And also that allow us to realized pricing quicker on that volume. So yes, increase is being announced for January 1. And the other meaningful piece of news there is that we’re of the way we’re kind of trying to manage the prebuy out of existence actually by limiting the purchases prior to the price increase.
Ketan Mamtora: And then just one quick follow-up on OSB. What was your kind of operating rate in Q3? And whether it’s fair to assume that those curtailments that you all took outside of Sagola continues into Q4?
Brad Southern: So we were running about 80% of capacity or ran about 8% capacity in Q3. And in Q4, we’re planning for that or a little lower, I would say probably with more downside than upside. As the way I responded to Sue’s question, if we really see a demand slowdown in the latter half of the quarter, we’ll plan to take more capacity out as we balance our capacity to demand. But that’s how we’re planning to operate during the quarter and we will make sure that we satisfy our customers’ needs but not get out of balance to that demand that we’re feeling in our order file.
Operator: [Operator Instructions] And that will come from the line of Sean Steuart with TD Securities.
Sean Steuart: Question on input costs. Can you give us a sense of variance versus Q3 for fiber and resin that’s embedded in the Q4 guidance, and any context on trends you’re seeing headed into 2024 on that front?
Alan Haughie: Well, generally speaking, trends are favorable as we head into Q4 and 2024. But we’re cautious forecasters, so we generally don’t bake in any sort of further improvements, meaning we assume that input costs are going to hold roughly at current levels as we forecast from Q3 to Q4. So if they improve there’s tailwind there.
Sean Steuart: And just one question on modeling. The Siding price realizations this quarter improved a little bit sequentially, which is encouraging. How much of that is just a mix issue as the inventory bubble progressed through the quarter, is there anything more to it than that and seeing that modest improvement sequentially?
Alan Haughie: Yes, it is mostly mix. So strong distribution business relative — which has particularly good pricing, ExpertFinish health nicely, things like that. So there was no Q2 to Q3 price increase, so it’s fundamentally the continuation of that favorable mix from Q2 to Q3.
Operator: [Operator Instructions] And that will come fine of George Staphos with Bank of America.
George Staphos: I wanted to talk a little bit about siding. So you mentioned that you were eliminating the ability for your customers to buy somewhat ahead of your price increase coming in January. Are there any other changes that you’re making with any of your commercial strategy or distribution strategy that you could relay on an open mic call to continue the progress into next year? And relatedly, with — and one of the other analysts, I think Mike was talking about, your peers also saying they’re growing. You want to grow market share with the large builders. You have the BuildersSeries product. How do you ultimately make the progress you want to make towards the 25% margin given that product would typically have, I would imagine, perhaps a little bit lower margin and you’re trying to gain share.
I know it’s going to be around selling the value, but I want to hear additional thoughts there. So any change in the commercial strategy and how do you get to the margin you want, given what you want to get to in terms of your share with builders?
Alan Haughie: So let me do the commercial first. And I would say that during COVID, being on allocation for all of two years, maybe a little more than 24 months, we’ve constantly cut back on our marketing spend as we were sold out. And so we will focus more on assets and resources that helped us optimize our order file versus getting into a growth and market share gain mindset. And so as we roll into next year and putting our budgets together, we’re going to be more — by allocating more resources to demand creation and a growth mindset versus how we’ve managed the business over the couple of years, and that will be certainly in support of our BuilderSeries products as well as our repair and remodel products. And everything of what we do in retail across the board really leaning into the new market condition here, which is in a flat to slightly growing housing market we need to get more aggressive on share gains.
On the margin question, you’re generally right about the way you’re thinking about lab siding sold into the big builder. I will say, compared to prior years, though, and I’ve mentioned this several times on the call, the BuilderSeries was engineered to be competitive there. So it’s not a ginormous margin hit for us to skew volume there but really where the offsetting — two offsets to any margin that we have to give up to secure a big builder business. First of all, repair and remodel, it’s not that way, it’s a value sell. We’re selling ExpertFinish, and the opportunity to gain market share through also growing our — again, margin by increasing our market share and repair and remodel can be a significant offset. Second to all that, as an example, on the manufacturing side, ex Sagola or take Bath, New York, both of those are large mills, high scale mills, low cost mills compared to our average.
And so as we ramp up these bigger pressing facilities or pre-finishing facilities, we’re also seeing opportunity for cost reduction that will meaningfully impact our margins going forward. So it is a constant area of management and analysis around pricing, margin, cost reduction, OEE. And we’ve gotten way more sophisticated on how we manage pricing by channel, by customer, in some cases. So I’m confident that we’ll manage it well. But I’m equally confident that our ability to get meaningful margin in this business is not going to be — we’ve always had a spread of low margin to higher margin SKUs in our portfolio. If we add hypothetically, say, BuilderSeries is on the lower side of that, we’ve got plenty of opportunities on the upper side of our portfolio to gain margin, especially when you couple that with a more efficient operating platform.
George Staphos: Brad, just quickly on distribution. Any change in terms of the way you’re going to approach ’24 versus ’23 or pretty much the same approach? And from my vantage point, maybe simplistically, maybe a little bit more of a one step versus two step?
