Jeff Zekauskas: Your SG&A costs are up 7.5%, which is about your rate of sales growth. Why is it SG&A going up at a lower rate? By contrast, your cost of goods sold sequentially is up 6%, your revenues are up 8%. So it looks like your raw materials are falling, and I take it that that’s giving you some benefit. Is that correct? And then lastly, it’s been a hot summer. So, that gives you above average or better water treatment chemical demand in the third quarter.
Christophe Beck: Great question. Thank you, Jeff. So three questions here for Scott, I guess.
Scott Kirkland: Hey Jeff. Yes, I’ll touch on the SG&A. Good question. The SG&A was up a little over 7.5% year-on-year in the second quarter. What I’d tell you is the underlying productivity remains really strong. We’ve — headcount has come down actually modestly over the last year, while the sales has increased. Our SG&A ratio was flat in Q2. But just as a reminder, we’re down about 300 basis points over the last three years. The Q2 SG&A increased. More than half of that was really driven by what we call the higher incentive compensation, and really is driven by our strong performance. So, what I would say around that as well is that on the SG&A, I would expect in the second half, the SG&A dollars to be pretty stable from what you saw in Q2.
So — which would mean it’s sort of the mid- to high-single-digits for the year. Certainly, in Q3, as you might recall, we’re going up a tougher comp in Q3 last year. But we also expect longer term to continue to drive productivities as we’re leveraging the digital investments that we’ve made over time.
Christophe Beck: So, that’s on SG&A. Maybe so an additional comment here. We’ve had that question so many times, Jeff, on have you reached the bottom in terms of SG&A ratio? The short answer is no, because of what Scott just said. All the digital technology that we’ve been implementing, plus all works to come will improve the performance of our organization. So for this year, expect our SG&A dollars are to remain kind of stable quarter-after-quarter, keeping in mind that our headcount at the same time is slightly down as well, which is driving that productivity, not because we spend less time with customers. We spend more time, but we automate most of the transactional work, if I may say. Your second question was on delivered product cost.
It is easing a bit faster that we had expected, but it’s important to keep in mind, it’s still 40% up versus two years ago, pre-inflation. So obviously, that trend is a positive trend for us, and I’ll take that, obviously, to improve margins as well. But most of the work is on pricing and new pricing, which is going really well. And your last question on the summer. We are in 172 countries. So, it’s not impacting in material ways the business, the way we look at it. So, no influence of that, at least no significant one.
Operator: Our next question is from the line of Christopher Parkinson with Mizuho.
Christopher Parkinson: Just on the Institutional side, you have some very helpful commentary by region. I was just hoping to dive down a little bit more on the volume trends in the various geographies, obviously, specifically North America. And just what ultimately is underscoring the confidence in kind of market share gains, just given all of the volume volatility on the post-COVID era. Just any color on that, and just trying to extrapolate, where the real opportunity is heading into ‘24 and ‘25?
