Operator: And your next question comes from the line of Garik Shmois from Loop Capital.
Garik Shmois: Just on the margin outlook for the fourth quarter, with the 200 basis points of expansion you’re expecting. Would you expect CCM margins to be up year-on-year in the fourth quarter? Or is all the gains coming from CWT just given how strong the margin ramp has been there?
Kevin Zdimal : It’s a balanced piece between CCM and CWT where, as I said earlier or last quarter, we’re looking at CCM to target 30% for the year on EBITDA. So that implies improvement in the fourth quarter. And then, yes, absolutely with CWT, they continue to improve. Last quarter, say, up to 350 basis points. We’re probably more like 400 basis point to 450 basis point improvement year-over-year for the full year for CWT.
Garik Shmois : Perfect. That’s helpful. I wanted to ask just in some of the discussions around project delays and CWT, I just want to get more clarity there. Is that mostly on the residential side, given that was the kind of the category that was softer? Or are you seeing project delays on nonresidents impacting that segment?
Christian Koch : I’d say it’s more on the commercial side. And I’d say more — you got the factors, the commercial lending standards, things like that are tightening up. We’re finding that people need more than one debt source when they got to do these where they used to be able to do it with one. And then I think labor, Garik, is always the constraint in all of this. We don’t see really labor pools changing much. We think labor continues to be what it is, and we don’t see a lot of people being added to the labor roles in the construction industry over the next few years, which, again, is why we place so much emphasis on the Carlisle Experience and on labor-saving products because we think that’s still a gating item.
Garik Shmois : Got it. Okay. Last one for me, just on inventories in CCM in the channel, encouraging to hear the destocking, some largely run its course finally. As you look to ’24, certainly, a little bit early, but would you expect distributors to manage their inventory in more normal seasonal patterns or just given some of the macro uncertainties at this point as a base case would be prudent to expect distribution to take a more conservative view on their inventories for the time being.
Christian Koch : Well, inventory is a use of cash, right? So when you have the interest rate levels we have today and with people borrowing and things like that, I think they’re going to be managing their inventory levels pretty tightly. It’s going to be a line item. I think every CEO and business leader is going to be looking at as we get into Q4 and through to Q1, just because, again, those are seasonally light, and I think they would be managing the inventories tightly anyway. So maybe you can say that’s the double whammy of having a seasonally like couple of quarters coupled with some higher interest rates. But I think as we go into the year, I think we are thinking that 2024 is going to look a lot more like a normal year.
We’ve had the COVID experience and the destocking experience and we get back to some level of normalcy and see inventory levels get back up to where they’ve been historically, say, in 2019 to service what we still think is a really positive outlook for the industry longer term.
Operator: And your next question comes from the line of David MacGregor from Longbow Research.
David MacGregor : I wanted to — just quickly, I think I caught the price/cost numbers for CCM, but I missed them if you said them for CWT, what would those look like?
Kevin Zdimal : CWT, overall for the full year, we’re $40 million plus.
David MacGregor : $40 million plus, okay. And then just a question on industry capacity, both for TPO and for polyiso, we get into 2024, will industry capacity be up in percentage terms for each of those 2 categories versus 2022 or 2021, looking back over 2, 3 years? .
Christian Koch : Well, I’m looking back as to what’s been added. And I think we’ve always said this industry has been pretty rational in terms of adding lines. We did add our sites in line for polyiso. We did add our 16-foot line in Carlisle for TPO. Obviously, no change in EPDM in the industry. A couple of years ago, we saw Eco had a facility, I think, in Maryland, and I think GAF might have added one in Eastern Pennsylvania for TPL and polyiso. So I think that’s it. PVC no real additions there that I can think of. So I think industry capacity is still compared to the historical averages. We’re right in line with where we probably should be given market growth in that. I don’t see any massive additional capacity being added or having been added. So I’d say…
David MacGregor : I mean, when you can think about what you’ve added, what GAF has added, is there any way to express that as a percentage over a base maybe 2 years ago or.
Christian Koch : Well, we used to say that one factory, at least in TPO or polyiso, also added about 5% to 7% capacity of the industry. I think that’s probably — as the industry has grown, I mean, I think that’s still probably a good number.
David MacGregor : Okay. That’s really helpful. Last question for me is just you’re passing that pivot point now. So congratulations on all the progress on getting to where you are now. Presumably, there’s quite a substantial inorganic growth chapter ahead of you. I wonder if you could just talk conceptually about where within your business, you see maybe the opportunities as you pursue that building envelope vision, what is the big sort of white space opportunities for you within that building envelope opportunity?
