WEBVTT - Mark Rayfield Talks US Economy

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Let's hear from someone who participates in this economy every day.

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<v Speaker 2>Saint Goban designs, manufactures, and distributes building materials for commercial

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<v Speaker 2>and residential construction, obviously a huge part of the economy.

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<v Speaker 2>The company's results last week showed that it's North American

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<v Speaker 2>business continues to lead the way for the group is

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<v Speaker 2>North America CEO Mark Rayfield joins us.

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<v Speaker 1>Now, Mark, thanks so much for your time.

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<v Speaker 2>Let me get first off, your take on the economy,

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<v Speaker 2>on supply chains, on inflation. You know this has been

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<v Speaker 2>a real focus out of the pandemic.

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<v Speaker 1>How does it look to you right now?

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<v Speaker 3>Well, first off, thanks for having me this morning. I

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<v Speaker 3>think the economy has been very strong, as you mentioned,

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<v Speaker 3>and we are continue to see a relatively robust housing environment.

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<v Speaker 4>We've been saying for some time now that the housing.

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<v Speaker 3>Stock is underbuilt in North America, and we see that

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<v Speaker 3>the general even with interest rates at a higher level,

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<v Speaker 3>the building continues to go at a steady state in

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<v Speaker 3>North America, as well as remodeling renovation. So so, supply

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<v Speaker 3>chains have loosened up, inflation has settled down. We don't

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<v Speaker 3>see as much inflation right now, but we still see

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<v Speaker 3>very strong demand in both new build and renovation.

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<v Speaker 1>So what's your revenue breakdown look like? Then?

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<v Speaker 2>In terms of commercial real estate you're putting up versus.

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<v Speaker 1>Say, residential and multi family homes, we're.

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<v Speaker 3>Certainly much heavier residential, so we're over two thirds and

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<v Speaker 3>residential in North America versus commercial in North America. In that,

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<v Speaker 3>you know, the single family multi family were much more again,

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<v Speaker 3>probably two thirds on single family versus multi family there,

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<v Speaker 3>and then if you take it one step further, we're

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<v Speaker 3>probably two thirds in renovation and remodel versus new builds,

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<v Speaker 3>so very diversified across the network.

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<v Speaker 5>Mark what would a single rate cut begin to unlock

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<v Speaker 5>and where would the most opportunity be.

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<v Speaker 4>It's a great question.

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<v Speaker 3>I mean, I think we've been talking about rates going

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<v Speaker 3>up and down for some period of time. We've seen

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<v Speaker 3>that housing because of it, underlying fundamental need for housing

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<v Speaker 3>has stayed relatively resistant. I think there's some with rate

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<v Speaker 3>cuts coming down one or two cuts, I.

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<v Speaker 4>Think you'll see some people start to leave their homes.

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<v Speaker 4>Right now.

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<v Speaker 3>They're locked in their homes with very low interest rates,

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<v Speaker 3>and in doing so, they're unwilling to sell their home

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<v Speaker 3>and go to another house, and that's kind of kept

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<v Speaker 3>the constraint of houses rotating. Hasn't stopped new build, but's

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<v Speaker 3>kept the houses rotating, which has kept prices up on

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<v Speaker 3>housing overall.

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<v Speaker 6>Well, that's kind of what I've been wondering about, the

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<v Speaker 6>fact that you don't see people moving around, that this

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<v Speaker 6>housing market has been kind of frozen, if you want

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<v Speaker 6>to call it that.

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<v Speaker 1>When it comes to the.

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<v Speaker 6>Sort of breakdown that you have between new build versus renovations,

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<v Speaker 6>I'm wondering if it's more tilted to renovations right now,

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<v Speaker 6>given just people aren't really moving and we have this

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<v Speaker 6>under supply of housing.

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<v Speaker 3>It is, you know, I think renovation goes up and

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<v Speaker 3>down a bit. You saw the huge surge in COVID

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<v Speaker 3>that's obviously calmed down a little bit. Renovation actually happens

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<v Speaker 3>a lot when you start rotating homes because when people

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<v Speaker 3>are getting ready to sell a home, they renovate it

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<v Speaker 3>to sell. People generally don't get exactly the house they

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<v Speaker 3>want when they buy one, so after they buy it,

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<v Speaker 3>about twelve to eighteen months after purchasing it, there's another

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<v Speaker 3>surgeon renovation. So when houses rotate, we see a bigger

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<v Speaker 3>input on renovation remodeling. However, you also see a significant

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<v Speaker 3>impact now on severe weather events, which is forcing kind

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<v Speaker 3>of a necessary renovation remodeling, and lots of parts of

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<v Speaker 3>the country as well, So there's a lot of dynamics

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<v Speaker 3>in play. In general, we see is just a steady,

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<v Speaker 3>robust market. We think with an interest rate cut, it

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<v Speaker 3>will just get stronger.

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<v Speaker 5>Mark, I do understand this inclination to rotate. You think

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<v Speaker 5>that those higher income customers could get a more expensive home,

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<v Speaker 5>but with the weaknesses you're seeing in the lower to

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<v Speaker 5>middle end consumer, there's skepticism here that those customers can

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<v Speaker 5>upgrade into a new home at this juncture as well.

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<v Speaker 5>Even if rates come down, prices are still relatively high

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<v Speaker 5>given the lack of supply. How much certainty do you

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<v Speaker 5>have in that rotation, you.

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<v Speaker 3>Know, I think I have certainty because there's always been

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<v Speaker 3>that issue around when you upgrade from one house to another.

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<v Speaker 3>So I think there's always that challenge when you go

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<v Speaker 3>through that for all of us as we went through

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<v Speaker 3>that process, so I think that still takes place. I

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<v Speaker 3>think you've got a lot of homes rotating with people

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<v Speaker 3>are kind of leaving and going to a single home

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<v Speaker 3>in the southeast or southwest retiring, so to speak.

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<v Speaker 4>And that's what we've seen for movement.

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<v Speaker 3>And houses now is kind of cash buyers cashing out

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<v Speaker 3>of the house and then going down and buying homes there.

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<v Speaker 3>I think is we'll see the new people entering the

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<v Speaker 3>homes with a slight rate cut.

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<v Speaker 1>Mark.

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<v Speaker 6>Let's go back to your business though, because North America

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<v Speaker 6>it's not just the United States, it also includes Canada.

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<v Speaker 6>And when it comes to Canada, you've made a lot

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<v Speaker 6>of recent acquisitions over the past couple of years, and

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<v Speaker 6>I'm curious what the strategy looks like going forward. Are

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<v Speaker 6>you looking to potentially acquire more businesses. Are you happy

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<v Speaker 6>with the portfolio as it stands.

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<v Speaker 4>Well, We're very happy with the portfolio that we have.

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<v Speaker 3>I mean, we've done there's say, a lot of expansion,

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<v Speaker 3>with almost six billion invested in North America, in about

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<v Speaker 3>half of that in Canada the last couple of years.

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<v Speaker 3>We skik Canada is a very strong market. We really

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<v Speaker 3>were able to balance our portfolio in Canada with these

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<v Speaker 3>last acquisitions going towards more exterior products, matching our portfolio

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<v Speaker 3>in the US with roofing and siding, and then with

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<v Speaker 3>Bailey allowing us to do systems for both commercial and residential,

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<v Speaker 3>so they kind of finished out and finalized our portfolio

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<v Speaker 3>for Canada. We will still look to grow in North America.

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<v Speaker 3>We think it's a growing market. We think the dynamics

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<v Speaker 3>is positive here, so we're always looking to continue to expand,

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<v Speaker 3>but that's as opportunities arise.

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<v Speaker 2>What are you seeing in terms of, as I said

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<v Speaker 2>at the top, supply chain and inflation, especially the latter,

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<v Speaker 2>you know, as the Fed moves to decide well on

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<v Speaker 2>Wednesday and then again in September, is inflation still sticky

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<v Speaker 2>for you?

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<v Speaker 3>Supply chain has stayed relatively steady, so products are available,

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<v Speaker 3>but again as high demand and certain certain of our categories,

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<v Speaker 3>so a few of our categories are hold out and

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<v Speaker 3>on allocation, so a little tight in supply chain, but

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<v Speaker 3>able to meet in the marketplace. Inflation has tempered, I

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<v Speaker 3>would say, so there's not as much price pressure.

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<v Speaker 4>On raw materials.

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<v Speaker 3>There's still some labor price pressure and therefore prices going

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<v Speaker 3>out the door have also moderated, haven't gone down, but

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<v Speaker 3>just stayed relatively steady.

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<v Speaker 2>In terms of you've been the CEO of the North

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<v Speaker 2>American Division here since the Trump administration, And I wonder

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<v Speaker 2>about your experience under these two different administrations, Trump and Biden.

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<v Speaker 2>Is there a difference in you know, the operational, everyday

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<v Speaker 2>business under each of those administrations.

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<v Speaker 4>Not really.

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<v Speaker 3>You know, we're fortunate to be in the housing and

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<v Speaker 3>renovation remodeling markets. So people need homes, it's a fundamental need.

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<v Speaker 3>We kind of service the sustainability side of that market,

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<v Speaker 3>making sure we can make products that are sustainable, lower

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<v Speaker 3>CO two footprint, lower energy costs for the homeowner. And

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<v Speaker 3>that pretty much is universe flow across I hope all

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<v Speaker 3>political parties.

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<v Speaker 4>So we have not seen a big change.

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<v Speaker 3>We we focus on the end customer, We focus on

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<v Speaker 3>our employees and try to keep that consistent regardless of

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<v Speaker 3>who's in power.

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<v Speaker 5>Mark, we thank you so very much for your time.

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<v Speaker 5>Of course, that is Mark Rayfield, CEO San Goban, North America.

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<v Speaker 5>Big look here at that housing market and what it

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<v Speaker 5>takes to build