Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Let's hear from someone who participates in this economy every day.
Speaker 2: Saint Goban designs, manufactures, and distributes building materials for commercial
Speaker 2: and residential construction, obviously a huge part of the economy.
Speaker 2: The company's results last week showed that it's North American
Speaker 2: business continues to lead the way for the group is
Speaker 2: North America CEO Mark Rayfield joins us.
Speaker 1: Now, Mark, thanks so much for your time.
Speaker 2: Let me get first off, your take on the economy,
Speaker 2: on supply chains, on inflation. You know this has been
Speaker 2: a real focus out of the pandemic.
Speaker 1: How does it look to you right now?
Speaker 3: Well, first off, thanks for having me this morning. I
Speaker 3: think the economy has been very strong, as you mentioned,
Speaker 3: and we are continue to see a relatively robust housing environment.
Speaker 4: We've been saying for some time now that the housing.
Speaker 3: Stock is underbuilt in North America, and we see that
Speaker 3: the general even with interest rates at a higher level,
Speaker 3: the building continues to go at a steady state in
Speaker 3: North America, as well as remodeling renovation. So so, supply
Speaker 3: chains have loosened up, inflation has settled down. We don't
Speaker 3: see as much inflation right now, but we still see
Speaker 3: very strong demand in both new build and renovation.
Speaker 1: So what's your revenue breakdown look like? Then?
Speaker 2: In terms of commercial real estate you're putting up versus.
Speaker 1: Say, residential and multi family homes, we're.
Speaker 3: Certainly much heavier residential, so we're over two thirds and
Speaker 3: residential in North America versus commercial in North America. In that,
Speaker 3: you know, the single family multi family were much more again,
Speaker 3: probably two thirds on single family versus multi family there,
Speaker 3: and then if you take it one step further, we're
Speaker 3: probably two thirds in renovation and remodel versus new builds,
Speaker 3: so very diversified across the network.
Speaker 5: Mark what would a single rate cut begin to unlock
Speaker 5: and where would the most opportunity be.
Speaker 4: It's a great question.
Speaker 3: I mean, I think we've been talking about rates going
Speaker 3: up and down for some period of time. We've seen
Speaker 3: that housing because of it, underlying fundamental need for housing
Speaker 3: has stayed relatively resistant. I think there's some with rate
Speaker 3: cuts coming down one or two cuts, I.
Speaker 4: Think you'll see some people start to leave their homes.
Speaker 4: Right now.
Speaker 3: They're locked in their homes with very low interest rates,
Speaker 3: and in doing so, they're unwilling to sell their home
Speaker 3: and go to another house, and that's kind of kept
Speaker 3: the constraint of houses rotating. Hasn't stopped new build, but's
Speaker 3: kept the houses rotating, which has kept prices up on
Speaker 3: housing overall.
Speaker 6: Well, that's kind of what I've been wondering about, the
Speaker 6: fact that you don't see people moving around, that this
Speaker 6: housing market has been kind of frozen, if you want
Speaker 6: to call it that.
Speaker 1: When it comes to the.
Speaker 6: Sort of breakdown that you have between new build versus renovations,
Speaker 6: I'm wondering if it's more tilted to renovations right now,
Speaker 6: given just people aren't really moving and we have this
Speaker 6: under supply of housing.
Speaker 3: It is, you know, I think renovation goes up and
Speaker 3: down a bit. You saw the huge surge in COVID
Speaker 3: that's obviously calmed down a little bit. Renovation actually happens
Speaker 3: a lot when you start rotating homes because when people
Speaker 3: are getting ready to sell a home, they renovate it
Speaker 3: to sell. People generally don't get exactly the house they
Speaker 3: want when they buy one, so after they buy it,
Speaker 3: about twelve to eighteen months after purchasing it, there's another
Speaker 3: surgeon renovation. So when houses rotate, we see a bigger
Speaker 3: input on renovation remodeling. However, you also see a significant
Speaker 3: impact now on severe weather events, which is forcing kind
Speaker 3: of a necessary renovation remodeling, and lots of parts of
Speaker 3: the country as well, So there's a lot of dynamics
Speaker 3: in play. In general, we see is just a steady,
Speaker 3: robust market. We think with an interest rate cut, it
Speaker 3: will just get stronger.
Speaker 5: Mark, I do understand this inclination to rotate. You think
Speaker 5: that those higher income customers could get a more expensive home,
Speaker 5: but with the weaknesses you're seeing in the lower to
Speaker 5: middle end consumer, there's skepticism here that those customers can
Speaker 5: upgrade into a new home at this juncture as well.
Speaker 5: Even if rates come down, prices are still relatively high
Speaker 5: given the lack of supply. How much certainty do you
Speaker 5: have in that rotation, you.
Speaker 3: Know, I think I have certainty because there's always been
Speaker 3: that issue around when you upgrade from one house to another.
Speaker 3: So I think there's always that challenge when you go
Speaker 3: through that for all of us as we went through
Speaker 3: that process, so I think that still takes place. I
Speaker 3: think you've got a lot of homes rotating with people
Speaker 3: are kind of leaving and going to a single home
Speaker 3: in the southeast or southwest retiring, so to speak.
Speaker 4: And that's what we've seen for movement.
Speaker 3: And houses now is kind of cash buyers cashing out
Speaker 3: of the house and then going down and buying homes there.
Speaker 3: I think is we'll see the new people entering the
Speaker 3: homes with a slight rate cut.
Speaker 1: Mark.
Speaker 6: Let's go back to your business though, because North America
Speaker 6: it's not just the United States, it also includes Canada.
Speaker 6: And when it comes to Canada, you've made a lot
Speaker 6: of recent acquisitions over the past couple of years, and
Speaker 6: I'm curious what the strategy looks like going forward. Are
Speaker 6: you looking to potentially acquire more businesses. Are you happy
Speaker 6: with the portfolio as it stands.
Speaker 4: Well, We're very happy with the portfolio that we have.
Speaker 3: I mean, we've done there's say, a lot of expansion,
Speaker 3: with almost six billion invested in North America, in about
Speaker 3: half of that in Canada the last couple of years.
Speaker 3: We skik Canada is a very strong market. We really
Speaker 3: were able to balance our portfolio in Canada with these
Speaker 3: last acquisitions going towards more exterior products, matching our portfolio
Speaker 3: in the US with roofing and siding, and then with
Speaker 3: Bailey allowing us to do systems for both commercial and residential,
Speaker 3: so they kind of finished out and finalized our portfolio
Speaker 3: for Canada. We will still look to grow in North America.
Speaker 3: We think it's a growing market. We think the dynamics
Speaker 3: is positive here, so we're always looking to continue to expand,
Speaker 3: but that's as opportunities arise.
Speaker 2: What are you seeing in terms of, as I said
Speaker 2: at the top, supply chain and inflation, especially the latter,
Speaker 2: you know, as the Fed moves to decide well on
Speaker 2: Wednesday and then again in September, is inflation still sticky
Speaker 2: for you?
Speaker 3: Supply chain has stayed relatively steady, so products are available,
Speaker 3: but again as high demand and certain certain of our categories,
Speaker 3: so a few of our categories are hold out and
Speaker 3: on allocation, so a little tight in supply chain, but
Speaker 3: able to meet in the marketplace. Inflation has tempered, I
Speaker 3: would say, so there's not as much price pressure.
Speaker 4: On raw materials.
Speaker 3: There's still some labor price pressure and therefore prices going
Speaker 3: out the door have also moderated, haven't gone down, but
Speaker 3: just stayed relatively steady.
Speaker 2: In terms of you've been the CEO of the North
Speaker 2: American Division here since the Trump administration, And I wonder
Speaker 2: about your experience under these two different administrations, Trump and Biden.
Speaker 2: Is there a difference in you know, the operational, everyday
Speaker 2: business under each of those administrations.
Speaker 4: Not really.
Speaker 3: You know, we're fortunate to be in the housing and
Speaker 3: renovation remodeling markets. So people need homes, it's a fundamental need.
Speaker 3: We kind of service the sustainability side of that market,
Speaker 3: making sure we can make products that are sustainable, lower
Speaker 3: CO two footprint, lower energy costs for the homeowner. And
Speaker 3: that pretty much is universe flow across I hope all
Speaker 3: political parties.
Speaker 4: So we have not seen a big change.
Speaker 3: We we focus on the end customer, We focus on
Speaker 3: our employees and try to keep that consistent regardless of
Speaker 3: who's in power.
Speaker 5: Mark, we thank you so very much for your time.
Speaker 5: Of course, that is Mark Rayfield, CEO San Goban, North America.
Speaker 5: Big look here at that housing market and what it
Speaker 5: takes to build