Celeste Mastin: Yes, Kevin in particular, our roofing business was very strong in Q1. And actually we’re instituting some price increases in that business unit as well.
Kevin McCarthy: Okay. Good to know. And then secondly, Celeste, I think you referenced some softness in the hygiene space within HHC. How is that business evolving relative to your expectations? And is the European dialogue part of the equation there? Or is that separate and distinct? Maybe you can just kind of update your thoughts on likely trajectory for that business as the year progresses?
Celeste Mastin: Yes absolutely. So the hygiene market within HHC again was responsible for that volume decline, the entirety of the volume decline that we saw in HHC. Now it’s a smaller business for us than it used to be in the past. And we were able to offset a lot of that with growth in our packaging and medical adhesive space but before I go down that tangent, let me just talk about hygiene in particular. So a few things going on there. Yes, per your question relative to Europe, that we did see some of our big customers overproducing demand so a correction happening there in Europe in particular in the hygiene market. Also our hygiene market is often the lead for us in a lot of developing markets and nations. And so the currency restrictions that we experienced, particularly in Argentina and in Egypt caused us to halt sales in those particular regions that had an impact.
Of course, we’ve got the index pricing adjustments. Those are significant in the hygiene space. And by the way just for future reference I would note that a lot of those – that index pricing is now flattening out this quarter and future, as opposed to the last two quarters, where indexes were down. And finally there was some – there is some price competition occurring in Asia and we decided to walk away from some of that business. So that’s what’s been – that’s sort of hygiene in Q1 and some of my comments of course relate to how I see it moving forward. I think – sorry, as far as the future, you asked about how the future there? I mean a lot of these things are going to correct, right? We saw this correction in production in Europe.
Europe is going to — core Europe will continue to be weak, but it won’t be as weak as first quarter. These currency restrictions, they’re lifting in some areas. So, we’ve seen some getting some help there. As I noted the index price adjustments are now switching to flat. So, aside from some business we’re walking away from in some parts of the world because of price, you’ll see that hygiene market performed better in future quarters.
Kevin McCarthy: Understood. Thank you.
Operator: Our next question comes from Jeff Zekauskas from JPMorgan. Your line is now open.
Jeff Zekauskas: Thanks very much. I think your SG&A expense adjusted was about $165 million. And I know that there’s a lot of discretion in the way you allocate SG&A in a seasonally weak quarter. Do you expect that number in absolute terms to rise through the course of the year or to be lower or stay the same? Can you give us some assistance on that?
John Corkrean: Sure. I’ll take this one, Jeff. So it was in line with expectations. It’s higher certainly as a percentage of revenue in the first quarter, because revenue, it’s our lowest revenue quarter seasonally. And if you look at the increase, it’s up about 10%. Half of that is acquisitions that we didn’t have in the first quarter last year. So that’s driving about half of that increase. And then the remainder is really driven by higher variable compensation. So, we’re accruing at a higher rate than we were last year at this time and the impact of wage inflation. So if you look forward, we would expect it to increase sequentially in terms of total dollars but decrease as a percentage of revenue. So, when we look at how we accrue things like variable compensation we do adjust the percentage, we accrue to match the seasonality of the business.
So we accrue a little less in Q1 than in Q2. So you’ll see that step up but you should see that come down both in terms of the year-on-year increase, because we’ll start to annualize against those acquisitions and it should also come down as a percentage of revenue.
Jeff Zekauskas: Great. And then for my follow-up, do you guys think that volumes will grow year-over-year in the second quarter or no or stay flat?
John Corkrean: I would say that they should sequentially improve, but I think we’re kind of still projecting they may be down, certainly, less than a couple of percent, but they would — they maybe down, maybe flat to down a percent, maybe flat to up a percent. So, I don’t think we’re going to see a significant deviation from Q1.
Jeff Zekauskas: Okay. Great. Thank you.
Celeste Mastin: Thanks, Jeff.
Operator: Our next question comes from Patrick Cunningham from Citi. Your line is now open.
Eric Zhang: Hi. Good morning. This is Eric Zhang on for Patrick. Can you walk us through how the 2023 vintage acquisitions have performed? And are there any positive or negative surprises?
Celeste Mastin: Sure, Eric. So I was just looking at the adhesion actually acquisition. Integration results this morning was delighted to see that we’ve actually doubled our performance on the deal model there. So overall, if you look at the entire collection, strong performance we’re ahead of our deal model plan and have — I think synergy projection for this year would be $25 million of synergies to be achieved was $12 million last year.
John Corkrean: Yes. And I can add just a little color on that Eric. As Celeste said, the total impact that we should see year-on-year from acquisitions is about $25 million. That’s what we discussed in Q1. That’s the incremental impact versus 2023 and first quarter — so far first quarter we’re right in line. And they’re all performing very well in line with expectations.
