Brook Campbell-Crawford: And then would you want to provide some comments on the R&R market. I know you talked to mid-teens decline in the quarter. But any sort of green shoots there. You’ve always sort of flagged there on that there are some good structural drivers that should support that market at some point. So are you hearing any green shoots at all? And as well if you’re able to comment about how it sort of trended through this year just so we can think about when the comps start to get easier, I guess, in calendar 2024.
Aaron Erter: Sure, Brook. Look, we remain bullish on R&R from a mid to long-term standpoint. There’s many reasons why which I’ll go into. But look, just more short-term, as we talk to our contractors, they feel the same way, but they’re cautious right now. And they’re cautious because homeowners are cautious for many different reasons. Interest rates continue to climb in North America, that’s one piece. But there’s just still uncertainty out there in the marketplace. But as I’ve said many times before, we’re in a really good spot as it relates to R&R. You think about the material conversion opportunity for us. There’s so many homes out there that are older that need recited, right? And that’s one of the reasons why we’re investing now because it is a long sales cycle for us.
Also, people have more wealth in their homes than they’ve ever had. So as they come off the sidelines, we want to be there. Rachel uses the term, which I like a lot. We think about the R&R market like a beach ball underwater. She cited that, but I still like it. And that’s what we see out there is this R&R market has all the elements to really take off. And if you look at some of the projections, it’s for the back half of next year. We also think about our investments, I mentioned in our marketing, but it’s also having people in the field and then it’s our capacity as well. If we think about Prattville 3, that’s going to come online at the end of February of next calendar year. So we’ll have the capacity. We’ll have the demand creation in store, all the elements check off.
We’re really, really excited about our prospects.
Operator: Your next question comes from Rohan Gallagher from Jarden Group.
Rohan Gallagher: First of all, congratulations on continuing to defy the market, so it’s a credit to you and the team. Just in relation to costs. I noticed that the last 12 months, you’ve had massive tailwinds associated with pulp and freight, in particular. I’m conscious of the geopolitical risk, diesel prices, et cetera. Can you just comment on where you see those 4 key cost of goods sold drivers and what you’re assuming impliciting your guidance going forward where you can, please?
Rachel Wilson: Yeah. So we’ve been talking about 4 key COGS drivers for us. And we talk about freight, we talk about cement, we talk about labor and pulp. So those are the 4 that we’ve been tracking. And as we’ve discussed, those are nearly kind of 50% of our COGS. So you’re right to point to those. As you pointed out [indiscernible] tailwinds for us this year. We’ve also cited that we expect cement, particularly in the very end of the year, it’s going to be a headwind for us. So we’ve had puts and takes on our cost overall, but those are really the 4 of the 2 key monitoring.
Rohan Gallagher : And just freight, in particular, are we seeing that starting to back up now?
Rachel Wilson: Cross rate has been for the year, you’re right, favorable on a quarter-to-quarter sequential basis, pulp has been the area that’s really been still supportive.
Rohan Gallagher : Okay. And a follow-up question, Rachel, if I may. And apologies, it was a previous question, and I missed the call. But on the term loan that you’ve refinanced, can you confirm whether that’s number 1 fully drill and the rate that you signed off on.
Rachel Wilson: Yeah. So it’s not a reside. So the term loan A, it’s roughly at SOFR plus 2%, it’s $300 million, it’s 5-year, and we used $140 million of those proceeds to repay our revolver, okay? So the other piece is we also announced the $250 million new share repurchase program. So if you look across the cap structure, we are taking a balanced approach here to how we are thinking about funding and supporting our growth.
Rohan Gallagher : Okay. And final question, if I may. Aaron, you’ve commented in your published remarks about mid-single price in growth as ASP being announced, et cetera. Obviously, the mix effect with your customer base will vary as well as product mix rebates, et cetera. At what point would you envisage or could you envisage ASP in North America flat-lining or even declining given the uncertain markets that we’re facing currently?
Aaron Erter: Yeah. Rohan, just very simply, we don’t see that average price declining for us. We believe for the foreseeable future is going to be positive.
Operator: Your next question comes from Sam Seow from Citi.
Sam Seow : Just wanted to ask on third quarter margin. I guess normally declined sequentially on lower volumes, but you’re talking on keeping that flat. I just wondered if you could walk us through the moving pieces. And in relation to margin seasonality going forward with the cost-out, is there a way to balance your reinvestment in SG&A, I guess, seasonally to keep that more stable through the year?
Aaron Erter: Yeah. Look, I’ll start, and then Rachel can jump in here. As far as margins, first of all, we’ve had a healthy margin through this entire year and moving forward I think we’re forecasting that as well. We’re going to continue to invest in the business. where we need to invest, which we talked about some of the demand creation, mainly some of the marketing tent-poles. And what’s also helping our margins is the benefits we’re getting from the outstanding work our team is doing around HMOS, right? Also working with our suppliers to continue to offset inflation were some of the cost savings. So if you think about our margins and how healthy they are, those are some of the areas that are really aiding us, but we’re still able to be able to invest in demand creation.
Rachel Wilson: What I like what Aaron’s focused on, given the market right now, he’s kind of telling us control the controllable, right? So that is kind of our execution mantra as we go through. And controlling the controllables needs, we’ve given some of that margin guidance, it’s also in relation to a very specific input cost environment as well. So I think we have to also keep in mind there’s things we can do and then less with the environment. So that’s one of the reasons we’re being quite cautious right now, keeping our focus very much on our execution and giving you guidance as we look ahead to the 1 quarter.
Sam Seow : But just following on from that, is there an opportunity with HMOS to keep the margins more stable. Will the margin profile more stable through the year?
Aaron Erter: And I think you’re probably looking at past years, correct, if you look at the margin profile. Look, I think there’s opportunities with our HOS system to keep our margins stable and really just continue to execute our existing strategy. So yes, I think there is.
