Brad Southern: George, you know we’ve talked about, we have set up DCs in some major metropolitan areas to provide more of a direct model,t hat is largely driven by the focus on the builder, the other customers benefit off that as well. So I would say that is not new for ’24, it was new for ’23, but we will continue to focus on optimizing that and pushing volume through that more direct path. And we’re only doing that to be more efficient in delivering more efficient from a cost standpoint and responsiveness, delivering product into strategic customers that need that level of service and honestly some cost advantage. But as we look into 2024, no major changes in the way we’re going to market other than continued growth in that more direct selling model.
Operator: [Operator Instructions] And that will come from the line of Paul Quinn with RBC Capital Markets.
Paul Quinn: It sounds like the two big levers to run a successful Siding operation are this penetration of the big builders and the rollout of ExpertFinish. So just on the big builders, is there — just so I can kind of increase my knowledge on what you’re doing. On BuildersSeries, is there a regional penetration difference, like are you making more gains in the South and the Northeast? And in terms of the manufacturing of that product, is that done at all of your siding mills or only a couple?
Brad Southern: On the manufacturing side, Paul, it’s done in our 24 foot press mills Dawson Creek, British Columbia being primarily where we’re sourcing it now. Sagola will have that capability or does have that capability. Obviously, a little bit closer to market there as well which will help on the cost of margin side. But it’s the most recent presses that we have converted, which are 24 foot in length because that to remind everybody to BuilderSeries is 12 foot. Our normal last SKU historically has been 16. And then you ask about penetration. Well, with the big national builders, you have to go where they are, and if you look at the smile of the country, that’s where a lot of the housing starts that are being driven by the big national builders are in that smile.
We have had historically good — pretty good penetration in Texas, Colorado markets, just because of SmartSides history there. So where we’re focused on penetration, it’d be the more South Central, Southeast Atlantic seaboard as opportunities for us to really gain market share. And just to round out that question, Paul. I would say from the central part of the country, we have been strong there, even with our 16-foot product offering with the bigger builders. So obviously, that would be a sweet spot for us to pick up incremental business. But the big potential opportunities for us to gain volume is in South Central, Southeast and Mid-Atlantic.
Paul Quinn: Just on the ExpertFinish side or R&R, how should we think about that progression margin uplift in volume through that? Is that — do you expect that to be slow and steady gains through ’24 into ’25?
Brad Southern: Yes, it’s probably more slow and steady than [Big Ben] other than to say and the finishing line we’ve put in to Bath, which we put a similar line into our existing facility in Green Bay. And we are seeing economies of scale that are exceeding expectations. And so as we ramp those up, there will be somewhat of a step change in margin. I think by the time you run it through all the Siding that we sell in the quarter, it might be a little bit harder to see but it’s common. And as we learn how to do this at scale and we just see a lot of opportunity for incremental margin above the decent margins we’re enjoying today.
Paul Quinn: And then just lastly, if you could — South America looked a little weak in the quarter. What can we expect going forward?
Brad Southern: South America right now, it’s a good solid business economically across that whole continent. Unfortunately, right now, there’s a lot of political and economic unrest. So we’re winning where we can, there’s no alarms from a market share standpoint. I mean, honestly, from kind of as a chaotic — not be a little bit too strong of a lower, but the chaotic economies down there, our kind of discouraging your volumes there. So from that standpoint, that’s been a little bit helpful. The pricing is really challenging in all the countries there. We have taken significant capacity outages across our operations down there. And so we are pedaling really hard to hold our own in South America, waiting for all that to term, which in our 25 years down there, it’s been that way a little bit cyclical economies can get out of kilter and that’s certainly happening right now.
So we’re optimistic on the long term. But I think we should be thinking about next year being somewhat similar to this year as far as the earnings potential down there as we walk through these economic headwinds that are facing basically all the economies we operate in down there.
Alan Haughie: Can I add one other thing, the risk of opening a can of worms. We did transfer Entekra’s assets to South America and the cost of transferring and packing, shipping and everything is noncapitalizable. You’re interested and therefore the cost of doing so is reflected in the EBITDA, that’s $2 million to $3 million in Q3 that was a quote I use the traditional freight that a lot of but we left it in their EBITDA because the corporation is always equipment about as a whole. So there’s no reason not to include an EBITDA. So that put — made a top environment appear slightly worse than it really is.
Operator: That concludes today’s question-and-answer session. I would now like to turn the call back over to Mr. Aaron Howald for any closing remarks.
Aaron Howald: Okay. Thank you, operator. With no further questions, we’ll end the call there. Thank you for joining LP for our third quarter earnings call. Stay safe, and we look forward to connecting again soon. Thanks, everyone.
Operator: Thank you all for participating. This concludes today’s program. You may now disconnect.
