO Bill Brundage stated that modest overall inflation is expected for the calendar year, with commodity prices still in low single-digit decline (PVC deflation, copper/steel inflation). He confirmed that the 31.7% gross margin included some temporary benefits from supplier price increase timing, and expects gross margins to normalize back into the 30-31% range in the future, noting August gross margins showed this normalization.

Asked about recent volume trends, the ability to achieve flat EBITDA in Q2, the outlook for price/cost, and the current environment for pricing conversations with customers.

Answer

The company expects improvement in Q2 from cost-saving levers and sees early signs of recovery in some industrial segments. The price/cost dynamic is expected to be relatively neutral in Q2. Pricing conversations with customers are manageable because while Berry is recovering non-resin inflation, customers are still seeing a lower net price due to the significant drop in resin costs from their peak.